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Inheritance Tax Initiative - an Initial Assessment

On March 4, 2024, the federal initiative “For a social climate policy - fairly financed through taxation (Initiative for a future)” (the “inheritance tax initiative” for short) was launched by JUSO (Young socialists) Switzerland.

The initiative basically contains the following:

Tax on inheritances and gifts from natural persons: Natural persons domiciled in Switzerland are affected. In addition to this new tax of 50%, the cantons and municipalities will retain the right to levy their own existing inheritance and gift taxes (in the worst-case scenario, this could result in charges of up to almost 100%).

Exemption amount of CHF 50 million: A one-off exemption amount of CHF 50 million will be granted on the estate, i.e. only assets in excess of this amount will be subject to the new tax of 50%.

No exceptions are provided for: No exceptions are envisaged - apart from the one-off tax-free amount - i.e. the new tax should also apply, for example, to business successions or donations to charitable institutions or the public sector.

Measures to prevent tax avoidance: In the event of a departure from Switzerland, taxation with the new tax is to be ensured (kind of exit tax).

The new tax is to come into force on the day it is adopted. The vote is currently expected in 2026 at the earliest. However, as only the initiative text is currently available, the actual legal text is still open. In May 2024, the Federal Council recommended rejection without a counterproposal and must now prepare a dispatch for the attention of Parliament. It remains to be seen (from around March 2025) whether Parliament will follow the Federal Council or draw up a counterproposal.

For those who may be affected, the question arises as to what the possible alternative options are. The following options are currently being considered:

Moving abroad: In principle, the new tax can be avoided by moving abroad. However, any limited tax liability due to Swiss real estate must be taken into account. These remain subject to Swiss taxation. With regard to moving abroad as late as possible, the Federal Council's response to an interpellation on August 21, 2024 should provide certainty that no precautionary move abroad is necessary before the vote, as no exit taxation is to take place.

Gifts to children (possibly with usufruct): Gifts to children prior to entry into force should be possible. However, a future generation would one day have to bear the new tax.

Gifts between spouses: The current understanding is that spouses will be treated separately and therefore the exemption amount of CHF 50 million per transferor should apply.

Disposal of assets: Assets could be disposed of by setting up a foundation. However, the civil law structure of a foundation must be taken into account for the tax assessment, i.e. no tax-transparent foundation is set up.

A more in-depth analysis should be possible around March 2025, when the Federal Council's dispatch to Parliament is available. For any further questions or advice, please contact Remo Merz, Swiss certified tax expert, remo.merz@fineac.ch.

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Remo Merz, 09.09.2024

Keywords: Taxes,Tax Consulting, Inheritance Tax, Popular Initiative, Federal Council, Parliament, Fineac