Voters have shot down a proposal to impose a new federal inheritance and gift tax regime in Switzerland, while recent data is also a comfort for the Alpine nation's wealth sector.
Switzerland remains the world’s premiere offshore financial centre and wealth management practitioners will also breathe a sigh of relief after voters in the Alpine state recently crushed a referendum proposal to introduce a Swiss federal and inheritance tax. More than 70 per cent of the vote was against the proposal.
The initiative at the ballot was to replace the gift and inheritance taxes currently levied at cantonal levels by a federal gift and inheritance tax at a rate of 20 per cent without exemption for direct descendants as of 1 January 2017.
“With the rejection of the initiative, Switzerland remains an attractive jurisdiction in this respect as direct descendants are still exempt from gift and inheritance tax in most cantons,” lawyers at Baker & McKenzie said in a note.
“The defeat of the federal initiative is to be welcomed. Taken in conjunction with the defeat in November 2014 of the federal level initiative to abolish lump sum taxation, there should now be a period of stability on two key issues for clients of the wealth management industry,” the firm said.
"While this is obviously good news for the moment, it is not clear this is the end of the situation. There are legitimate arguments that the party who sponsored this referendum, SP, consciously put the exemption as low as it was so that the referendum would fail, allowing SP to keep the issue with no impact. It is likely SP will try again in a few years with another proposal. The excellent result is the retroactive application of estate tax to gifts after 2011 is over," it continued.
The firm added: "The significance of the `no' vote is in how cantons vary widely in what they levy, or whom is affected. In all cantons spouses are exempt from gift and inheritance taxes and most of them provide for a full exemption for direct descendants (exceptions are cantons of Appenzell Innerrhoden, Vaud and Neuchâtel). The canton of Luzern only levies an inheritance tax – there is no gift tax - and in the canton of Schwyz there is neither a gift nor an inheritance tax."
Earlier this week, Boston Consulting Group noted that Switzerland booked more than $2.4 trillion in wealth from overseas in 2014, taking more than a quarter of global offshore assets, drawing in a large chunk of that money from Western Europe, accounting for around 35 per cent of offshore wealth originating from the region.
The Alpine state also has the most millionaires per total household; it has 135 millionaires in 1,000 households, putting it ahead of Bahrain (123 per 1,000 households), Qatar (116), Singapore (107), Kuwait (99) and Hong Kong (94). It had the fourth-highest density of ultra high net worth households, at 90 per 1,000, behind Hong Kong (153), Singapore (143) and Austria (120).