Is tax charged on death or on gifts by individuals and, if so, which factors cause the tax to apply, when must a tax return be submitted, and at what rate, by whom and when must the tax be paid?
Currently, India does not have any taxes, which are charged upon death of an individual. Taxability of gift transactions is currently dealt under the IT Act. Section 56 of the IT Act provides that if any person (including individual) receives any property from any person whatsoever, the value of which exceeds INR 50,000 without any consideration or for inadequate consideration, then the difference between the fair market value of such property and the price paid, if any, will be considered as income in the hands of the recipient and taxed accordingly. However, Section 56 is inapplicable under certain circumstances, some of which are elaborated hereunder:
(a) any relative (in case of an individual) as defined under the IT Act;
(b) on the occasion of the marriage of the individual;
(c) under a Will or by way of inheritance;
(d) in contemplation of death of the payer;
(e) any prescribed local authority;
(f) any prescribed fund or foundation or university or other educational institution or any medical institution;
(g) any prescribed charitable trust;
(h) any trust settled by the settlor for the benefit of the individuals who are his relatives.
For details relating to filing of tax return, please see response to Question No 2.
There is tax on donations. Subject to taxation are properties acquired free of charge and extinguished liabilities.
Generally, the tax liable person is the donated individual; however, it is possible that both the donor and the donated person are tax liable if they have agreed on that.
The tax base is the value of the property determined. The donation tax is in the rage of 0,4%-0,8% for siblings and their children and 3,3% - 6,6% for all other cases.
The donation must be declared and the donation tax should be paid by the tax liable person through filing a tax return at the municipality within two months from the donation receipt.
Exempt from taxation are donations between spouses and lineal heirs, and also donations to certain non-profit organizations and institutions, hospitals, common gifts and other donations envisaged by law.
There is also inheritance tax. Subject to taxation is the inherited property, incl. immovable property and the property rights on it as well as all other debts and liabilities (unless envisaged otherwise by law) located on the territory of Bulgaria or abroad. The inherited property located in Bulgaria of foreign citizens is also subject to Bulgarian inheritance tax.
Exempt from taxation is an inheritance share with value below BGN 250 thousand, inheritance of the surviving spouse and the lineal heirs and certain other exceptions envisaged by law.
Tax liable individuals are the heirs or the covenants. The tax base is determined by law considering certain deductions envisaged. Тhe taxable inheritance is divided into inheritance shares as each heir receives a particular share.
The tax rate is from 0.4 % to 0.8 % for siblings and the children of siblings per inherited share above BGN 250 thousand and between 3,3% and 6,6 % for all the others per inherited share above BGN 250 thousand.
Tax liable individuals are obliged to submit a tax return in the municipality where deceased resided last or in the municipality where the majority of the inheritance is located (in case the decedent had domicile outside Bulgaria) within six months after the inheritance was found. Representatives of the respective municipality determine the amount of the inheritance tax due and notify the heirs. The tax due should be paid within two months from the receipt of this notification.
Yes, Capital Acquisitions Tax (“CAT”) is charged on the receipt of gifts and inheritances.
The charge to CAT is governed by the Capital Acquisitions Tax Consolidation Act 2003 (“CATCA”)
A charge to CAT will generally arise where:
- The donor / disponer is resident in Ireland at the date of the gift / inheritance;
- The recipient is resident in Ireland at the date of the gift / inheritance;
- The property comprised in the gift / inheritance is Irish situate property.
The recipient of a gift / inheritance will be subject to CAT where the value of the gift / inheritance exceeds the applicable CAT-free threshold amount.
The deadline for payment of CAT and filing returns will depend on the valuation date. The valuation date is also relevant when considering whether the recipient can avail of certain exemptions / reliefs from CAT.
The valuation date of a taxable gift is the date of a gift. The valuation date of an inheritance will vary depending on the nature of the assets comprised in the inheritance and the length of time it takes to administer the deceased’s estate.
