Inheritance Tax Initiative

Making sure you know what to expect

In March 2024, the popular initiative ‘For a social climate policy – financed fairly through taxation (Initiative for a Future)’ – in short, the ‘Inheritance tax initiative’ – came into being. It calls for an inheritance and gift tax of 50%. This is to be levied by the federal government in addition to cantonal or municipal inheritance and gift taxes.

Those affected can claim a one-off tax exemption of CHF 50 million on all gifts and a person’s estate after the initiative is adopted. The number of persons or institutions that receive donations from this estate is irrelevant.

Study on the Inheritance Tax Initiative

What family businesses think of the inheritance tax initiative and how they’re preparing for possible implications

This initiative threatens the sustainable continuation of family businesses and destabilises the pillars of our economy. To find out the opinions of Swiss family businesses on the ‘Initiative for a Future’ and initiate the debate, we surveyed 224 family business entrepreneurs. The findings are clear:

Clear No: 96% of survey participants would reject the inheritance tax initiative.
Insufficient liquid assets: 8 out of 10 of the people affected would not have sufficient liquid funds to pay the future tax.
Threat to Switzerland as a centre of business: 2 out of 3 family businesses would not or only partially remain in family hands following succession.
Moving abroad: 78% of those affected are already considering moving abroad or transferring assets within the family ahead of time.

Study: Swiss family businesses in danger

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Challenges

Since this is only the text of an initiative, there are only scant details regarding how it could potentially be implemented. Based on the publications of the initiative committee, we interpret it as follows:

The legislator is not granted any leeway or exceptions, not even in the case of company succession. In many cases, the inheritance tax may only be financed through the following measures:

Partial sales
IPO
Significant external financing

Nonprofit institutions would also be affected if the initiative were to be adopted without any exceptions (legacies, bequests, etc. to nonprofit institutions form part of the estate).

At present, donations to nonprofit institutions (and political parties) are tax-deductible to a certain extent and do not need to be declared.
Do donations during a person’s lifetime take up the entire tax-free allowance of 50mCHF?

The cantons currently have the right to levy inheritance or gift tax on real estate in Switzerland (in the relevant canton).

How are properties in Switzerland owned by people residing abroad treated?

Since the federal estate and gift tax is to be levied in addition to the existing cantonal inheritance and gift taxes, in extreme cases this could result in a tax rate of almost 100%.

Does the combination of cantonal and national tax rates lead to confiscatory taxation?
The maximum cantonal inheritance and gift tax is 49.5%, which means that a tax rate of almost 100% is conceivable.

Stages in the political process

Based on the Parliamentary Act on the Treatment of an Initiative, we have created a possible timeline for the political process (see Figure 1). Accordingly, a referendum on the inheritance tax initiative could take place in around 2026.

Recent developments

On 15 May 2024, the Federal Council of the Swiss government recommended rejecting the initiative without presenting a direct alternative or indirect counter-proposal. It has instructed the Federal Department of Finance to prepare the message to present before Parliament.