What is usufruct?

Usufruct is a widely used legal instrument in Switzerland, which allows a person, known as the usufructuary, to use the property of another person without owning the property itself. This right allows the usufructuary to use the item fully and derive income from it, whether through renting, agricultural use or similar activities. However, the owner remains the legal holder of the item.

Legal basis of usufruct in Switzerland

The legal basis for usufruct in Switzerland can be found in the Civil Code (ZGB). In particular, Art. 745 ff. ZGB regulates the structuring and scope of the usufruct. According to Art. 745 Para. 1 ZGB the usufructuary has the right to use the object in the same manner as an owner, however, the substance of the object must not be impaired.

However, the usufruct agreement is subject to certain legal formal requirements. Here, a distinction is made between immovable and movable property:

Immovable property: Anyone wishing to enter into a usufruct agreement on an immovable item must do so in writing and have it publicly notarized. This means that the contract must be concluded before a notary.

Movable property: For movable property, a simple written form is sufficient. No public notarization is necessary. Nevertheless, it is advisable to keep the agreement clear and detailed.

Tax treatment of usufruct

In Swiss tax law, usufruct plays an important role, especially in wealth and income taxation. The usufructuary is generally liable for the income from the usufruct. This means that the usufructuary must declare the income derived from the use of the item in their tax return. On the other hand, the owner is generally not taxed on this income as they do not directly benefit from it.

In terms of wealth taxation, it is similar. In general, the usufructuary must tax the wealth. However, it is advisable that both the usufructuary and the owner declare the property value. The owner can assess the property value at 0 in the tax return, while the usufructuary declares the full tax value.

Conclusion

In summary, usufruct in Switzerland is a flexible and useful instrument that is applicable in various legal and economic contexts. It allows individuals to benefit from an asset without transferring ownership, which can be particularly advantageous in family or business structures. However, it is important to carefully consider the legal and tax implications to avoid unexpected obligations.

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