Roche & Cie

Denunciation of the franco-swiss tax agreement on inheritances

After many negotiations, the Franco-Swiss tax agreement of 1953 on inheritances has just been denounced, since Switzerland has refused to ratify a new agreement. In this way, from the 1st January 2015, the taxation of inheritances involving Swiss or/and French residents will depend only on the domestic law of each country, and no longer on the agreement previously in effect. We suggest you to review the consequences of this termination, especially concerning the fate of mostly real estate companies (like SCI), as well as the various solutions available to taxpayers.

•  Evolution of the taxation

The Franco-Swiss agreement in effect until the end of 2014 is considered as largely in favour of Switzerland. Indeed, the criterion for taxing the inheritance was the country of residence of the deceased person. One exception was stipulated for real estate properties, taxed only in the State where they were located. By contrast, transferable securities were subject to the common law scheme: in this way, the Swiss residents used to invest in France through the SCI (Real Estate Companies), so that in case of inheritance, the securities that represent the shares of this company are taxed in Switzerland, even if the property held by the SCI was situated in France.

From now on, French law regains its autonomy while establishing the tax and the shares of SCI will be subject to the regime applied to properties, namely the taxation in the State where the immovable property is situated.

•  Perspectives

Some Swiss residents might see in this evolution an argument in favour of the removal of the assets held in France. It is appropriate to put into perspective the interest of such a decision.

Indeed, first we can notice that Switzerland committed in a popular initiative process, which allows to a full range of citizens suggesting a law in order to adopt it by vote. Within this framework, it has been proposed to tax inheritances at a rate of 20%, and this independently from the taxpayer’s canton of residence (at present only 3 cantons are taxing the inheritances). Then the benefit of an expatriation or a repatriation of the assets in Switzerland would be largely reduced.

Also, there are solutions allowing a substantial reduction of the due tax in France. As such, the anticipation of an inheritance is the best solution. In fact, many specific allowances are foreseen within the context of donations-sharing (donation-partage). As example, it can be mentioned the discount of 100 000€ per share for any donation to a child.

For example, let’s calculate the price of a donation by a 65 years old couple, married under the regime of  communal estate settlement,having 3 children, and wishing to transfer to them the bare ownership of a property in France (or the rights attached to a mostly real estate company). It’s value is of 1 200 000 €: but the tax base will be of only 600 000 €(as the couple has more than 61 years old: cf. scale of assessment of the bare ownership calculated according to the donor’s age), to which it is appropriate to apply the discount of 100 000€per child and per parent. So: 3 x 100 000 €= 300 000€, i.e. 600 000€of total discount for both the parents. In this way, the tax base is reduced to 0, leading to a total exemption of the donation.

Once the inheritance initiated, a similar preferential regime is also applied. However, we notice that deductions operated within the context of the previous donations are taken into account for the calculation of the inheritance tax: the allowances can’t be cumulated, unless the donation was operated more than 15 years before the inheritance. In this case, the inheritance in favour of the spouses is totally exempted from tax and an allowance of 100 000€is foreseen for ascendants or children.

So, we notice that the articulation between different preferential regimes evoked above allows limiting the fiscal impact with regard to French taxation when transferring the assets situated in France by inheritance. The termination of the Franco-Swiss agreement  which initially could seem not very favourable for the assets held in France, can be counterbalanced by tax allowances and discounts stipulated by the French common law.

Switzerland also regains its sovereigntyin terms of taxation. Also, the cantons will be able to take the decision about the taxation of the Swiss residents’ worldwide assets. In such an event, it is likely that a double taxation be applied for the same asset, but it entirely depends on the domestic fiscal policy of each canton.


Cabinet Roche & Cie, English speaking accountant in Lyon, France.
Specialist in Real estate and non-résidents taxation.