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Real Estate Investment Funds in Switzerland - Guide on REITs

Real Estate Investment Funds in Switzerland

Updated on Wednesday 10th April 2024

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Real Estate Investment Funds in Switzerland

 
Real estate investment funds (REITs) in Switzerland fall under the governance of several laws and ordinances. Among these, the Collective Investment Schemes Act (CISA) is the most important. Like all other types of Swiss investment funds, REITs fall under the supervision of the Financial Market Supervisory Authority (FINMA).
 
Below, our Swiss lawyers explain how to set up a real estate investment fund (REIT) in in this country.
 

Steps to open a REIT in Switzerland

 
In Switzerland, establishing an investment fund, including a REIT requires:
 
  1. drafting a business strategy and policies;
  2. registering a company (usually as a SICAV company);
  3. opening a Swiss bank account and depositing the approved capital;
  4. appointing a fund manager and confirming the fund manager's level of experience.

 

The requirements for drawing investors need to be approved by the fund. Every new member must register in line with the fund's regulations. Swiss REIT funds must go through the authorization process with the Financial Supervisory Authority.
 

Characteristics of REITs in Switzerland

 

Compared to other types of investment structuresSwiss REITs can be actively managed which means their main goal is to obtain returns on their investments. In order to set up a real estate investment fund in Switzerland, the Swiss Stock Exchange required a minimum share capital of 100 million CHF and at least 25% of their shares must be made available to the public for purchase. For more information about the legislation on REITs, you can refer to our lawyers in Switzerland.
 
A real estate investment trust, or REIT, is a company that finances or owns rental properties that produce income and distribute dividends to its shareholders.

In Switzerland, the following types of REITs can be created:
 
  • hybrid REITs;
  • equity REITs
  • mortgage REITs.
     
All over the world and in Switzerland, REITs trade on major market exchanges and are comparable to stocks. Through REITs, businesses can purchase mortgages or real estate by pooling the capital of various investors. With this types of investment, Swiss companies can hold real estate shares without having to fund, manage, or purchase the property themselves.
 
Our law firm in Switzerland can offer more information on this type of fund and its main advantages.
 

The main requirements to open REITs in Switzerland

 

Even if setting up a REIT does not differ much from other types of investment funds, there are specific conditions to meet for it. For example:
 
  • REITs are usually required to have a large number of investors, in most cases at least 100;
  • the  REIT's gross income must originate from rent, mortgage interest, or gains from the sale of the property, and at least 75% of its assets must be in real estate;
  • also, REITs are mandated by law to distribute dividends to their shareholders equal to at least 90% of their taxable revenue for the year.

 

If you want to open a company in Switzerland and want to use it to create a REIT, you need to respect both the Company Act and the Collective Investment Schemes Law.

 

Vehicles to be registered as REITs in Switzerland

 

Swiss REITs are deemed open-ended retail funds that can invest in the following:
 
  • real estate property;
  • real estate companies;
  • units in other investment funds;
  • foreign real estate property.
 
There are several types of structures that can be employed in order to open a Swiss real estate investment fund. Among these are:
 
  • limited partnerships;
  • investment companies with variable capital (SICAV).

 

Equity REITs in Switzerland

 
The most common types of REITs are equity real estate investment trusts in Switzerland. They can buy, oversee, build, repair, and sell properties that generate revenue. Their real estate holdings' rental incomes account for the majority of their revenue. An equity REIT may focus on a certain market area or make wide investments.

Equity REITs often offer consistent income. Additionally, since this type of Swiss REITs generate revenue by renting out properties, it is straightforward to predict how much income they will make each year.
 
Feel free to address our Swiss law firm for guidance on equity REITs.
 

Mortgage REITs in Switzerland

 
Swiss mortgage REITs usually invest in:
 
  • mortgages;
  • mortgage-backed securities (MBS);
  • associated assets.
 
A mortgage-backed securities (MBS) is an investment that resembles a bond and is composed of a collection of house loans that investors purchase from the banks who issued them. MBS investors get regular payments that resemble bond payments.
 
Mortgage REITs receive income from the interest on their investments, compared to  equity REITs that normally make money from rent.  The majority of mortgage REIT revenues are distributed as dividends to investors, just like equity REITs do. When interest rates rise, mortgage REITs typically perform better than equity REITs.
 
Should you need more information on this type of REITs in Switzerland, we invite you to discuss them with our local law office.

 

Taxation of Swiss REITs

 
The first step when registering a REIT in Switzerland is to select the type of vehicle to use. This selection is usually made taking into account the tax particularities related to the structure. Swiss real estate investment funds are subject to the following taxes:
 

 

SICAV companies and limited partnerships for collective investment schemes earning incomes from real estate are subject to a reduced corporate tax. The capital tax applies at cantonal and municipal levels; therefore, different rates apply. With respect to the withholding tax applied to REITs, SICAV companies and limited partnerships are not taxed on incomes derived from real estate property. Our Swiss lawyers can explain in detail how the taxation of REITs occurs.
 
If you want to open a REIT in Switzerland and need assistance, do not hesitate to contact our law firm.