How Swiss inheritance taxes compare internationally

On November 30, the Swiss will vote on a popular initiative to create a federal inheritance tax to finance climate policy via a new tax on large estates. Keystone/DPA/Arne Dedert

Swiss inheritance taxes are in the spotlight thanks to a popular initiative up for a vote on November 30. Switzerland is unusual among OECD countries in having no federal inheritance tax. Instead, the cantons (and some municipalities) set their own rates, which vary widely. This makes it tricky to compare the Swiss scheme with national-level schemes in other countries.

On November 30, the Swiss will vote on a popular initiative to create a federal inheritance tax. The initiative was submitted by the youth chapter of the left-wing Social Democratic Party and aims to finance climate policy through a new tax on very large estates. Its chances of being accepted are slim.

>> Read our article on the issues at stake and the arguments of supporters and opponents:

The idea of using a federal inheritance tax to help fund the federal budget is not new, but it is particularly controversial. In 2015, a popular initiative proposed a federal tax on inheritances worth several million Swiss francs to support the old-age pension scheme. More than seven out of ten voters rejected the proposal.

The government, parties on the right, and the business community opposed the 2015 initiative, claiming it would increase the tax burden for many heirs and push wealthy residents to leave the country.

But the possibility of a federal inheritance tax still sometimes surfaces in Switzerland. Inheritance tax is also debated periodically in other developed countries in the context of increasing inequality and budget problems. FranceExternal link and GermanyExternal link, for example, are currently re-examining the issue.

Fourteen OECD countries do not tax inheritance

According toExternal link the Organisation for Economic Co-operation and Development (OECD), 24 of the 38 OECD countries tax inheritance. Of those 24, only Switzerland and Belgium do not impose a tax at the national level. In Switzerland, each canton determines whether and how to tax inheritance. Obwalden and Schwyz are the only two cantons (out of 26 in total) that do not impose some form of inheritance tax, according to the Swiss Tax ConferenceExternal link.

Among the 14 OECD countries without an inheritance tax, four have never imposed one. The others gradually abolished theirs, starting in the 1970s, primarily due to a “lack of political support for this tax”, according to the OECD. Norway and the Czech Republic were the last to do so, in 2014.

Common principles

Inheritance taxes in OECD countries tend to share certain common features. For example, they are generally designed to be progressive, meaning that larger fortunes are taxed at a higher rate.

The degree of kinship also typically affects the tax rate. Close relatives are usually taxed the least. Spouses are exempt in virtually every country, and children are in most countries. If they are taxed, significant tax allowances (untaxed amounts) are granted.

In Switzerland, all cantons exempt spouses and registered partners. All but three cantons exempt direct descendants.

Differences in details

Despite these common features, the exact details of inheritance-tax schemes – tax rates, tax allowances – vary considerably among the OECD countries and within federal states such as Switzerland and Belgium.

In Japan, for example, children inheriting from a parent are taxed (above a certain allowance) at a rate that can reach as high as 55%. In South Korea it can reach 50%, and in France it can reach 45%. In some OECD countries children are not taxed at all. The average rate is around 15%.

Direct descendants in Switzerland are taxed at a rate well below the OECD average: the only three cantons that don’t exempt them impose low rates. Canton Appenzell Inner Rhodes imposes 1% on inheritances over CHF300,000 ($370,000), canton Neuchâtel imposes 3%, and canton Vaud imposes between 0.1% and 7% on inheritances of more than CHF1 million.

The picture changes significantly, however, for heirs without family ties. In Switzerland, they pay rates that vary greatly between cantons and climb as high as 50% in canton Vaud and canton Geneva – a rate approaching those of the highest-taxing countries. In France, the rate is 60%.

Modest tax revenue

The various OECD inheritance-tax schemes generate different revenues, but they are almost universally quite low. Today, the OECD notes, inheritance tax accounts on average for only 0.5% of total tax revenue.

This, according to the OECD, is due to “narrow inheritance-tax bases and tax-planning opportunities”. In most countries, therefore, only a minority of inheritances fall within the highest tax bracket.

Currently in Switzerland, inheritance-tax revenue (CHF1.5 billion) represents 0.7% of the total combined municipal, cantonal, and federal tax revenue. At the cantonal level, tax revenue from inheritances and gifts represents a more significant 2.4% of tax revenue.

Inheritance tax accounts for more than 1% of total tax revenue in only four OECD countries: South Korea, France, Japan and Belgium. In South Korea it exceeds 2%, a record among major economiesExternal link.

At the other end of the spectrum (putting aside the 14 countries that do not levy any inheritance tax), eight OECD countries derive less than 0.25% of their total tax revenue from inheritance taxes.

Bigger inheritances, lower taxes

In recent decades, the international trend has tended towards reducing or abolishing inheritance taxes. According to the OECD, tax allowances have risen and tax rates have fallen in several member countries since the 1980s.

Switzerland has followed this trend. The average inheritance-tax rate has declined steadily over the past three decades, saysExternal link Marius Brülhart, an inheritance-tax expert and professor of economics at the University of Lausanne.

This decline, Brühlhart explains, is “primarily due to the abolition of inheritance tax for direct descendants”. Between 1991 and 2004, he says, inheritance tax was reduced throughout Switzerland “in a kind of domino effect”. Canton Obwalden eliminated it completely in 2017, even though it had only introduced the tax in 1981.

As a result, although the total value of inheritances skyrocketed between 1990 and 2022 – rising from CHF20 billion to CHF88 billion – revenue from inheritance taxes in that same period did not keep pace, according toExternal link Brühlhart. It increased from approximately CHF900 million to less than CHF1.4 billion.

Today, the average tax on every CHF100 inherited in Switzerland is CHF1.60. The Swiss Tax Conference considers this a rather modest amount given the sum of inherited wealth and gifts – which should reach a record CHF100 billion this year, according toExternal link Marius Brülhart.

Switzerland is not the only country where inherited wealth is set to rise. Globally, “the looming inheritances from the baby-boomer generation represent the largest transfer of wealth in financial history”, according to a study published last year by the consulting firm EY Switzerland.

EY calculates that $2-3 trillion (CHF1.6-2.4 trillion) were bequeathed worldwide in 2024. And a sum “equivalent to the annual GDP of China” ($18 trillion) will be inherited between now and 2030. Some see in these figures a potential windfall for public finances.

Edited by Balz Rigendinger. Adapted from French by K. Bidwell/ts

The main arguments for and against inheritance tax

The merits of taxing inheritances and gifts divide economists. Here is a summary of the main arguments for and against this type of tax.

For:

Recently in developed countries – including Switzerland, according to an articleExternal link in 24 heures – inheritance has contributed more and more to wealth creation. Inequality has also increased. An inheritance tax, according to its supporters, helps limit the concentration of wealth and promotes equal opportunities by redistributing a portion of inherited assets.

The tax is also seen as a more equitable source of public-policy funding than certain other taxes because it targets the wealthy.

Some supporters make an economically liberal argument: they believe that an inheritance tax is more efficient than an income tax because it is less likely to dissuade people from working or starting a business. They also maintain that an inheritance tax encourages people to consume during their lifetimes.

Against:

Opponents contend that an inheritance tax amounts to a second levy on assets already taxed during a person’s lifetime. They also condemn it as infringing on property rights and family succession.

Some emphasise the potential negative economic consequences of poorly designed inheritance taxes. Studies address the risk of discouraging saving and entrepreneurship as well as the risk of pushing wealthy taxpayers and companies to leave the country. The Swiss government fears a possible flight of capital and therefore recommends voting against the initiative on November 30.