Gift & inheritance tax implications for Swiss and non-Swiss residents

Who and what is taxed under Swiss Inheritance Tax Law?

In Switzerland, inheritance law is regulated by the Civil Code which applies when there is no will or succession settlement. Under Swiss law, gift taxes follow similar rules as inheritance taxes, both are regulated by Cantonal tax laws only. Swiss civil laws regulate the inheritance organisation and distribution of assets. Cantonal tax laws determine the details of the inheritance taxation.

Gift and inheritance taxes are due if the donor is a Swiss resident or if the deceased was a Swiss resident at the time of their death. According to Swiss case law, an individual is considered as a Swiss resident when he/she actually resides or intends to reside in Switzerland on a long-term basis. Tax must be paid to the canton where the donor is resident, or where the deceased resides at the time of their death, with the exception of:

• Business assets which are taxed in the canton of where the business of a partnership/individual entity is located;
• Real estates which are taxed in the canton where the property is located;
• Foreign real estate which is not subject to Swiss inheritance tax according to cantonal laws.

Important facts:

• Quick reminder: Switzerland is divided into 26 cantons with 26 different cantonal tax regimes;
• Rates depend on the relationship with the deceased (from 0% to 50%);
• Double tax residency may occur resulting in two countries settling the inheritance and taxing the movable assets twice when they have different definitions of residency.

How is it taxed?

Inheritance/gift tax is normally levied on what is received by each heir/donee.

This amount of tax depends on:

• The amount of the gift or inheritance;
• The degree of kinship between the deceased person and their heir(s).

Tax rates and degree on kinship

• In all cantons, the transfers between spouses are exempt.
• Gifts or inheritances received by biological and adopted children are also exempt except for those in the following Cantons:
  • Appenzell-Innerrhoden: first CHF 300’000 is exempt and the excess is subject to flat tax rate of 1%
  • Vaud/Waadt:
    • First CHF 250’000 inheritance is exempt and the tax rate on the excess varies between 0.1% and up to 7% over an amunt of CHF 1.300 million;
    • First CHF 50’000 gift per year is exempt and the tax rate on the excess varies between 0.1% and up to 7% over an amount of CHF 1.302 million.
  • Neuchâtel: flat tax rate of 3%.
• Parents are exempt in the cantons of Uri, Fribourg, Ticino, Wallis, Nidwalden, Zug, Basel-City, Aargau, Appenzell-Innerrhoden and Geneva;
• Range of tax rates from the lowest to the highest:
  • Parents (including grandparents in most cantons) between 2% in Zürich, Thurgau, and Schaffhausen and up to 15% in Bern
  • Siblings: between 4% in Schaffhausen, Zug, and Solothurn to 25% in Vaud/Waadt;
  • Not family related: between 12% in Solothurn and Aargau and up to 50% in Vaud/Waadt;
  • Other heirs: various tax rates varying between cantons;
  • Public utility foundation: 0% but subject to some specific cantonal requirements.

Tax rates basis

• Normally the same tax rates apply for gifts and inheritances, however these rates are subject to cantonal exceptions where certain deductions are allowed.
• There are five different methods to set the tax rates within Switzerland.
• Illustration of these five methods with the following example: a deceased person left his sister an inheritance of CHF 100’000 

1. Progressive tax rate depending on the amount of the inheritance and on the degree of kinship (Zug, Solothurn, Aargaux and Vaud/Waadt).
   • Example: Vaud/Waadt cantonal tax rate for a sister and for an inheritance of CHF 100’000 is between 8.118% and 16.236% depending on the communal tax.
2. Flat rate based on the degree of kinship with an additional charge according to the amount received (Luzern, Basel- City and Thurgau).
   • Example: Basel-City rate for a sister: 6% increased by 25% for inheritance up to CHF 100’000 à Final tax rate is 7.5%.
3. Progressive scale depending on the amount of the inhertiance adjusted by a multiplying factor related to the degree of kindship (Zürich, Bern, Basel-Land and Schaffhausen).
   • Example: Zürich cantonal tax for an inheritance of CHF 100’000 is CHF 2’250 adjusted by a multiplying factor of 300% due to the siblings kinship à Final tax liability is CHF 6’750.
4. Progressive scale depending on the degree of kinship adjusted by a multiplying factor related to the importance of the devolution (Ticino).
   • Example: Ticino tax rate regarding an inheritance of CHF 100’000 is 7.947% multiplied by the coefficient of kinship (1.0) which makes it CHF 7’947.
5. Flat tax rates solely based on the degree of kinship with no consideration of the amount (Uri, Nidwalden, Fribourg, Appenzell-Innerrhoden, St-Gallen, Valais/Wallis, Neuchâtel and Jura);
   • Example: Valais/Wallis tax rate is 10% which is the tax rate applied for siblings.

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