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Swiss National Council Blocks French Inheritance Tax Deal

by Ulrika Lomas, Tax-News.com, Brussels

16 December 2013


As expected, the Swiss National Council has rejected the Franco-Swiss agreement, aimed at avoiding double taxation in the area of inheritance tax. Replacing the existing bilateral accord between the two countries dating from 1953, the text was overwhelmingly blocked by 122 votes to 53, with 11 abstentions.

Vehemently criticized by the Right, opponents of the accord denounced provisions allowing France to exercise its taxing power. Lawmakers alluded to a form of "French imperialism," refusing to be dictated to by a neighboring country and friend.

In contrast to the previous agreement, which stipulated that inheritance tax is due in the deceased's place of residence, the new deal enables the French Government to tax heirs and beneficiaries of Swiss citizens, resident in France. This is after deduction of any inheritance tax due in Switzerland, however, and on condition that heirs and beneficiaries have been resident in France for at least eight out of ten years prior to the period of receipt.

Although the changes may merely seem of a technical nature at first glance, the financial ramifications of the new provisions are enormous, and of great concern to the Swiss community currently living in France, for example.

For direct inheritances, heirs are subject to very little inheritance tax or indeed are exempt from taxation in Switzerland. In France, inheritances between direct descendants are taxed at rates varying between 5 and 45 percent, depending on the value of the inherited assets.

While taking note "with regret" of the National Council's decision to block the Franco-Swiss deal, which was signed in Paris on July 11, 2013, French Finance Minister Pierre Moscovici nevertheless stressed that this is not the end of the Swiss ratification process. Moscovici pointed out that the text will now pass to the Swiss Council of States for its consideration, in March 2014.

Thanking Swiss Finance Minister Eveline Widmer-Schlumpf for her commitment and involvement, Finance Minister Moscovici underlined his confidence that the "excellent dialogue" now in place between France and Switzerland will continue and will serve to improve tax cooperation between the two states.

Concluding, French Finance Minister Moscovici underscored the merits of the new text, which, he insisted, fully satisfies the overarching aim of bilateral tax agreements, namely to eliminate double taxation, to avoid cases of double non-taxation, and to combat tax fraud and tax evasion.

The Swiss Council of States is also expected to reject the deal.

TAGS: inheritance tax | Finance | tax | agreements | tax rates | France | Switzerland

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