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Old 28.05.2010, 19:13
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American inheritance tax in CH?

I was just reading and article in a local paper, and it left me with a question:

If an elderly Swiss-American living in Switzerland dies and leaves a Swiss-based inheritance to their Swiss-American kids living in Switzerland, does the American tax department tax the inheritance?

- the parent was born in CH, but lived in US for some time, and currently has US and CH passports, but has been living back in CH for over 20 years

- the kids where born in the US, but have been living in CH for over 20 years, and have CH and US passports

thanks in advance

matt
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Old 29.05.2010, 10:39
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Re: American inheritance tax in CH?

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I was just reading and article in a local paper, and it left me with a question:

If an elderly Swiss-American living in Switzerland dies and leaves a Swiss-based inheritance to their Swiss-American kids living in Switzerland, does the American tax department tax the inheritance?

- the parent was born in CH, but lived in US for some time, and currently has US and CH passports, but has been living back in CH for over 20 years

- the kids where born in the US, but have been living in CH for over 20 years, and have CH and US passports

thanks in advance

matt
Yes, all estates of "US persons" are subject to US federal estate tax (the US does not have an "inheritance" tax although some states do; inheritance taxes generally vary according to the relationship of the recipient (as does the German IHT; thus UK "IHT" is also an estate tax despite its name)). There will be a credit towards the US federal tax for any Swiss/cantonal inheritance tax paid. If there is property located in a US state or a state deems the person domiciled there, it may also assess tax.

That said, there is no reciprocal tax collection agreement between the USA and Switzerland and thus if there are no assets of the succession in the USA there are no means for the IRS to enforce the tax unless the heirs have a US connection, visit the US or have assets there.

Read this memo, formerly distributed by the Swiss Embassy in Washington: http://uniset.ca/misc/swissestates.pdf

Civil-law "succession" is not by means of an "estate" ("une masse" in French). The legal heirs and the testamentary heirs of any discretionary portion of the decedent's assets gain direct title. It may thus be difficult to achieve the unanimity needed to file IRS Form 709 and apportion the tax fairly among the heirs, even more so if there are minors involved. If there is a surviving spouse, the chances are nil that Swiss court will assist in the creation of a QDOT (you can Google that, it's a trust that permits the postponement of US estate tax on assets passing to a spouse at death).

But: there is a principle of "transferee liability" that would enable the IRS to seize any US assets of an heir to meet the estate tax (death duty) liability of that person in respect of inheritance from a decedent whose succession passed with unpaid tax. The fact that the decedent's offspring are (you say) American citizens suggests that the IRS will have jurisdiction over them. And where an executor or an administrator fails to file Form 709, or is not appointed (or doesn't exist, as in Swiss law), it is incumbent on the heirs to file it and pay any tax due.

Bear in mind that few estates are actually subject to US estate tax. It is a base canard, propagated by anti-tax people like Grover Norquist and by propagandists acting for the very rich, that ordinary working people, owners of small businesses and family farmers will have estates subject to the tax. In 2011 the exemption amount (unless changed by Congress) will revert to $1 million and the federal tax rate on amounts above that may be taxed at a rate up to 55%; in 2010 there is no estate duty at all. Google 'estate tax exemption' for more information.
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Old 02.05.2013, 15:34
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Re: American inheritance tax in CH?

Hi
I'm new to this Forum.
I have an alternate Question about this: What if the deceased was ONLY Swiss, but the heirs are Double-Citizens (USA and Switzerland)?

And to make things even more complicated: The deceased dies in Switzerland, resided in Switzerland. Two of three heirs live in Switzerland (Double Citizens), one heir lives in the US (Double Citizen, too).

Which Heir pays what to the IRS?

Thanks a LOT for helping out!
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Old 02.05.2013, 17:36
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Re: American inheritance tax in CH?

As all 3 are Americans, all 3 will be liable for American income tax, regardless of residency.
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Old 02.05.2013, 19:27
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Re: American inheritance tax in CH?

Thank you.
But there is nothing 'new' coming onto that?
Something like inhertance tax or whatever!?
So it will just be 'more' to file, next time we file?
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Old 06.05.2013, 10:01
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Re: American inheritance tax in CH?

As I understand, federal inheritance tax is often not so much of an issue, but state inheritance tax can be. Depends of course on the state of residence, and whether the CH residents are still subject to state tax (varies by state law, some have far-reaching arms).
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Old 06.05.2013, 14:37
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Re: American inheritance tax in CH?

To tag on to this question -- what if you received a large "gift" in USD from a living, US citizen and you are a US citizen but you live in CH as a local (on local contract). Does CH collect tax from your US dollars gift? I know that CH does not differentiate from gift or inheritance while US does.
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Old 06.05.2013, 16:54
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Re: American inheritance tax in CH?

This is my understanding. Inheritance and gift taxes are generally considered the same in CH* and are assessed at the cantonal and not at the Federal level. Whether a gift recipient is taxed and the tax rate used then depend on the canton.

Based on the attached link, if a gift-recipient lives in Canton Zurich, is not related to the gift-giver and receives the equivalent of CHF 500'000, the gift-recipient would pay CHF 140'400 to the Canton Zurich in inheritance/ gift taxes. On the other hand, if the gift-recipient is a direct descendent of the gift-giver and resides in Ct. Zurich would result in -0- taxes due.

http://www.erbschaftssteuern.ch/wp-c...ersicht-21.pdf

This link has information on the reporting process to follow:

http://www.erbschaftssteuern.ch/verfahren

Going forward, a Swiss resident would pay normal annual capital taxes on the assets from the gift.

To the extent that you are source-taxed (Quellensteuer) the taxes may be different. You should likely talk to a tax adviser in your canton.

* - But also see bullet 12 on pdf: "Angegebene Beträge gelten nur für die Erbschaftssteuer; Beträge für Schenkungssteuer sind z.T.etwas höher, insbesondere für Eltern, direkte Nachkommen und Geschwister."
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Old 07.05.2013, 11:22
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Re: American inheritance tax in CH?

Curt -- so does that mean that the Swiss do not differentiate between a gift giver from the US or Switzerland. If the giver and receiver are US citizens, does the Canton have the right to tax the gift that was in US Dollars?
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