Roche & Cie

Swiss franc surge : a windfall for the investments

27 Jan 2015

Switzerland has just renounced to peg its currency rate: at the time of writing this article, 1 euro is worth about 1 Swiss franc. The sharp rise of the Swiss franc causes not insignificant consequences: we will here provide a brief reminder of the context as well as an overview of the new opportunities.

•  A decision with significant consequences

Since 2011, Switzerland has been maintaining a minimum rate of 1,20 franc for one euro. The goal was to avoid the situation where the Swiss franc become too strong and particularly damage  exports. The peg of its exchange rate passed by a large-scale purchase of euros: in 2015 the total amount of euros held by Switzerland was estimated to180 billion. On 15 January 2015, because of the economic conditions, the Swiss National Bank (BNS) abandoned this threshold and stopped buying more euros.

Inevitably, this will have an impact on Swiss and border household finances: we estimate that the purchasing power of people receiving Swiss income leapt up by 20 to 30 % for what concerns the purchase of goods and services in euros. Real investment opportunities are now opened, and it is appropriate to consider the French real estate sector as particularly attractive in this respect.

•  The opportunities

Thanks to this rise of the purchasing power, the French real estate market is now open to the Swiss. However, many people hesitate acting for fear of the French tax system. It is appropriate to reassure people wishing to acquire a property in France, as the French bad reputation concerning the tax system is not justified at all. Indeed, there are several regimes of tax reduction or tax exemption very competitive for the non-residents. There are simple provisions allowing foreign investors to significantly reduce the wealth tax (ISF) in France, but also the inheritance tax…

Nevertheless, this very favorable context to the acquisitions in euros is uncertain as for its term: in fact, as the value of the Swiss franc is not controlled anymore by the Swiss National Bank, its rate is directly governed by the laws of the market, with the consequence of a possible volatility. However, the purchase of a property is a decision that has to be considered carefully. Accordingly, our advice for people wanting to benefit from this situation but who dread doing a bad purchase is to open a bank account in France: this will allow them to convert their Swiss francs in euros at the current rate and, at the same time, give them the time to think about their investment.

Our firm, founded in 1948, specializes in the tax and asset management for non-residents. Don’t hesitate to contact us in order to receive from our co-workers and partners the most appropriate solutions for your investment project.

Cabinet Roche & Cie, English speaking accountant in Lyon, France.
Specialist in Real estate and non-résidents taxation.