An individual who is domiciled outside Ireland will not be resident or ordinarily resident for these purposes unless he has been resident in Ireland for the preceding five years.
Payment of CAT is made by way of self-assessment. Where 80 per cent of the class threshold which is appropriate to a benefit has been exceeded, the person who is primarily accountable for paying the CAT is obliged to deliver a return and pay the tax due.
Where the valuation date falls within the period 1 September to 31 August the following year, the filing and payment date is 31 October of the following year.
The US transfer tax system is three pronged: a gift tax applies to certain transfers made during lifetime; an estate tax applies to certain transfers taking effect at death; and a generation-skipping transfer tax (GST tax) is imposed on certain transfers made during lifetime or at death (or at the time of distribution in the case of a transfer from a trust) to a person (a skip person) more than one generation below the transferor. Some, but not all, states within the US also impose estate or inheritance taxes.
The US imposes a gift tax on donative transfers from a US citizen or domiciliary to donees other than a US citizen spouse or charity, except with respect to certain transfers for a donee’s education or healthcare. US gift tax is imposed on a flat 40% rate on cumulative taxable gifts (other than annual exclusion gifts) in excess of the basic exclusion (gift tax exemption) amount of $10,000,000, as adjusted annually for inflation from 2010 (estimated to be $11,180,000 in 2018). Annual exclusion gifts are gifts of a present interest from a US citizen or domiciliary to a donee other than a US citizen spouse or charity that do not exceed $15,000 (for 2018) per donee (or $30,000 per donee if made by a married donor whose spouse consents on a US gift tax return to having such gifts treated as having come one-half from him or her). Gifts to a spouse who is not a US citizen that do not exceed around $152,000 (estimated for 2018) qualify for the annual gift tax exclusion. Outright gifts are considered gifts of a present interest. Gifts made in trust may be gifts of a present interest if certain withdrawal powers or termination provisions are present in the trust; the absence of such entitlements will cause a gift made in trust to not qualify as an annual exclusion gift. Reporting of taxable gifts and the payment of any US gift tax due thereon must be made by April 15 of the year following the year in which the taxable gift was made (with extensions available upon request).
The US imposes an estate tax on the taxable estate of a US citizen or domiciliary. A US citizen’s or domiciliary’s taxable estate consists of his or her worldwide gross estate, valued as of date of death (or the earlier of the date of disposal of the assets or the date that is six months after the date of death, if the effect of choosing this ‘alternate valuation date’ will be a lowering of the estate tax due), reduced by various deductions (such as debts, administration expenses, qualified distributions made to or for the benefit of a surviving US citizen spouse or charity) and credits. US estate tax is imposed at a flat 40% rate on a taxable estate above the basic exclusion (estate tax exemption) amount of $10,000,000, as adjusted annually for inflation from 2010 (estimated to be $11,180,000 in 2018), after reduction therefrom of taxable gifts made during lifetime. Nonresidents are also subject to US estate tax on US-situs property owned at death. US-situs property of a nonresident includes real or tangible personal property with a physical location within the US, shares of stock of a US corporation, certain debt obligations, deferred compensation of a US Person, and annuity contracts of a US obligor. Bank deposits and life insurance are not considered US-situs property of a nonresident. The taxable estate of a nonresident is taxed at a progressive estate tax rate capped at 40%, but the estate is allowed an estate tax exemption of only $60,000. US estate tax is due 9 months from date of death, although an extension of time to pay may be granted for reasonable cause. Likewise, for gross estates that exceed the estate tax exemption amount, a US estate tax return is due 9 months from date of death; an automatic 6-month extension of time to file is available. No further extension is available beyond 15 months from date of death. Under the concept of portability, for a married decedent who has not exhausted his or her available estate tax exemption, the filing of an estate tax return allows the porting of the deceased spouse’s unused exemption to the surviving spouse to avoid wastage of the predeceased spouse’s estate tax exemption. Portability is not available with respect to unused GST exemption.
