Avacore Wealth Planning contributed to the chapter on Franco-Swiss aspects of the Practical Guide to Estates (Swiss law), edited by Pierre Novello.
This reference work provides an in-depth analysis of the civil and tax issues specific to international estates, particularly those involving France and Switzerland, where the risk of double estate taxation may exist.
The Practical Guide to Estates can be ordered at a very reasonable price on the author’s website: Purchase the book
Cross-Border Estate Taxation at Risk
Estates involving France and Switzerland constitute particularly sensitive territory from a tax perspective in the absence of a tax treaty on estates since January 1, 2015. Without proper planning, heirs may face cumulative taxation that is sometimes disproportionate to the actual economic value transferred.
This risk results from the overlap of two tax systems, each potentially claiming taxation rights over the same transfer.
Overlap of French and Swiss Tax Systems
Swiss Approach
Taxation of gifts and estates falls under the exclusive sovereignty of the cantons. Taxation depends primarily on the deceased’s domicile, the nature of the assets transferred, and the location of real property.
French Approach
France applies an extensive approach based on the existence of a connecting factor with its territory. The deceased’s domicile, the heir’s domicile, or the location of assets may be sufficient to trigger taxation in France, even when the estate has a strong international character.
The Central Role of the Deceased’s and Heir’s Domicile
Analysis of tax risk is primarily based on identifying the domicile of the deceased and that of the heirs. Certain configurations are particularly exposed.
Deceased Domiciled in Switzerland and Heir Resident in France
In this configuration, France may tax the transfer based on the heir’s domicile, while Switzerland will tax all Swiss, French, or other movable assets and Swiss real property. A tax credit mechanism eliminates double taxation in France, but not always.
Deceased Domiciled in France and Heir Resident in Switzerland
When the deceased is domiciled in France, France will tax the entire estate. Swiss cantons may, in parallel, tax assets located in Switzerland (real property, furnishings, etc.). Each cantonal law must be examined.
Deceased and Heir Domiciled in Switzerland with French Assets
Even when the deceased and heir are domiciled in Switzerland, the presence of assets located in France triggers French taxation, potentially creating a situation of partial or total double taxation.
The Distinction Between Real Property and Movable Assets
The nature of the assets transferred is a key element of international estate planning. Real property and movable assets are subject to different taxation rules depending on the jurisdiction.
Real Property Located in Switzerland
Real property located in Switzerland is in principle taxable in Switzerland. However, France may tax it if the deceased or heir(s) are in France.
Real Property Located in France
Real property located in France remains taxable in France, even when the deceased and heirs are domiciled abroad. This rule is central to estates involving Swiss residents with French real estate. This asset will not be taxable in the canton of the deceased’s domicile.
Movable Assets and Financial Holdings
Bank holdings and French movable assets may contribute to cumulative taxation when held by a deceased domiciled in Switzerland.
SCI and Indirect Ownership
Ownership of French real property through a société civile immobilière may be a source of double taxation since they will be taxable in France and in the canton of the deceased’s domicile.
