In the canton of Zurich, inheritance tax is a tax on hereditary shares that strikes the personal enrichment of each beneficiary at the time of death.
The circle of liable taxpayers depends principally on the kinship between the deceased and the person who receives the estate assets.
The persons liable and the total exemptions
The Zurich legislature draws a sharp distinction between the close family circle and the other beneficiaries:
- Total exemptions for close relatives: The surviving spouse, the registered partner and the direct descendants (children and grandchildren) benefit from a complete exemption from all inheritance tax in the canton of Zurich.
- Taxpayers subject to the tax: All other heirs or legatees who receive a share of the estate are personally liable to the tax; they include in particular the parents, brothers and sisters, nephews and nieces, cohabiting partners who are neither married nor in a registered partnership, and unrelated third parties, with progressive rates of tax that can become very heavy for more distant persons.
The extent of liability and the territorial rules
The obligation to pay this tax in the canton of Zurich also depends on precise geographical and succession criteria:
- Territorial connection: Zurich levies the tax on the entire movable estate where the deceased had his or her last legal domicile there; if the deceased lived outside the canton or abroad, Zurich taxes only the immovable property or the interests in immovable property situated on its own territory, according to the rules of intercantonal allocation.
- Particular cases and liability: In the case of a fideicommissary substitution, the subsequent heir (the person taking at the second succession) is taxed in Zurich according to his or her kinship with the original testator; in addition, each heir or beneficiary is personally liable for payment of the tax calculated on his or her net hereditary share.
Zurich applies its own statute, in a country where there is no federal inheritance tax. The canton of Aargau follows a similar logic, set out in who pays inheritance tax in Aargau.
Legal sources
Federal and cantonal legislation:
- Art. 127 para. 3 Cst.(cited in particular byBGE 150 I 31 ; Federal Supreme Court judgment 2P.98/2004 (cantonal tax jurisdiction and prohibition of intercantonal double taxation)
- Art. 129 para. 1 Cst. (cited in Federal Supreme Court judgment 2C_242/2014) (exclusive cantonal tax jurisdiction regarding inheritance tax due to the lack of federal harmonization)
- Art. 125 para. 1 of the Constitution of the Canton of Zurich (cited in Federal Supreme Court judgment 2C_242/2014) (cantonal constitutional basis authorizing the act on inheritance and gift tax)
Federal case law:
- Federal Supreme Court judgment 2C_242/2014 (purely cantonal nature of Zurich inheritance tax and determination of the taxpayer and rate based on kinship with the deceased)
- BGE 123 I 264 (Zurich’s tax jurisdiction at the deceased’s last domicile for movable property and taxing power in relation to the heir)
- Federal Supreme Court judgment 2P.98/2004 (liability criteria and delimitation of the share taxable in Zurich when immovable property is located in other cantons)