The US imposes a GST tax on (1) outright transfers to skip persons (including trusts where all of the beneficiaries are skip persons), (2) distributions from certain trusts to skip person, and (3) on the assets of a trust where all of the remaining beneficiaries are skip persons upon the death of the last beneficiary who is not a skip person (GST transfers). In addition to any US estate tax or gift tax applicable to the transfer, US GST tax is imposed at a flat 40% rate on cumulative GST transfers above the basic exclusion (GST exemption) amount of $10,000,000, as adjusted annually for inflation from 2010 (estimated to be $11,180,000 in 2018). US GST tax is due by April 15 of the year following the year in which the GST transfer was made or, in the case of GST transfers taking effect upon the donor’s death, on the due date of the US estate tax return in respect of the donor’s estate.
Property included in a decedent’s estate will qualify for a basis adjustment (commonly referred to a basis step-up, although the adjustment can be downward) to the property’s date of death (or alternate valuation date) value, for subsequent capital gains tax purposes.
In France, gift tax is due by the donee on lifetime gifts (see § 5.1.) and inheritance tax is due by the heir/legatee on death of the deceased (5.2.).
The same territorial principles apply to gift tax and inheritance tax. They are due if one of the three following conditions is met:
- the donor (or deceased) is resident of France as defined by article 4 B of the French tax code (see §1.1.)
- the donee (or heir) has been resident of France (as defined by article 4 B of the French tax code) for at least six of the preceding ten years.
- The transferred asset (movable or immovable) is located in France.
The main assets which are considered as located in France for gift tax, inheritance tax and ISF (see §4.1.) purposes are the following:
- real estate properties located in France
- movable assets (i.e. furniture, pieces of art) located in France
- shares of companies registered in France
- debts when the debtor is resident of France
- shares of companies (French or foreign) owning real estate properties located in France having a market value exceeding those of their other French movable assets (“société à prépondérance immobilière”).
- shares of companies (French or foreign) owning real estate properties located in France directly or indirectly held for more than 50% by the same family members (only for the fraction of their market price which represent the market value of real estate properties located in France).
Transfers for no consideration of the above mentioned French assets between non-resident individuals are subject to either French gift tax or French inheritance tax.
5.1. Gift tax
Gift tax is due by the donee but can be paid by the donor. When this is the case the gift tax paid by the donor is not treated as additional gift.
Various allowances, for each fifteen-year period may apply depending on the donor’s relationship with the donee:
- parent and children in direct line: – 100,000 €
- brothers and sisters: – 15,932 €
- nephews and nieces: – 7,967 €
- spouses or partners: – 80,724 €
- grandchildren: – 31,865 €
- great-grandchildren: – 5,310 €
- disabled people: – 159,325 €
- other beneficiaries: – 1,594 €
Cash gifts benefiting to children, grandchildren, great grandchildren (nieces and nephews in the absence of direct descendants) are exempted from gift tax up to 31,865 € assuming the donor is under 80 years old and beneficiaries are over 18 years old or emancipated for each fifteen-year period.
The rates of gift tax for 2017/2018 are also different depending on the donor’s relationship with the donee.
Lifetime gifts to spouse or civil partners do not benefit from the exemption which applies to inheritance tax (see below). They are subject to the following progressive scale rates:
- up to 8,072 € – 5 %
- from 8,072 € to 15,932 € – 10 %
- from 15,932 € to 31,865 € – 15 %
- from 31,865 € to 552,324 € – 20 %
- from 552,324 € to 902,838 € – 30 %
- from 902,838 € to 1,805,677 € – 40 %
- more than 1,805,677 € – 45 %
Lifetime gifts between parents and children in direct line are subject to the same progressive scale rates from 5 % to 45% than those which applies for inheritance tax (see § 5.2.).
Lifetime gifts between brothers and sisters are subject to the same progressive scale rates from 35% to 45% than those applying for inheritance tax (see § 5.2.).
