Inheritance and gift taxes for Foreigners in Switzerland

							Inheritance and Gift Taxes for
Foreigners in Switzerland
Outline: Foreigners domiciled in Switzerland or non-domiciled
individuals owning Swiss real estate need to consider the
financial consequences of a transfer of their assets to heirs or
donees. Apart from legal requirements taxes are an absolute
key issue.
More and more Cantons grant specific exemptions and tax
allowances for direct successors as well as for spouses.


Key Issues

With the exception of the Canton of Schwyz all cantons levy inheritance tax.
However, a number of other cantons exempt direct descendants and spouses
from inheritance tax. All cantons except the Cantons of Lucerne and Schwyz
also levy gift taxes. Neither inheritance nor gift taxes are levied at federal
level. As inheritance and gift taxes are regulated by the same cantonal acts,
the items subject to tax, their valuation and the applicable tax rates are
usually similar for both kinds of taxes.

The fact that the Canton of Schwyz totally ignores the existence of
inheritance and gifts taxes makes this canton a very rewarding location for
persons who do not have direct successors and would be exposed to
excessive gift and inheritance taxes.


Characteristics

Gift Tax: A gift of movable property is a taxable in the canton I which the
donor is domiciled, wherever the property may be situated. Immovable
property, however, is subject to gift taxes in the canton, in which it is
effectively located. In the first place the donee is liable for the gift tax.
Alternatively the donator guarantees that the tax be paid, in case the donee
should not comply with his obligations. The worth of transferred assets is
assessed on the basis of fair market value. Burdens, which the assets has to
bear, e.g. loans, can usually be deducted.

•   Inheritance Tax: In case of death of a Swiss domiciled individual, its
    worldwide assets,


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                                with the exception of real property and permanent establishments abroad,
                                are subject to inheritance taxes in the canton in which the individual had
                                his principal place of residence. Real estate located in another canton is
                                subject to inheritance taxes of that canton. In order to determine the
                                applicable tax rate the worldwide net assets are relevant. As a general
                                rule, the heirs are liable to pay the tax but under certain conditions the
                                executor may be liable by way of compensation. In few cantons (e.g.
                                Grisons) the estate itself is liable (estate tax) for payment of the taxes.
                            •   Tax Rates and Exemptions: Tax rates vary from canton, depend on the
                                degree of relationship between the donee/heir and the donor/deceased
                                and are, according to the value, progressive. Most cantons grant a total
                                tax allowance for spouses and a rising number of cantons even exempt
                                children from inheritance and gift taxes or at least grant partial
                                allowances.
                            •   Double Taxation: When the donor/deceased, or the donee/heir is resident
                                or domiciled in more than one or in different countries, double taxation
                                questions will arise. To avoid or to mitigate the incidence of double
                                taxation, Switzerland has concluded tax agreements in respect of
                                inheritance (but not gift) taxes with a number of countries. Sophisticated
                                planning optimizes the overall tax burden and is therefore strongly
                                recommended.




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                                      Mandaris Ltd. | info@mandaris.com | www.mandaris.com
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