Donation from grand parent

Children
1

Hello

I’m expecting my first kid by mid summer, and my father (american citizen living in the US) would like to setup some long lasting fund for the kid.

What would be the best way to setup this. from a banking point of view (type of account, banks…) but also from a fiscal point of view (how are international donations from grand parents taxed here) ?

I’m aware of the complications that could arise if the account is the kid’s name (can’t do much without the bank approval, the kid gets it at 18 no matter what).

Any tips or feedback appreciated

2

Complex topic, some first input:

Two options:

IB Family Account
True Wealth Kids Account

Most cantons don’t have inheritance tax, so Swiss authorities don’t tax these transactions.

3

Swiss gift/inheritance tax only matters if the donor/deceased is domiciled in CH (which isn’t the case here). So even if there was no family link it would be untaxed by CH.

(No idea if there are US triggered taxes tho)

1 Like
4

You’re right. The topic was also discussed here:

Gifts and tax declaration

5

I don’t think so, while as @nabalzbhf mentioned in this case there may not be any Swiss tax liability because the donor lives abroad, in general 23 out of 26 cantons levy gift taxes and 24 out of 26 levy inheritance taxes

1 Like
6

This.
Within CH, no tax has to be paid by the receiving person, nor to the receiving canton or the state by the gifting person.

(If the gift were gifted from within Switzerland, the gifting person might have to pay taxes, if I recall correctly to their canton.)

You’ll need to check US rules, if taxes apply there.

7

What’s right is that the tax is due in the donor’s canton.
Who pays it is up to the deal between the donor and the beneficiary.

What is due depends on two facts: how they’re related and what’s the (donor’s) kanton’s law about it and it varies A LOT between places. From tax-free to … much more.

8

Apparently, the recipient is actually the one held responsible for paying the tax (if one has to be paid).

9

Yes and I think it actually matters in principle, because this way the tax money is also effectively taxed.

For example, let’s say person A (Swiss resident) wants to make a gift such that person B gets 100k CHF net (so after tax), and say that the effective gift tax between them is 20%. If the donor was allowed to pay the gift tax, A would donate 100k and pay 20k taxes = 120k

But this is not allowed, B must pay the tax: so to achieve the same result A now has to donate 125k to B, so that B pays 20% on that (25k) and gets 100k post-tax. So the canton with this rule just got a 5k extra

10

It is generally correct that the cantons usually only levy gift tax when the person donating is a resident (concerning movable goods). However, gift and inheritance taxes are a minefield and e.g. Ticino could also levy tax when only the recipient lives in the canton (Art. 148 lit. c LT-TI). Then there are some double tax agreement regarding gift- and inheritance taxes. So the fact pattern is super important in gift/inheritance tax cases.

2 Likes
11

wow, thanks - TIL.
I thought that federal rules prevented cantons from taxing donations where the donor is not resident in that canton, but apparently this is not the case: it’s the case only for between-canton donations, so indeed Ticino may not tax a donation from a resident of another canton to the resident of Ticino, but may tax donations coming from outside of Switzerland