Lifetime gifts between relatives up to the fourth degree, including nephews, nieces, grandnephews and grandnieces, aunts and uncles, grandaunts and granduncles, first cousins are subject to a 55% gift tax.
Other gifts are subject to a 60% gift tax.
Gift tax should be paid within 30 days after the lifetime gift or after its disclosure to the French tax authorities (for manual gifts).
5.2. Inheritance tax
Inheritance tax is due by the heirs.
Allowances described in § 5.1. apply to inheritance tax if they were not already used on gifts made during the fifteen-year period preceding the death.
The rates of inheritance tax for 2017/2018 are also different depending on the deceased’s relationship with the heir.
A total exemption of inheritance tax applies between spouses and civil partners.
The progressive Inheritance tax scale rates between parents and children is as follows:
- up to 8,072 € – 5 %
- from 8,072 € to 12,109 € – 10 %
- from 12,109 € to 15,932 € – 15 %
- from 15,932 € to 552,324 € – 20 %
- from 552,324 € to 902,828 € – 30 %
- from 902,838 € to 1,805,677 € – 40 %
- more than 1,805,677 € – 45 %
The progressive scale inheritance tax rates applying between brothers and sisters is as follows:
- up to 24,430 € – 35 %
- more than 24,430 € – 45 %
The inheritance tax rate applying between relatives up to the fourth degree is 55%.
The inheritance tax rate applicable for more distant relatives and unrelated persons is 60%.
Inheritance tax should be paid within six months following the death if the deceased was resident of France upon his/her death and within one year if he/she was non-resident.
Transfers upon death and gifts are subject to inheritance and gift tax at the following rates and with the following exempt amounts:
(a) 4 per cent, if the transfer is made to spouses and direct descendants or ancestors; here, the transfer is subject to tax on the value exceeding Euro 1 million (this exempt amount applies to each beneficiary);
(b) 6 per cent, if the transfer is made to brothers and sisters; here, the transfer is subject to tax on the value exceeding Euro 100,000 (this exempt amount applies to each beneficiary);
(c) 6 per cent, if the transfer is made to relatives up to the fourth degree, to persons related by direct affinity as well as to persons related by collateral affinity up to the third degree; and
(d) 8 per cent, in all other cases.
Lifetime gifts, executed by the deceased to the beneficiary, erode the amount that is exempt from inheritance gift tax. According to two recent judgments of the Supreme Court (No. 24940 of 6 December 2016 and No. 26050 of 16 December 2016), the exempt amounts available on death are not eroded by lifetime transfers (it is fair to say that the position of the Supreme Court does not seem to be shared by the tax authorities).
Inheritance and gift tax is levied on worldwide assets if the deceased or donor had his or her habitual abode in Italy on the date of demise or gift, otherwise it applies only to Italian-situs assets.
The law sets forth non-refutable presumptions whereby certain assets are deemed to be situated in Italy. For example, the following assets are in any event deemed to be situated in Italy: assets enrolled in the public registers of Italy (such as real estate, ships and aircrafts, trademarks and patents) and connected rights of enjoyment in rem; shares and quotas of companies with either the legal seat or the seat of management or the main object in Italy; bonds and other securities in series, other than shares, issued by Italy or by the aforementioned companies; receivables and cheques if the debtor or the issuer is a resident of Italy (irrespective of the location of the security, if any); receivables secured by property situated within Italy up to the value of the property, irrespective of the residence of the debtor.
The inheritance tax return must be filed within 1 year from the date of demise by either of the individuals called to succeed and the legatees, their legal representatives, the administrators or the persons managing the estate. In the event of a gift executed in form of a donation in front of an Italian public notary, the notary is bound to report the gift to the Italian tax authorities. The tax is assessed by the tax authorities following the filing of the inheritance tax return or the reporting of the gift. Specific rules apply to gifts other than formal donations.
It is common to gift the bare ownership of assets to future generations by reserving the right of usufruct. This triggers the levy of gift tax on the value of the sole bare ownership, whilst the expansion of bare ownership to full ownership, upon the death of the usufruct holder, is not subject to inheritance tax.
