Legal | Tax | Compliance
Legal | Tax | Compliance
How can wealthy individuals and entrepreneurs already address the harmful inheritance tax initiative proposed by the Swiss Juso?
The inheritance tax initiative by JUSO (supported by influential members of the "adult" SP) aims to introduce a federal inheritance and gift tax on estates and gifts exceeding CHF 50 million. 50% of the amount exceeding this threshold is to be allocated specifically for "a socially just fight against the climate crisis.
At the end of 2024, the Federal Council clearly and unequivocally opposed the initiative in a report (message) to Parliament. It backed this stance with facts, figures, and an expert opinion, demonstrating that the initiative is economically harmful, infringes on the cantons' tax sovereignty, partially contradicts the Constitution and the principle of proportionality in Swiss tax policy, and ultimately leads to an outflow of taxable income from Switzerland rather than generating additional tax revenue. The verdict is therefore clear: the Federal Council rejects the initiative without proposing a direct counterproposal or an indirect alternative and explicitly emphasizes that inheritance and gift taxes are under the jurisdiction of the cantons, and the initiative undermines this authority. However, referring to the Federal Constitution and established practices, the Federal Council does not declare the initiative invalid or partially invalid.
he Federal Council makes it clear that the popular initiative is harmful and questionable from a state political perspective. This is especially true for the preemptive effect triggered by the initiative. It creates uncertainty among entrepreneurs and wealthy individuals and deters potential affluent newcomers from moving to Switzerland: Investments are withheld, relocation plans are being prepared, and plans to move are put on hold. This damage has already been done and is costing the Swiss economy millions of francs.
Rightly, Parliament is moving forward at great speed: Already in the fourth week of January, the initiative was overwhelmingly rejected by the responsible commission of the National Council (17 to 8 votes). A vote on the initiative could likely take place later this year – so the damage caused by it could at least be somewhat limited. Initial surveys also show a clear "No" from the people regarding the initiative, and a clear majority of cantons are against it.
Somewhat reassuring is that the possibility of an (immediate and effective upon acceptance of the initiative) exit tax is ruled out by the Federal Council for legal reasons. The exit tax provided for in the transitional provision of the initiative could therefore only come into effect after the adoption of corresponding implementing provisions (and thus not retroactively to the date of the vote). Such provisions would need to be enacted in a law or regulation no later than three years after the acceptance of the popular initiative. Since it is unclear which measures to prevent tax avoidance might even be considered and could be enforced internationally, and not least because relocation may also occur for reasons other than tax avoidance, an exit tax could only be imposed after the creation of a legally valid basis. A fiscal "imprisonment" of entrepreneurs and wealthy individuals living in Switzerland, therefore, will not occur.
An immediate effect would, however, take place after a possible acceptance of the popular initiative for actual inheritances and gifts. Upon acceptance of the initiative, inheritances and gifts from persons who are residents in Switzerland at the time of death or the gift would (immediately) be subject to the new inheritance and gift tax, which siphons off 50% of the portion of the donation or inheritance exceeding the CHF 50 million threshold.
For the specific situation of entrepreneurs and wealthy individuals living in Switzerland, this means the following:
1. Should the initiative be accepted at all (which, as of today, is extremely questionable, if not highly unlikely), there would be sufficient time (approximately three years) to plan a potential relocation from Switzerland to adapt to the new tax situation. This risk is generally both manageable and predictable. While it makes sense to reflect on this, immediate measures are currently unnecessary.
2. The new taxation would, however, come into effect immediately for donors and testators residing in Switzerland who make actual donations or pass away and whose transfers or estates exceed the CHF 50 million threshold. It is unlikely that gifts would still be made under such circumstances, which is why this risk can be avoided or considered negligible. The risk of death, however, remains an ever-present latent factor. Should the initiative be accepted during a person’s lifetime, and they unfortunately pass away before a possible relocation abroad, the new taxation would apply. Given the high likelihood that the initiative will not overcome the double hurdle of a popular and cantonal majority, this risk can also likely be considered acceptable.
3. The looming threat of the initiative, as well as the various (completed and planned) revisions of Swiss inheritance law, have created uncertainties or questions regarding the legal situation. It is therefore advisable to review one's estate and tax planning in the near future and discuss it with experts. The team at MME Legal & Tax, specializing in private clients, is available in Zurich and Zug for consultations and further information.
