Gift and Inheritance Taxes Potential tax consequences in Switzerland

Are you a Swiss resident and find yourself in a situation in which you will receive money from an inheritance or gift? There may be tax consequences on top of ordinary income and wealth tax.

Legal basis - inheritance law

The Swiss Civil Code regulates the Swiss inheritance law and intends to protect heirs at law, which include children, the spouse and if there are no children, parents of the deceased. Basically, the law defines how the estate of the deceased has to be split between the heirs at law.

For example, if a married person with two children dies without having completed an inheritance agreement or a will, the spouse receives one half and the children the other half of the inheritance, which results in a quarter per child of the total inheritance.

Furthermore, it is possible to define another allocation of the inheritance within the legal provisions. Within this further allocation possibility, it is also an option to favor a third person that is not a family member. With regard to the example above, it is possible to reduce the portion of the children and raise the one for the spouse or vice versa. It is also feasible to favor a third person.

Also, if international assets are involved, it might be important to conclude an inheritance contract under foreign law, in order to avoid any inconveniences at the time of distribution and defining the portion per heir of the inheritance.

 

Let the experts handle it for you

Gordana Muggler is Head of Global Mobility and HR Services at BDO Switzerland.

Gordana and her team of tax specialists are here to support you and your family members on your personal tax situation.

 

Tax consequences of an inheritance or gift

Several cantons levy an inheritance and a gift tax. There is no such tax on federal level. Basically, inheritance tax is due on the deceased's worldwide income and assets. However, the cantons are free to levy inheritance tax and if so, to define if there are exceptions, i.e. the transfer of wealth by inheritance to the spouse is tax-free.

All Swiss cantons, except for the canton of Schwyz, levy inheritance tax if the deceased has been a resident of the respective canton. Gift tax is in general levied for Swiss residents as well, except for residents in the cantons Schwyz and Lucerne. Moreover, a tax liability arises as well if i.e. a house in Switzerland is passed on to the heirs or if the estate has been opened in Switzerland.

As such, neither inheritance nor gift tax arise in Switzerland if the deceased or donor is not a Swiss resident. 

As already mentioned above, spouses are not subject to inheritance and gift tax in all cantons. Furthermore, most cantons also exempt direct offspring from these taxes.

The respective tax burden, if any, depends on the amount inherited as well as the relationship between the heir and the deceased (degree of relationship).

In Switzerland, the heir or recipient of the gift pays the tax burden. Please see below a table providing an overview of different cantons of possible inheritance as well as gift taxes, due depending on the relationship:

Inheritance taxation

Canton Tax due for children Tax due for parents
Zurich Tax threshold: CHF 5000
Tax rate: 
max. 6%
Tax-free amount:
CHF 200'000
 
Lucerne Tax rate:
1.6% - 2%;
Tax threshold:
CHF 100'000
6% - 12%
Grisons - Tax rate:
10%
Berne - Tax rate:
max. 15%;
Tax-free amount:
CHF 12'000
Zug - -
Schwyz - -

 

Gift taxation

Canton Tax due for children Tax due for parents
Zurich Tax threshold:
CHF 5'000
Tax rate:
max. 6%;

Tax-free amount:
CHF 200'000
 
Lucerne - -
Grisons - Tax rate:
10%
Berne - Tax rate:
max. 15%;
Tax-free amount:
CHF 12'000
Zug - -
Schwyz - -

 

Tax planning

In order to avoid any inconveniences, it is important to conclude an inheritance contract under foreign law in case of international assets. It might be important, as if international assets form part of the estate or if the decedent is a foreign national, the estate may be subject to inheritance tax in different countries and therefore a double taxation may arise.

Switzerland has concluded a few tax treaties to avoid double inheritance taxation. However, where a possible double taxation might be a potential risk, timely estate tax planning is the key to maximizing the wealth that finally should find the way to the heirs.

 

Author: Gordana Muggler

Gordana Muggler is Head Global Mobility and HR Services at BDO Switzerland. BDO's experienced specialists are here to advise and support you and your family members on all aspects of international assignments, be it concerning the arrival to Switzerland or the deployment abroad, from the beginning of the preparations through to the return home.

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