Inheritance: There is currently no inheritance or estate tax in Israel and death is not a taxable event.
Gifts: Cash gifts to Israeli individuals are not subject to gift tax. Gifts of other assets to family members or to others in good faith are not taxable, provided that the recipient is not a foreign resident in which case, there is liability to capital gains tax.
Greece charges tax both on inheritance as well as on gifts.
Inheritance tax and gift tax returns are generally filed within 6 months of death or will’s publishing [if deceased or heir is a foreign resident, filing is extended to 12 months] or of gift accepted respectively and tax is paid in 12 equal monthly installments.
The tax rates applied in both cases are affected (i)by the relevant relationship of the deceased/heir and donor/donee and (ii)by the value of the property accepted, while certain reliefs, subject to conditions [value and surface], apply particularly to primary dwellings.
Inheritance and gift tax is due and paid by the receiving party and imposed upon the receiving party’s wealth [not upon the estate or the donor].
Tax rates are indifferent in both cases [inheritance and gift], are calculated progressively and are split in 3 categories, as follows:
Category 1: Spouse [<5 yrs married], children [>18 yrs old], grandchildren, parents, cohabitation, cohabitation partnership
above 600k: 10%
[Spouses married over 5 yrs to the deceased and minor children under 18 years old are eligible to tax exemption up to 400k of property’s value while the higher rates are imposed accordingly].
Cash gifts are taxed at 10%, irrespective of amount.
Category 2: Siblings, uncles, aunts, great-grandchildren, grandparents, spouse’s prior marriage children and “in-laws”
above 300k: 20%
Cash gifts are taxed at 20%, irrespective of amount.
Category 3: All others
above 267k: 40%
Cash gifts are taxed at 40%, irrespective of amount.
Property donated or inherited is subject to tax, generally if:
(a) property is located in Greece regardless of donor’s/donee’s or deceased’s/heir’s residence or nationality or
(b) property is located abroad and owned by Greek national [regardless of residency] unless –in regards to inheritance tax only- the Greek national has been established abroad for more than 10 years [applies to movable property] or
(c) property is located abroad and owned by foreign national who is Greek resident.
Transfers of worldwide assets on death or on gifts are subject to German inheritance or gift tax if at least one of the individuals (transferor or transferee) is resident in Germany. If none of them is a German resident, German inheritance or gift tax may apply to the extent as certain assets located in Germany are transferred (e.g. German real estate, business property which belongs to a permanent establishment in Germany, shares in German companies). A tax treaty may provide shelter from German taxation in certain cases. The applicable tax rate ranges between 7-50 % depending on the value of the assets received and the relationship between the parties involved. Notice on a taxable transfer must be given to the competent authority within 3 months after the transfer. A tax return will then have to be filed within a term to be determined by the authority and the tax will usually become due 30 days after the tax has been assessed by the authority. In general, the tax is to be paid by the transferee.
A. Competence of the Regions
Gift and inheritance tax fall under the competence of the three Regions: the Flemish Region, the Brussels Capital Region and the Walloon Region. As a consequence, different gift and inheritance tax rules apply in the three regions. The most relevant differences relate to the categories of gift and inheritance tax rates and the criteria to be considered as partners (spouses and cohabiting persons).
In each region the categories of gift and inheritance tax rates depend on the degree of kinship between the donor or deceased and the beneficiary, the value of the gift or inheritance and the nature of the donated or inherited goods.
B. Relevant factors
The relevant factor that causes Belgian gift tax to apply is the registration of the donation with the Belgian tax authorities. Such registration is mandatory for each donation that is done before a Belgian notary. The registration of a donation of tangible movable property is not mandatory if not done before a Belgian notary; such donation is not subject to gift tax unless it is voluntarily registered with the Belgian tax authorities.
