Cross-border inheritance: US/Switzerland Tax Treaty

Taxes
1

I’m trying to get a better grasp of inheritance taxes to be paid in Switzerland. My Swiss tax advisor and US one are not sure about this.

The case is as follows:
I have received a distribution from a US Trust where there were several beneficiaries.
There was 30% withholding on this, which my US tax advisor says will be paid out.

From what I gather the US and Switzerland has a tax treaty, to avoid double taxation etc. From what I read online: “Switzerland concluded inheritance and estate tax agreements with the US, Germany, Denmark, Finland, France, UK, Northern Ireland, Netherlands, Norway, Austria, and Sweden. Such agreements follow the residence principle, and the deceased person’s last residence state will tax all worldwide assets.”

"If a person dies with last domicile in the U.S., the state of the last domicile usually claims jurisdiction for that person’s estate and the laws of the decedent’s last domicile will apply. In 2024, the first $13,610,000 of an estate is exempt from taxes.”

Does this mean that it will not be taxed in Switzerland? I understand it will be taxed on wealth, but what about inheritance tax?

Thank you for any leads.

2

Get better tax advisors?

I mean, are you seriously asking the internet for something your own advisors, which you apparently have, can’t answer? Besides, you provide too little information to give you any inputs you don’t know already.

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3

Besides isn’t the whole point for a trust (in the US) that this actually isn’t an inheritance (the 30% aren’t estate tax afaict).

(I guess the question is how the swiss taxes treat the trust distribution, skimming online this might actually be treated as income which might be worse than if it wasn’t setup in a trust… but do your own research)

4

Thank you very much, that helps a lot. I guess it will be a per-case basis with the tax authorities.

5

FYI https://www.ius.uzh.ch/dam/jcr:0be7235d-c765-40d5-b12e-3c45470dc11b/Informal%20Translation%20of%20Trust%20Circular.pdf has a lot of details (incl pointers to how DTA might apply, but in general it does look like it’s often treated as income)

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6

I am also not sure how the fact that it is a trust plays out in Switzerland. But if this is considered a normal inheritance (you need to figure out if) then the situation is trivial: in Switzerland the federal government levies no inheritance taxes and the single cantons can levy inheritance taxes only if the deceased was a Swiss resident or if the inherited asset is a real estate located in that canton. So if you receive a cash inheritance from a deceased who was not resident in Switzerland - there is no Swiss tax liability. You will just declare the inheritance in your next year tax returns as an FYI to the tax office to explain the increase in wealth

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7

Have a look at “Kreisschreiben Nr. 20: Besteuerung von Trusts”. Also hire advisors that know what they are doing.

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