Q&A this week looks at buying-to-let for sales and buying in Switzerland

VAT and buy-to-let

I have put a deposit on an apartment and it will be ready for completion in May 2005. The property is an investment property. From what I gather, VAT at 13 per cent is charged on all new homes. Apparently, somehow you can waive VAT exemption when you register for VAT so that you will pay VAT on all your rental income. This happens as a result of getting the VAT refund. I am a civil servant and do not know if I qualify to do so. I would be grateful if you could explain the VAT refund and of any tax implications regarding the fact that I am a PAYE employee.

Your question is a complex one and highlights yet again what this column is always preaching - once you buy an investment property, no matter how modest, you must get professional advice on tax and legal matters. But to answer your question. Where a property investor waives the exemption re short term lettings, VAT on the purchase price of 13.5 per cent may be reclaimed. As a result of the voluntary registration, the investor will be liable to pay over 21 per cent of all rental income from the property and will also be liable to charge VAT again at 13.5 per cent on the sale of the property.

Any purchaser of a new property may register for VAT and the current tax status has no bearing on their right to register. If the investor has other rental income this will also be effected by the registration and he will also have to pay over VAT at 21 per cent on all such rents; one cannot elect in respect of one property, the election must cover all properties.

Buying in Switzerland

We are a group of keen skiers and, following two trips to Switzerland on skiing holidays, are convinced that buying a small chalet or apartment there would be an excellent idea. Four of us would be buying it together for private use and estimate that we would put in around €100,000 each - we would not be looking for a mortgage. However, we have heard that there are restrictions on foreigners buying in Switzerland (to control speculation I think?) So is it possible?

EU citizens who are Swiss residents can buy without restrictions and EU citizens who are resident elsewhere can buy one property for their own use. A prospective purchaser from a country outside the EU can, under certain conditions, buy a vacation property in tourist areas, but not normally more than one property. Special permission is needed to buy land or properties larger than 3,000 sq m (32,292 sq ft). These permissions are all subject to the "Lex Friedrich" which outlines the permits needed by foreigners to buy property of any kind in Switzerland.

Some Cantons also restrict the size of property that a foreigner can purchase and sometimes the re-sale of property may carry restrictions. Only individual foreigners or groups of foreigners may acquire property in Switzerland. Property cannot be acquired by foreign companies or Swiss companies with over 30 per cent foreign ownership. Property transactions are done through a notaire but you would be wise to take on a local lawyer to guide you through the whole process.

Send your queries to Property Questions, The Irish Times, 10-16 D'Olier Street, Dublin 2 or e-mail propertyquestions@irish-times.ie.

Unfortunately, it is not possible to respond to all questions. The above is a representative sample of queries received. This column is a readers' service and is not intended to replace professional advice. No individual correspondence will be entered into.