Belgian inheritance tax is due if the deceased was a resident of Belgium, i.e. if he had his domicile or his ‘seat of wealth’ in Belgium. These criteria should be interpreted in the same way as for income taxes (cf. question 1).
For Belgian residents, the region where the donor or deceased has his place of residence will in principle determine which rules will in principle apply (Flemish, Brussels or Walloon).
For non-residents, gift and inheritance tax is due on the donation or inheritance of Belgian immovable property, according to the rules that apply in the region where the immovable property is located. Gift tax on movable property is only due if the donation is registered with the tax authorities. Upon the death of a non-resident, no inheritance tax is due on his Belgian movable property.
C. Inheritance tax
When a Belgian resident passes away, inheritance tax is due on the net value of his worldwide estate. Subject to certain conditions and within certain limits, foreign inheritance tax on foreign immovable property can be offset against the Belgian inheritance tax on the foreign immovable property.
For non-residents, inheritance tax is only due on their Belgian immovable property. If the deceased was a resident of the EEA, inheritance tax is due on the net value, while for non-EEA-residents inheritance tax is due on the gross value.
An inheritance tax return must be filed within four, five or six months from the deceased’s death, depending on the physical location where the deceased was at the time that he passed away (in Belgium/EEA/outside EEA). Upon receipt of the tax bill, the tax is due within two months.
In the Flemish Region, inheritance tax is due as follows:
- In direct line and between partners: movable and immovable property are taxed separately at rates of 3% to 27% (27% as from EUR 250.000). The calculation is made on the net share per beneficiary.
- Between brothers and sisters: no split between movable and immovable property. Tax rates go from 30% - 65% (65% as from EUR 125.000). The calculation is made on the net share per beneficiary.
- Between all other beneficiaries: no split between movable and immovable property. Tax rates go from 45% - 65% (65% as from EUR 125.000). The calculation is made on the total net share of these persons, then divided amongst them according to their share in the inheritance.
In the Brussels Capital Region, inheritance tax is due as follows:
- In direct line and between partners: tax rates go from 3% to 30% (30% as from EUR 500.000). The calculation is made on the net share per beneficiary.
- Between brothers and sisters: tax rates go from 20% - 65% (65% as from EUR 250.000). The calculation is made on the net share per beneficiary.
- Between uncles/aunts and nephews/nieces: tax rates go from 35% - 70% (70% as from EUR 175.000). The calculation is made on the total net share of these persons, then divided amongst them according to their share in the inheritance.
- Between all other beneficiaries: tax rates go from 40% - 80% (80% as from EUR 175.000). The calculation is made on the total net share of these persons, then divided amongst them according to their share in the inheritance.
In the Walloon Region, inheritance tax is due as follows:
- In direct line and between partners: tax rates go from 3% to 30% (30% as from EUR 500.000). The calculation is made on the net share per beneficiary.
- Between brothers and sisters: tax rates go from 20% - 65% (65% as from EUR 175.000). The calculation is made on the net share per beneficiary.
- Between uncles/aunts and nephews/nieces: tax rates go from 25% - 70% (70% as from EUR 175.000). The calculation is made on the net share per beneficiary.
- Between all other beneficiaries: tax rates go from 30% - 80% (80% as from EUR 175.000). The calculation is made on the net share per beneficiary.
D. Gift tax
A donation of movable property that is registered, will be taxed at flat rates:
- in the Flemish Region and the Brussels Capital Region: 3% in direct line and between partners, and 7% between all other persons;
- in the Walloon Region: 3,3% in direct line and between partners, 5,5% between brothers and sisters, uncles/aunts and nephews/nieces, and 7,7% between all other persons. However, as from 1 January 2018, the rate of 7,7% will be abolished and the 5,5% tax rate will apply to all other persons than the direct line and partners.
