Will a drastic hike in Swiss inheritance tax lead to an exodus of billionaires? 

Keystone / Gaetan Bally

A proposal to levy an inheritance tax of 50% on the super-rich has provoked emigration threats from wealthy Swiss residents.   

Billionaires with a tax residency in Switzerland received a rude shock when the youth wing of the Social Democratic Party (JUSO) launched an initiative in 2022 calling for a 50% tax on inheritances worth more than CHF50 million ($56 million). The left-wing proposal estimates that CHF6 billion could be raised through this every year and wants the money to be funnelled into environmental protection initiatives such as renovating buildings, developing renewable energies or investing in public transport. The justification given by the proponents of the so-called “For the Future” initiativeExternal link is that the richest people are largely responsible for climate change and should therefore make amends.  

A lot of people in Switzerland apparently agree, as the Young Socialists managed to collect enough signatures by February this year to force a nationwide vote as early as 2026.  

Against the trend

The proposal to drastically raise inheritance tax for the super-rich is going against the general trend of making it less painful for the general populace. Between the mid-1990s and the early 2000s, many Swiss cantons reformed their tax strategies and abolished inheritance tax for close family members.   

Inheritance tax in Switzerland

Switzerland does not have inheritance tax at the federal level, but all cantons except Schwyz and Obwalden levy an inheritance tax. The relationship between the deceased and their heirs also plays a decisive role: spouses and direct descendants are exempt in most cantons. The inheritance tax rate is also progressive and, in most cases, it is multiplied by a factor depending on the relationship between the deceased and the heir. 

Take canton Zurich. According to wealth management and family office firm Centro LAW, spouses and direct descendants are exempt from inheritance tax. Parents are exempt up to an amount of CHF200,000 and siblings up to CHF15,000. For all other cases, the tax rate is progressive and starts at 2% for inheritances up to CHF30,000 and rises as high as 6% for amounts above CHF1.5 million. Depending on the relationship with the deceased, these tax rates are multiplied by a factor of one for parents, two for grandparents, three for siblings, five for aunts and uncles, and six for non-related persons. 

A similar trend can be observed at the European level. Since 2000, Austria, the Czech Republic, Norway, Slovakia and Sweden have abolished their inheritance or estate taxes. According to a report by the Organisation for Economic Co-operation and Development (OECD)External link, a lack of political support for inheritance tax was responsible for the recent decisions to repeal inheritance, estate, and gift taxes. The high administrative burden compared to relatively meagre revenues was also cited as a reason in some countries.  

Will the spectre of the 50% inheritance tax rate in Switzerland for the super-rich provoke a flight of the captains of Swiss industry to other countries? 

“JUSO are forcing me to emigrate,” complained Peter SpuhlerExternal link, the boss of Stadler Rail, in the SonntagsZeitung newspaper earlier this month.  

With a fortune estimated at over CHF3 billion, Spuhler’s descendants will have to fork out at least CHF1.5 billion in one fell swoop as inheritance tax if Swiss voters approve the initiative. The super-rich in Switzerland are right to be worried. A study by the Swiss Institute for Economic Research (KOF)External link revealed that about 60% of the 300 richest Swiss residents inherited their fortune. It is not by accident that the Alpine nation is quite a favourable location for the fabulously wealthy. 

“Wealthy individuals can set up family offices that save on income tax, and private capital gains are not subject to personal income tax. Yes, there’s a wealth tax, but it’s more like an income tax of last resort on the super-rich,” Isabel Martinez, head of the Inequality and Public Economics research section at the KOF, told SWI swissinfo.ch.  

However, according to her, an inheritance tax of 50% is still quite high by international standards and could potentially backfire. 

“There’s a risk that Switzerland could lose both inheritance tax and the annual income and wealth tax revenue if the super-rich decided to emigrate,” she says. 

This is exactly what Spuhler is threatening to do. He told the SonntagsZeitung that he was considering emigrating to Austria (the Austrian Constitutional Court repealed inheritance tax in 2008) to avoid his companies being “sold off to Chinese or private equity investors abroad who only wanted to make a quick buck” to pay the 50% inheritance tax rate proposed by JUSO. But Martinez is not convinced that such drastic measures are necessary.  

“I find it difficult to believe that the heirs can’t find a bank to lend them money to pay the inheritance tax if the company they’ve inherited is profitable,” she says.  

Edited by Marc Leutenegger/ts