Initiative for a new inheritance and gift tax by the Juso party

The party Juso (young socialists) managed to collect sufficient signatures for a popular initiative to implement a new inheritance and gift tax on the federal level. This means that the Swiss citizens can decide on a popular vote about the implementation of this initiative, probably in 2026 at the earliest. If the initiative will be accepted, estates from deceased persons and gifts exceeding CHF 50 million will be subject to a tax of 50%. At this time, it can be assumed that the initiative will not be accepted. Most of the political parties reject it. However, there is no 100% guarantee for this and affected individuals should consider measures for the avoidance or reduction of such new tax.

| Benno Hinni, Paul Thalmann

Content of the initiative

The official title is initiative “for a social climate policy – fairly financed by taxes (initiative for a future)”. The revenues from the new inheritance and gift tax are to be used only for a “social and fair combat against the climate crisis and for the necessary reorganisation of the overall economy”.

The tax is to be levied on estates and gifts after a one-time deduction of CHF 50 million. The tax rate for estates and gifts above CHF 50 million is 50%. Estates and gifts below CHF 50 million would not be affected by the new tax.

It is foreseen in the initiative text that the new inheritance and gift tax would be applicable from the day the initiative is accepted in a popular vote. The implementing of federal and cantonal regulations are to take effect retroactively from the date of the popular vote. Furthermore, the implementing regulations are supposed to prevent the avoidance of the new tax, in particular, with respect to individuals leaving Switzerland.

On 13 December 2024, the Swiss government adopted its statement on the initiative for the attention of the parliament. The government recommends the rejection of the initiative. Switzerland is already pursuing an active climate policy so that the goal of the initiative is already met today. Furthermore, with the acceptance of the initiative many persons with assets above a value of CHF 50 million would leave Switzerland. As a consequence, the revenues from the new tax would be much lower than anticipated and Switzerland would also loose the income and wealth taxes from these wealthy persons. Especially the cantons would be adversely affected by this. The government is also of the opinion that taxes or other measures to prevent individuals from leaving Switzerland would not be permitted. Therefore, persons resident in Switzerland affected by the new tax in case of its implementation are not required to leave Switzerland prior to the popular vote to avoid the new tax.

Tax consequences after acceptance of the initiative

With the acceptance of the initiative, the new inheritance and gift tax would be applicable from the day of the popular vote. If a person with a domicile in Switzerland deceases (possibly shortly) after the day of acceptance and if the estate has a value of more than CHF 50 million, the new inheritance tax will be levied. The new tax of 50% will only be levied on the part of the estate exceeding CHF 50 million. The new tax would be payable by the heirs in proportion to their participation in the estate. Based on the general tax practice, an inheritance and gift tax is levied if the deceased person or the person giving a gift has his or her (last) tax domicile in Switzerland or if Swiss real estate is part of the estate or gift. However, an inheritance or gift tax is not levied only because the heir or recipient of a gift has his or her tax domicile in Switzerland.

The new inheritance tax would be levied on Swiss real estate as part of the estate even if the deceased owner had his or her last domicile outside of Switzerland. The amount of CHF 50 million would then not be fully deducted from the value of the Swiss real estate but only in proportion of the value of the Swiss real estate in relation to the total value of the estate. Therefore, also people who are not resident in Switzerland, including their heirs, respectively, can be affected by the new tax if the worldwide estate has a value of more than CHF 50 million.

Measures to avoid the new tax in case of the acceptance of the initiative

An obvious measure to avoid the new inheritance and gift tax – should it be accepted at all – would be to leave Switzerland. This could be done after the acceptance of the initiative as it is not planned that there will be taxes or other restrictions related to leaving Switzerland. However, if the initiative should be accepted, the new tax would be levied from the date of such acceptance and would affect every person with assets of more than CHF 50 million who dies with a tax domicile in Switzerland.

Leaving Switzerland would not prevent the new inheritance or gift tax on Swiss real estate. To avoid the new tax after leaving Switzerland, Swiss real estate must be sold or contributed into a company. However, such transactions might trigger other taxes in Switzerland.

The new tax could be deferred for a generation with gifts to descendants (possibly as part of the inheritance planning) prior to the day of the popular vote. Such gifts could be given under conditions or with the reservation of a usufruct. Gifts to descendants do not trigger the current cantonal gift taxes in most cantons.

An option could also be to transfer assets to foundations or trusts. Such transfer will only be accepted for tax purposes if the founder or settlor completely gives up the legal and actual control over these assets. This has a massive impact on the asset structure and wealth which should not be implemented without thoroughly considering its consequences.

Whether and which measures are conceivable at all must be examined in each individual case on the basis of the specific circumstances.

Benno Hinni
Attorney at law, Certified Tax Expert
[email protected]
Paul Thalmann
Attorney at law, Notary Public
[email protected]

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