Immovable assets are taxed at progressive rates. In the Flemish Region and the Brussels Capital Region the rates vary between 3% and 27% in direct line and between partners (27% as from EUR 450.000). In the Walloon Region, rates vary between 3% and 30% in direct line and between partners (30% as from EUR 500.000). For other persons, the applicable rates are higher, up till 40% as from EUR 450.000 in the Flemish and the Brussels Capital Region and up till 50% as from EUR 450.000 in the Walloon Region.
British Virgin Islands
No. There are no estate or gift taxes in the BVI.
There is no Inheritance Tax due on death in Dubai however, Dubai citizens and expatriate residents could still be subject to Inheritance Tax or Death Tax in other jurisdictions where they hold assets.
Where real estate property passes on death in Dubai, whether under Shari’a Law or in implementation of a Will, there are transfer fees for the re-registration of the property to the heirs/beneficiaries.
There is no tax payable on gifts by individuals.
There are no estate taxes, inheritance taxes nor gift taxes in New Zealand.
Tax on lifetime gifts only applies to assets that are situated in Monaco, regardless of the domicile, residence or nationality of the donor.
Gift tax is applicable to lifetime gifts evidenced in writing and/or by notarised deed. Gifts that can be made by a physical transfer of property (which does not require a written deed, such as a gift of a chattel) are not subject to tax. Gift tax is in principle paid by the done but can be paid by the donor if intended so. Gift tax is paid when a triggering event of gift tax occurs (notary act for example).
Inheritance tax only applies to assets that are situated in Monaco, regardless of the domicile, residence or nationality of the deceased.
Inheritance or succession tax is payable at the same rate as lifetime gift tax. The rates are of:
- 0 per cent between spouses and in direct line;
- 8 per cent between brothers and sisters;
- 10 per cent between uncles or aunts, nephews or nieces;
- 13 per cent between other collateral relatives; and
- 16 per cent between unrelated persons.
Inheritance tax is paid by the heirs when the declaration of succession is filed with the Monegasque notary.
Inheritance tax: Inheritance tax is levied at the cantonal/municipal levels only, except in the canton of Schwyz (no inheritance tax at all). Tax jurisdiction normally lies with the canton of the last domicile of the deceased. The deceased worldwide estate (valued at market value) is taxable, with the exception of real estate located abroad and assets belonging to a foreign permanent establishment. The tax rates on bequests, which are generally progressive, vary depending on the relationship between the parties and the canton. Spouses, registered partners and descendants are typically exempt from inheritance tax. However, the tax rate may be as high as 55% in the event of a gift or bequest to an unrelated person.
Tax on gifts: At the cantonal/ municipal levels (only), tax on gifts is levied, except in the cantons of Schwyz and Lucerne (no gift tax at all). Gifts made by a resident in Switzerland are typically subject to gift tax in the canton of the donor's residence. The person liable for the tax on gifts is the recipient of the gift, not the donor. However, the latter is jointly liable to the gift tax. Gifts to spouses, registered partners and descendants are exempt in most of the cantons. Tax rates are progressive, reflecting the relationship between the donor and the recipient. Rates vary from zero to over 50%. Market value is determinant. Gifts have to be declared by the recipient in a separate tax return.
The canton of Geneva has a special rule for lump sum taxpayers (see question 10 below): a 6% gift/inheritance tax applies to spouse or descendants.
5.1 The principal tax on gifts and transfers on death is inheritance tax, which is a charge on transfers of value (§5.2).
5.2 A transfer of value is a disposition by which the value of the individual's estate (§5.3) is reduced. On death, an individual is deemed to have made a transfer of value equal to the value of his estate immediately before his death.
5.3 Generally, the estate of an individual includes all the property to which he is beneficially entitled, property which he has given away but from which he continues to benefit, and (in some circumstances) trust property in which he has a life interest (§19.2). However, the estate of an individual who is neither domiciled (§1.9) nor deemed domiciled for inheritance tax purposes (§5.9) in the UK excludes property situated outside the UK so that, for such an individual, inheritance tax is only relevant to the extent of his assets situated in the UK. Non-UK property representing the value of UK residential property is for this purpose generally treated as if situated in the UK.
