1. Overview of Swiss Inheritance Tax

• No federal inheritance tax: Switzerland does not impose inheritance or gift tax at the federal level. All rules are set by the cantons.
• Cantonal variation: Each canton has its own inheritance and gift tax regime. For example:
  • Cantons such as Schwyz and Obwalden levy no inheritance tax at all.
  • Cantons like Zurich, Geneva, and Basel levy inheritance tax, but usually exempt close family members.
• Spouses and direct descendants: In nearly all cantons, transfers to spouses and children are exempt.
• Other heirs: Siblings, more distant relatives, and unrelated heirs often face substantial inheritance tax, sometimes with progressive rates exceeding 30%.

2. U.S. Estate Tax Considerations

• Worldwide taxation: U.S. citizens and residents are subject to estate tax on their worldwide assets. The 2025 exemption is high (over $12 million), but estates above that threshold face rates up to 40%.
• No U.S.–Switzerland estate tax treaty: Unlike with Germany or France, the U.S. has no bilateral estate or gift tax treaty with Switzerland. This means there is no automatic mechanism to avoid double taxation.
• Foreign tax credit: In certain cases, U.S. taxpayers may claim a credit for Swiss inheritance taxes under general foreign tax credit rules, but application can be limited and complex.
• Reporting requirements: U.S. heirs receiving Swiss assets may need to file IRS Form 3520 (foreign gift/inheritance reporting) and disclose foreign financial accounts on FBAR/FinCEN Form 114 or FATCA/IRS Form 8938.

3. Exemptions and Allowances in Switzerland

• Spouses: Universally exempt in all cantons.
• Children and descendants: Exempt in most cantons, though not always (e.g., Vaud taxes children at low rates).
• Siblings and extended family: Frequently taxed at intermediate rates.
• Unrelated persons: Usually taxed most heavily, often with the lowest exemptions.

Because Switzerland has no unified system, a single inheritance can have very different tax outcomes depending on the canton.

4. Strategies for U.S. Persons with Swiss Connections

4.1 Choice of Residence and Canton

If the decedent is a Swiss resident, their canton of residence usually determines taxation. Some cantons are inheritance tax havens (e.g., Schwyz). Planning the place of residence before death can significantly reduce exposure.

4.2 Lifetime Gifts

Lifetime gifts are generally subject to the same cantonal gift tax rules as inheritances. In many cantons, exemptions mirror those for inheritance. From a U.S. perspective, however, such gifts may also trigger U.S. gift tax reporting obligations.

4.3 Holding Real Estate

Swiss real estate is always taxed in the canton where it is located, regardless of the decedent’s residence. This creates a “real estate trap” for U.S. citizens inheriting Swiss property, as U.S. estate tax and cantonal inheritance tax may apply without treaty relief.

4.4 Trusts and Foundations

Switzerland recognizes foreign trusts under the Hague Trust Convention, but the tax treatment depends on the canton and the type of trust (revocable, irrevocable, discretionary). In practice:

• Trusts can face look-through taxation, meaning assets are attributed directly to the settlor or beneficiaries.
• U.S. persons must also comply with strict IRS reporting rules (Forms 3520, 3520-A).

Swiss foundations (Stiftungen) are generally more restricted in use, but may serve charitable or private purposes. Their inheritance tax treatment varies by canton.

4.5 Coordination of U.S. and Swiss Law

Because the U.S. and Switzerland do not coordinate inheritance taxation through a treaty, U.S. persons should carefully align their estate plan to:

• Minimize exposure to cantonal inheritance tax.
• Ensure U.S. estate tax obligations are managed efficiently.
• Structure reporting to comply with both systems.

5. Common Pitfalls

• Assuming exemptions apply everywhere: Not every canton exempts children or grandchildren.
• Ignoring real estate situs rules: Property in Switzerland is always taxed locally, regardless of domicile.
• Overlooking reporting: U.S. beneficiaries must often report inheritances, accounts, and structures to the IRS, even if no U.S. tax is due.
• Trust mismatches: U.S. trusts may be poorly understood in Switzerland, leading to double taxation risks.

6. Practical Example

An American citizen living in California inherits CHF 2 million from an aunt who lived in Zurich:

• Zurich inheritance tax: nieces and nephews are taxed at progressive rates, possibly leading to a liability of more than CHF 200,000.
• U.S. estate tax: no credit under a treaty, but the U.S. beneficiary may attempt to use foreign tax credit rules to offset some liability.
• Reporting: the inheritance must be disclosed on Form 3520, and Swiss accounts over USD 10,000 must be reported on FBAR.

Without planning, the U.S. heir faces double taxation exposure.

7. Inheritance Tax Rules for Non-Residents & Foreigners

If you are not a Swiss resident or are a foreign national, the inheritance tax rules in Switzerland still may apply to your inheritance if you receive assets located in Switzerland (such as real estate or Swiss-banked assets). The key determinants are:

• Location of the asset: Real estate or Swiss-situated assets are taxed by the canton in which the property is located.
• Relationship to the deceased: Spouse and close relatives are often exempt or taxed at lower rates; more distant heirs may face higher rates or fewer exemptions.
• Canton of inheritance: Each canton has its own laws regarding non-resident heirs, including possible filing obligations and documentation requirements.
• International treaties: Where there are treaties between Switzerland and your country of residence, they may affect duties, double taxation relief or reporting requirements.

It is recommended to consult a Swiss tax expert or legal advisor to assess how your specific situation will be treated, especially in cross-border cases involving non-resident heirs or foreign nationals.

8. Conclusion

Switzerland’s inheritance tax system is highly decentralized, and the lack of a U.S.–Swiss estate tax treaty creates unique risks for U.S. citizens and residents. While spouses and children are often exempt, heirs such as siblings, nieces, nephews, or unrelated persons may face significant liabilities.

Because the U.S. estate tax applies worldwide and Swiss cantons impose their own inheritance taxes, professional advice is essential to structure wealth efficiently, prevent double taxation, and remain compliant with reporting rules.

If you are a U.S. citizen with assets or heirs in Switzerland, consult experienced cross-border tax professionals to secure your family’s future. Proper planning can dramatically reduce taxes, prevent compliance issues, and ensure a smooth transfer of wealth.