SWITZERLAND Law and Practice Contributed by: Olivier Sigg and Quentin Thorens, Walder Wyss
general rules on direct taxes, while gifts are exempt from direct taxes. Hence, no gift tax is levied at the federal level in Switzerland; gift tax exists only at the cantonal and municipal levels. Although rules vary from one canton to another, most cantons levy gift tax if the donor is a resident of the relevant canton or if the gift is real estate located in the relevant canton. However, the tax is due from the donee. The applicable rate gen- erally varies depending on the relationship between the donor and the donee. Some cantons exempt gifts made between spouses or to direct heirs. Private capital gains realised on privately held mov- able assets are generally tax-exempt in Switzerland at the federal, cantonal and communal levels. However, capital gains arising from professional trading activi- ties or self-employment are subject to income tax. In addition, gains derived from the transfer of Swiss real estate are typically subject to a specific real estate capital gains tax at the cantonal level. Some considerations may prove crucial on the tax outcomes of lifetime transfers. Notably, gift tax is lev- ied at the cantonal and municipal levels; consequently, the domicile has a huge impact on tax outcomes, as the rate may double from one municipality to another. Moreover, the timing of gifts may be a crucial con- sideration, as certain cantons provide for annual tax- Transfers of property upon death are subject to can- tonal inheritance tax, generally assessed on the mar- ket value of the assets at the date of death. Unrealised gains may arise in respect of business assets. However, death does not trigger taxation of unrealised gains. Instead, under the principle of tax succession, the heirs assume the deceased’s tax position and the assets are transferred at their exist- ing book values for income tax purposes. The precise rules depend on the relevant cantonal legislation. This may lead to unexpected tax consequences for heirs, particularly where an asset has been used for private purposes by several generations but remains subject exempt allowances in respect of gifts. 5.2 Testamentary Dispositions
to taxation on the latent capital gain upon its eventual sale. Specific rules are of course dependent on cantonal law. Nevertheless, common planning considerations are the place of residence, given that the tax rate var- ies from municipality to municipality. Moreover, some cantons provide broader exemptions based on the relationship with the deceased. Finally, the inheritance tax burden may be reduced by inter vivos gifts, sub- ject to the conditions of cantonal law.
6. Lifetime Succession Planning Mechanisms 6.1 Common Planning Techniques
Under Swiss law, inter vivos estate-planning tech- niques primarily rely on civil-law instruments, includ- ing gifts, either as outright transfers or structured as advances on inheritance, loans or the creation of usu- fruct rights. As lifetime transfers made by the testator, gifts may be structured so as not to be brought into account in the estate, for example in order to favour a particular heir. On the contrary, gifts may take the form of advance payments of inheritance, in which case their value must be taken into consideration when calculating the estate to be divided, thereby preserving equality among the heirs. It is also common to transfer real estate during lifetime while reserving a usufruct in favour of the transferor, allowing the early transmission of assets while retain- ing the right to occupy or use the property. Loans may likewise be granted to heirs or to third par- ties as part of succession planning. Family entities, such as holding companies or family partnerships, enable orderly succession and provide a structured framework for managing family wealth. These vehicles allow for a gradual transfer of control and assets, preserve operational continuity and can facilitate the implementation of tax or governance arrangements tailored to complex family situations.
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