5.4 A transfer of value (§5.2) by way of a lifetime gift to an individual made seven years or more before the death of the donor is not charged to inheritance tax on the donor's death, provided the donor does not continue (after making the gift) to benefit from the property included in the gift. Transfers of value by way of lifetime gifts made during the last seven years of the donor's life are brought into account on the donor's death and added to the deemed transfer of value which takes place on the death itself (§5.2). The total of these transfers of value is then charged to inheritance tax (except to the extent that a relief or exemption applies), with an amount equal to the individual's available nil-rate band (§5.8) being charged at a nil rate and the balance being charged at 40%, subject to a reduction in the rate payable in respect of gifts made to individuals more than three years before the death.
5.5 Inheritance tax which is charged on the death of an individual is normally a liability of his personal representatives (§17.1). The tax must normally be paid no later than six months after the end of the month in which the death occurred, but may in some circumstances be paid in 10 equal annual instalments (together with interest on the unpaid instalments) if it is charged on land, certain kinds of shares or securities, or a business. Inheritance tax due on a death must be paid before a grant of probate (§17.1) can be issued to the personal representatives. Subject to exceptions for low value and simple estates, an inheritance tax return must be submitted to HMRC with details of the assets and liabilities of the estate. In practice, the personal representatives will file this return with HMRC in advance of the date on which the tax itself falls due, although the deadline for filing the return falls 12 months after the end of the month in which the death occurred.
5.6 Where a lifetime gift is charged to inheritance tax because the donor dies within seven years of making the gift, the tax liability falls on the donee, with a secondary liability falling on the personal representatives (§17.1) if the tax remains unpaid 12 months after the end of the month in which the death occurred.
5.7 Where an individual makes a transfer of value (§5.2) during his lifetime to the trustees of a trust (other than a bare trust or certain favoured kinds of trust), there is an immediate charge to inheritance tax at 20% to the extent that the individual's available nil-rate band (§5.8) is exceeded, with further tax being charged if the individual dies within seven years of making the transfer of value.
5.8 The full nil-rate band is normally £325,000, but is reduced by the value of chargeable transfers made by the individual in the previous seven years, and may be increased where the individual has been predeceased by a spouse or civil partner who did not use (or completely use) his or her nil-rate band. Where a home is left on death to a descendant or descendants and is within the scope of inheritance tax, the deceased's nil-rate band is increased by an amount called the residence nil-rate band (RNRB). The RNRB is £100,000 for a death in the tax year (§2.13) ending 5 April 2018, will increase by £25,000 each tax year until it reaches £175,000 for a death in the tax year ending 5 April 2021, can be further increased where the deceased was predeceased by a spouse or civil partner who did not use (or completely use) his or her RNRB, and is progressively reduced where the value of the deceased's estate (§5.3) exceeds a limit which currently stands at £2,000,000.
5.9 An individual is deemed domiciled for inheritance tax purposes in the UK in a particular tax year (§2.13) if he has been UK-resident (§1.5-1.7) for at least 15 of the 20 tax years immediately preceding the relevant tax year and for at least one of the four tax years ending with the relevant tax year. An individual (called a "formerly domiciled resident") is also deemed domiciled for inheritance tax purposes in a particular tax year if he was born in the UK with a domicile of origin in the UK (§1.9), is UK-resident for the relevant tax year, and was UK-resident for at least one of the two tax years immediately preceding the relevant tax year.
5.10 A gift made during the donor's lifetime is a disposal (§2.8) for the purposes of capital gains tax (§2.6), and is normally deemed for those purposes to have been made for a consideration equal to its market value at the date of the gift (but see §6.2). An asset passing on death is rebased to its market value (as at the date of the death) for the purposes of capital gains tax, with no capital gains tax arising on the death itself, so that an individual inheriting the asset takes it at a base cost which, for the purposes of capital gains tax on a subsequent disposal, is equal to its market value at the date of the death.