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France, Switzerland Ink New Inheritance Tax Accord

by Ulrika Lomas,, Brussels

16 July 2013

Swiss Finance Minister Eveline Widmer-Schlumpf and her French counterpart Pierre Moscovici have recently signed, in Paris, the new Franco-Swiss agreement aimed at avoiding double taxation in the area of inheritance tax. Both Ministers also signed a joint declaration reaffirming their commitment to extensive bilateral dialogue, to resolve outstanding tax issues.

Replacing the existing bilateral accord from 1953, the new text is intended to put an end to certain situations of non-taxation of inheritances. The revised treaty provides that France can tax heirs and beneficiaries resident in France, although after deduction of any inheritance tax paid in Switzerland. Switzerland thereby retains its primary right of taxation and its taxing power is not affected.

However, heirs and beneficiaries of the deceased who are resident in Switzerland must have been resident in France for at least eight out of ten years prior to the period of receipt, in order for France to be able to exercise its taxing power.

Furthermore, the agreement establishes tax transparency for real estate companies. Real estate held indirectly via a company is taxable where these assets are located. However, this tax is not applicable if the deceased or his/her family owns half of this company and property represents more than a third of all of the assets of the company.

Finally, the accord facilitates future information exchange between Switzerland and France, permitting requests and group requests, even in cases where taxpayers' banking details are not known.

According to the Swiss Federal Department of Finance (FDF), the signing of the Franco-Swiss agreement marks "a first concrete step" in mutual dialogue. Underlining the commitment of both countries to further strengthening cooperation and to deepening discussions, the FDF highlights the fact that a joint working group is to be set up in September, tasked with finding a solution to contested tax issues.

The working group will address issues including administrative assistance in tax matters, the regularization of untaxed assets, Switzerland's expenditure-based taxation (lump-sum taxation), and the application of tax regulations governing the Basel-Mülhausen airport.

Welcoming the joint signing of the treaty, French Finance Minister Moscovici emphasized that the accord constitutes significant progress in the fight against tax exile and tax evasion, as well as in strengthening bilateral dialogue between France and Switzerland.

The inheritance tax agreement must first be approved by the parliaments of both treaty states, before the provisions can enter into force.

TAGS: inheritance tax | Finance | tax | banking | France | Switzerland | regulation

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