Who is subject to inheritance tax in Switzerland?
In Switzerland, inheritance tax is generally paid by the heirs or the beneficiaries who receive the deceased's assets. However, the amount of the tax and who is subject to it depend on a number of factors:
- Spouses and direct descendants (children) are tax-exempted in most cantons.
- Other heirs (brothers, sisters, friends) pay this tax at varying rates, depending on their relationship and the canton.
- The more distant the relationship, the higher the rate, up to 50% for unrelated third parties.
How do you calculate inheritance tax?
The calculation of inheritance tax in Switzerland depends mainly on the canton of residence, but also on the family relationship with the deceased, and the value of the inheritance.
Inheritance tax rates are set by canton, but can also vary by commune (as is the case in Vaud, for example).
Example of taxation in Geneva
For an inheritance of CHF 500,000:
- Spouse/Children
0 CHF (exempt)
- Parents
0 CHF (exempt)
- Brothers and sisters
107,919 CHF (21%)
- Unrelated & cohabiting
268,296 CHF (53%)
Example of taxation in Neuchâtel
- Spouse/Children
13,500 CHF (2.7%)
- Parents
13,500 CHF (2.7%)
- Brothers and sisters
75,000 (15%)
- Unrelated
225,000 (45%)
- Concubines
100,000 CHF (20%)
Donation or inheritance?
Donations and inheritances are often confused, but their tax treatment differs. The donation involves passing on assets during someone's lifetime. This can include money, real estate or other assets. A donation allows you to anticipate the succession and potentially reduce the tax burden by splitting the gifts.
The inheritance for its part, occurs after the death of a person, according to the rules defined in his or her will or, in the absence of a will, according to the legal rules of succession.
Inheritance is often simpler and offers more tax advantages for spouses and direct descendants, but can be very costly for more distant heirs.
Foreign inheritance tax
Country of residence of the deceased
The inheritance tax is levied in the country where the deceased resided at the time of their death.
Every country has its own inheritance tax rules. Some countries impose high inheritance taxes, while others have no inheritance tax at all, or very low rates.
Heir's country of residence
Heirs may also be subject to inheritance tax in their own country of residence, especially if they receive assets located abroad.
For example, a Swiss heir receiving an inheritance from a foreign country will be taxed in Switzerland according to the rules of his canton of residence.
Double taxation agreements (DTAs)
Switzerland has signed tax treaties with a number of countries to avoid double taxation on inheritances.
For example, France and Switzerland have a tax treaty limiting the taxation of inheritances. Tax is levied in the country where the assets are located, but exceptions exist.
In the US, estate taxation can be complex, as estate tax rules are very different and include exemption thresholds but also high rates above certain amounts.
Real estate abroad
As a general rule, real estate located abroad is subject to inheritance tax in the country regardless of the nationality or place of residence of the deceased or heir.
For example, if a Swiss national owns a house in France, it will be subject to inheritance tax in France.
How to reduce inheritance tax?
There are a number of ways to reduce the inheritance tax burden:
- Donating assets before death allows you to anticipate the succession and spread the tax burden over several years. Donations are sometimes subject to lower taxes than inheritances, especially if they are split into several smaller gifts over time.
- Structured estate planning, through wills or inheritance agreements, makes it possible to clearly define who will inherit which assets, while optimizing the transfer according to tax rules. Certain assets can be placed in family foundations, which are often subject to more favorable tax regimes.
- It is possible to bequeath the bare ownership of a property to an heir, while retaining the usufruct of the property during his or her lifetime. This reduces the taxable value of the estate, as only the bare ownership is taken into account for tax purposes. A person can pass on the bare ownership of his or her home to his or her children, while continuing to live there, thus reducing the inheritance tax.
- In some cases, it may be worthwhile to change tax residence to a canton with a more advantageous inheritance tax system. For example, the canton of Schwyz (SZ) does not levy inheritance tax.
Frequently Asked Questions
What is an inheritance tax in Switzerland?
Inheritance tax is a tax levied on the value of assets inherited on the death of a person. Each canton in Switzerland has its own rules and tax rates.
Who pays inheritance tax?
Inheritance tax is paid by the heirs or beneficiaries of the inherited assets. Spouses and direct descendants (children, grandchildren) are generally exempt in most cantons.
What are the tax rates?
Rates vary from canton to canton, depending on the degree of kinship between the heir and the deceased. The more distant the relationship, the higher the tax rate. In some cantons, rates can be as high as 50 % for unrelated heirs.
How is inheritance tax calculated?
The tax is calculated on the basis of the value of the assets inherited, after application of any franchises or canton-specific exemptions. The tax rate depends on the relationship between the deceased and the heir, and on the total amount of the inheritance.
What are the current exemptions?
In the majority of cantons, the deceased's spouse and children are exempt of inheritance tax. Other family members (brothers, sisters, nephews, nieces) may be subject to tax, often at lower rates than unrelated persons.
What happens if the deceased or heir lives abroad?
If the deceased or the heir resides abroad, the tax rules of international succession apply. Assets may be taxed in both countries, but Switzerland has bilateral tax treaties with certain countries to avoid double taxation.
Are there any cantons without inheritance tax?
Yes, some Swiss cantons, such as Schwyz (SZ) and Obwalden (OW), do not levy inheritance tax on direct descendants. Other cantons may offer very low rates or significant exemptions.
What can be done to avoid double taxation in the case of international inheritance?
It is advisable to check if any bilateral tax treaties between Switzerland and the other countries concerned exist. These agreements often help to avoid double taxation by determining which country is responsible for taxation and how cross-border inheritances are handled.
