In the Swiss real estate landscape, a Real Estate Company (SI) is a popular legal structure for acquiring, managing, and transferring property assets. Especially in Valais, where the real estate market is thriving, understanding the specifics of SIs can offer significant tax and estate planning advantages. This article provides a detailed overview of the concept of a real estate company in Switzerland, with a special focus on the canton of Valais.

A real estate company is a legal entity, generally structured as a public limited company (SA) or a limited liability company (Sàrl), whose main activity is the acquisition, management, operation, or sale of real estate assets. Unlike purchasing property in one's own name, acquiring real estate through an SI involves buying shares or equity in the company rather than the property itself.

There are also shareholder-tenant real estate companies (SIALs), where shareholders own shares that entitle them to occupy a specific housing unit, while collectively owning the entire building.

In Valais, SIs benefit from a corporate income tax rate that is lower than that for individuals. For example, individuals are taxed on their net rental income at an average rate of around 25–30%, whereas a real estate company in Valais is subject to a profit tax rate of 13.5% for net profits under CHF 250,000. It is important to note that, in some cantons, the sale of shares in an IS may be treated as a sale of real estate, with the resulting capital gain taxable. In Geneva, for example, the sale of shares in an IS is treated as a real estate sale, subject to real estate gains tax.

Purchasing shares in a real estate company can help avoid certain costs associated with direct real estate acquisitions, such as:

- Property transfer taxes

- Notary fees

- Land registry fees

These savings can be substantial, especially for high-value properties. However, this optimization of costs may be called into question if the tax authorities consider that the sale of shares is tantamount to a sale of real estate, particularly if the majority of voting rights are transferred.

Owning real estate through an SI simplifies estate planning and wealth transfer. Transferring company shares is generally easier than transferring real estate assets, offering advantages for inheritance planning. However, it is essential to consider the tax implications when transferring shares in an SI, particularly with regard to inheritance tax and any latent capital gains.

The legal structure of an SI creates a separation between personal and company assets, which can help protect personal wealth in case of financial difficulties related to real estate activities.

Establishing and managing an SI involves several legal and administrative steps, including:

- Drafting of the company’s articles of association

- Registration with the commercial register

- Maintaining accounting records in accordance with legal standards

These obligations incur costs and require diligent management.

Profits generated by an SI are subject to corporate income tax. When dividends are distributed to shareholders, those earnings are also taxed as personal income, resulting in double taxation.

Using a property held by an SI for personal purposes may trigger specific tax implications, such as benefits in kind, which must be carefully assessed.

It is common for potential buyers to prefer acquiring the real estate asset directly rather than purchasing shares in the SI. This preference is due to the legal and tax complexities involved in shareholding and the desire for direct ownership. As a result, the real estate company may need to sell the property itself, which brings specific tax consequences that must be carefully anticipated. In addition, the acquisition of shares in an IS by persons abroad may be subject to the Lex Koller, which restricts the purchase of real estate in Switzerland by foreigners. This law also applies to indirect acquisitions via real estate companies.

When an SI sells its real estate asset, it generates a taxable profit, with the tax rate varying by canton (in Valais, the rate is generally more favorable than for individuals). However, the sale may also trigger cantonal property gains tax, which depends on the holding period and specific local regulations.

If the SI has no further activity following the sale of its property, it will typically need to be liquidated. The profit from the sale is then distributed to the shareholders. These distributed funds are considered taxable income for the shareholders. In addition, a 35% withholding tax may be levied by the Swiss tax authorities but is often reclaimable by the shareholders in their annual tax returns.

This process may lead to double taxation: once at the company level on the capital gain, and again at the shareholder level when the funds are distributed upon liquidation. This reduces the potential tax benefit originally sought through the use of an SI for real estate ownership.

1. Choose a legal structure: SA or Sàrl, depending on the needs and preferences of the partners.

2. Draft the articles of association: Define the company’s governance rules.

3. Contribute real estate assets: Assets can be contributed at incorporation or acquired later.

4. Register with the commercial registry: Required for the legal existence of the company.

5. Ensure proper accounting and tax compliance: Maintain accurate records and meet tax obligations.

6. Seek professional support: Involve notaries, lawyers, or fiduciaries to assist with the process.

A real estate company is an effective tool for optimizing the management and transfer of real estate in Switzerland, particularly in Valais. It offers tax and estate planning advantages but requires careful management and a solid understanding of its legal implications. Before proceeding, it is crucial to consult experts to evaluate whether this structure aligns with your personal circumstances and investment goals.