As you may already know, inheritance and gift taxes in Switzerland are a matter of cantonal law. No inheritance or gift tax is therefore levied at the federal level.
In most of the cantons, a full exemption applies between spouses and in direct lines, which tends to narrow the relevance of such tax in Switzerland in comparison to other countries. Some cantons, like Schwyz and Obwalden, do not levy any inheritance or gift taxes at all.
A radical impact on gifts and successions
However, this might change in the future with a popular initiative launched in 2022 by the Young Socialists and called: “For a social climate policy – fairly financed through taxes (Initiative for a Future)”. By February 2024, such initiative had already collected a sufficient number of signatures (the minimum being 100’000) and will therefore be submitted to the popular vote in the years to come (late 2025 but most likely in 2026). The Federal Council has already taken position on this initiative and recommended the Parliament to reject it without presenting a direct alternative or indirect counterproposal.
What is it all about?
In a nutshell, the initiative calls for an inheritance and gift tax of 50% to be levied by the federal government in addition to cantonal or municipal inheritance and gift taxes. A one-off exemption of CHF 50 million can be claimed on all gifts and a person’s estate after the initiative is adopted (spouses are supposed to be treated separately, which might double the exempted amount). The text of the initiative does not allow for any exceptions (e.g. for family businesses or charities) and provides for additional measures to prevent tax avoidance, for example when moving abroad (so-called “exit tax”, which has clearly been rejected by the Federal Council). In certain cases and depending on the relationships between the donor/deceased and donee/heir, the addition of the federal new charge and the cantonal taxes could mean paying 100% of the gifted or inherited assets! It is estimated that around 2’000 individuals in Switzerland may be affected by this tax.
Combat the climate crisis
Two thirds of the revenue from the new inheritance and gift tax (supposed to be around CHF 6 billion a year) are supposed to go to the federal government and one third to the cantons. The funds would be used to combat the climate crisis in a manner that is socially acceptable, as well as for the necessary restructuring of the economy as a whole.
Retroactivity?
Many aspects of the initiative still need to be clarified, in particular regarding the possible retroactive application of the new rules.
According to the text of the initiative, the new tax is supposed to come into force on the day it is adopted by the Swiss people (even before regulations are adopted at the Parliament level). Federal Council considers that the retroactive taxation of estates and gifts demanded by the initiators is highly problematic in terms of Government policy. Further clarifications are expected by February 2025 on this matter.
A “subsequent right of taxation”, e.g. in the case of gifts made shortly after emigrating, would theoretically be possible but it will be difficult to enforce it abroad as there is at present no enforcement assistance for inheritance tax claims with third countries. In any case, the Federal Council made it clear that it would still be possible for Swiss taxpayers to leave Switzerland after the day of the vote without incurring such punitive inheritance/gift tax.
Conclusion
So far, a large majority of the surveyed people would reject the initiative. Another initiative to reform inheritance tax was already rejected by 71% of voters in 2015 (it called for the introduction of a national inheritance and gift tax of 20% on sums of CHF 2 million or more). A more in-depth analysis should be possible around March 2025, when the Federal Council's dispatch to Parliament is available.
This article is brought to you by the Wealth Planning Solutions Team.
Contributors: Samuel Favre - Wealth Planner, Sylvain Pichard - Head of Wealth Planning Solutions