Inheritance tax in Switzerland – tax rates and allowances

Since tax sovereignty in Switzerland lies with the cantons and municipalities, inheritance tax is also regulated and levied by them. This means that different tax rates and regulations apply depending on the canton. While there have been repeated attempts to have inheritance tax uniformly regulated by the federal government, these have so far been unsuccessful.

The canton in which the testator had their last residence is responsible for inheritance tax. An exception applies to immovable property, such as real estate. In these cases, the canton in which the property is located is responsible for assessing the inheritance tax.

What is the difference between inheritance tax and inheritance tax?

While colloquially the term inheritance tax is often used, a legal distinction is made between inheritance tax and inheritance tax. Inheritance tax refers directly to the estate and does not distinguish between the individual heirs. Inheritance tax, on the other hand, is based on the respective share of the inheritance of the heirs and takes into account their relationship to the testator. In Switzerland, inheritance tax is only levied in the cantons of Solothurn and Graubünden. However, the municipalities in these cantons can levy an inheritance tax.

Inheritance tax is payable by the persons to whom an inheritance accrues. If an estate is divided among several people, i.e., there are multiple heirs, theoretically all of these people must pay inheritance tax.

The amount of inheritance tax to be paid depends on three factors:

• The canton in which the tax must be paid
• The relationship to the testator
• The amount of the inheritance

In general, the closer the relationship, the lower the inheritance tax. As already mentioned, the spouse is exempt from inheritance tax in all cantons and the direct descendants in most cantons. However, the larger the inherited estate, the higher the inheritance tax. This is due, among other things, to the fact that most cantons apply a progressive tax rate.

How high are the tax allowances in the cantons?

A tax allowance is the amount exempt from inheritance tax. Tax is therefore only levied on the amount that exceeds the tax allowance. The amount of these tax allowances varies from canton to canton. They also depend on the degree of relationship and are generally higher the closer the relationship.

How high are the inheritance tax rates in the cantons?

Inheritance tax rates in Switzerland vary considerably from canton to canton. However, the general rule here is: the closer the relationship, the lower the tax rate. For example, while in the cantons of Obwalden and St. Gallen all heirs are exempt from inheritance tax, the highest tax rate in Basel-Stadt applies to the remaining heirs, who must pay up to 49.5%.

While, as mentioned, spouses and registered partners are exempt from inheritance tax in all cantons, high tax rates apply to unregistered partners in some cantons. For example, the tax rate for them is 30% in Schaffhausen and 25% in Valais.

Declaring an inheritance on a tax return is often problematic because it can be a complex undertaking. The heirs must declare the inheritance in the year of the testator’s death. However, it is not uncommon for it to take a little longer for an inheritance to be divided among several people. In this case, the inheritance can be declared as an estimated value and a note added so that the tax office knows that the exact amount of the inheritance has not yet been determined.

Tip: If in doubt, seek advice to avoid errors in your tax return. You can consult a tax advisor or schedule an appointment with a lawyer specializing in inheritance law.

Inheritance tax is generally due in the country where the testator resides. This means that inheritance tax does not have to be paid again in Switzerland if the inheritance originates from abroad. In practice, however, complex situations can arise, and some special cases must be considered. For example, an inheritance from abroad may not be subject to tax in Switzerland but must still be declared as assets. Accordingly, wealth taxes may be payable. If income is generated from the inheritance, income tax must also be paid.

Even if the inheritance laws of two countries contradict each other, complex cases can arise. For example, Swiss inheritance law stipulates that Swiss law applies if the testator last resided in Switzerland. German law, on the other hand, is based on the testator’s nationality. If, for example, the testator is a German citizen who last resided in Switzerland, it is therefore unclear which law applies. In such cases, it is advisable to consult an inheritance law expert.