Germany–Switzerland · Valuation

BewG · Real estate · Shareholdings · Securities

Valuing Swiss assets for German inheritance and gift tax

Where Swiss assets are subject to German inheritance or gift tax, their valuation is generally governed by German tax law. Swiss tax values, cantonal wealth tax values and book values may provide important information, but they are not automatically decisive for German purposes. Different rules apply depending on the type of asset: foreign real estate and foreign business assets are valued at fair market value, in particular under section 31 of the German Valuation Act (BewG), while shares in corporations are governed by section 11 BewG.

Section 12 ErbStG

German tax liability generally means German valuation rules

The amount of German inheritance or gift tax depends not only on whether Germany is entitled to impose tax. The value assigned to the transferred Swiss assets is also decisive.

Section 12 of the German Inheritance and Gift Tax Act (ErbStG) generally refers to the provisions of the German Valuation Act. For foreign real estate and foreign business assets, section 12(7) ErbStG expressly refers to section 31 BewG.

The value used by a Swiss canton for its wealth, inheritance or gift tax is therefore not automatically the relevant value.

Section 11 ErbStG

The value at the relevant tax valuation date is decisive

Valuation is generally based on the point at which the inheritance or gift tax liability arises.

For an acquisition on death, the relevant valuation date is therefore usually the date of death.

For a gift, the relevant date is generally the date on which the gift is completed.

Inheritance: generally the date of death
Gift: generally the date of completion
Market prices and exchange rates at the valuation date
Business value as at the valuation date
Subsequent changes in value are generally disregarded

Valuation principle

Fair market value: what would an unrelated buyer pay?

The German Valuation Act uses fair market value (“gemeiner Wert”) in many areas.

Under section 9 BewG, this generally corresponds to the price that could be obtained if the asset were sold in the ordinary course of business.

All circumstances affecting the price must be taken into account. Unusual or purely personal circumstances, however, are generally disregarded.

Fair market value is a market-based concept

The decisive factor is not the subjective value that a family business, holiday home or shareholding has for the recipient. The starting point is an objective value in ordinary business transactions.

Section 31 BewG

Swiss real estate is generally valued at fair market value

Section 31 BewG applies to foreign real estate. Unlike German real estate, Swiss property is not valued under the special German property valuation procedures in sections 176 et seq. BewG.

Instead, the general valuation provisions in Part One of the BewG apply, particularly section 9 BewG. The relevant value is therefore generally the fair market value of the Swiss property.

Relevant factors may include recent market transactions, location, plot size, building condition, use, tenancy arrangements and market yields.

Market

Comparable prices

Sales of comparable Swiss properties close to the valuation date can provide an important benchmark.

Income

Income approach

For rented properties, sustainable rental income and market yields may be relevant.

Report

Valuation report

For larger or unusual properties, a Swiss market valuation report may be appropriate.

The cantonal tax value is not automatically the German inheritance tax value

A Swiss tax value may be substantially lower or higher than the fair market value relevant for German purposes. It may serve as an indication or starting point, but it does not replace an assessment under section 31 BewG.

Listed securities

Listed shares and other marketable securities

Listed securities are generally valued by reference to their market value at the valuation date.

Section 11 BewG contains specific rules for securities quoted on a stock exchange. For foreign securities, the market value at the relevant date must be substantiated and converted into euros for German tax purposes.

In practice, evidence of the quoted price on the relevant trading venue and the currency conversion used should be documented.

Do not treat a securities portfolio as a single asset

A Swiss securities portfolio may contain numerous individual positions subject to different tax valuation rules: shares, bonds, funds, structured products and cash balances.

Section 11(2) BewG

Unlisted shares in Swiss AGs and GmbHs

For unlisted interests in a Swiss corporation, the fair market value of the shareholding must generally be determined.

If the value can be derived from sales between unrelated third parties that took place less than one year before the valuation date, those transactions may provide a direct basis for the valuation.

In the absence of suitable sales, fair market value must be determined by reference to earnings prospects or another recognised valuation method commonly used in ordinary business transactions for non-tax purposes.

The method should correspond to the approach a buyer would typically use to determine the purchase price. In addition, the value must generally not fall below the statutory net asset value (“Substanzwert”).

Valuation approach	Significance
Recent sale to an unrelated party	The primary reference point where suitable sales between unrelated third parties took place less than one year before the valuation date
Capitalised earnings value	Valuation based on sustainable and expected earning capacity
DCF / business valuation methods used in the market	May be used where customary in ordinary business transactions involving comparable businesses
Multiples method	May be considered where supported by relevant market practice
Net asset value	Statutory minimum value under section 11(2) BewG

Do not adopt the Swiss “practitioner method” without reviewing it

Swiss cantonal valuations of unlisted shares may follow Swiss administrative principles or a locally customary combination of earnings value and net asset value. For German inheritance or gift tax, however, section 11 BewG is decisive.

Size of the shareholding

Control rights may affect the value of a shareholding

The value of a shareholding does not always simply equal the value of one share multiplied by the number of shares held.

Section 11(3) BewG recognises that a shareholding may have a higher fair market value because of particular circumstances, for example where the size of the holding allows the shareholder to control the company.

For larger Swiss family companies, voting rights, veto rights, shareholder agreements and the actual degree of control should therefore be included in the valuation.

Securities portfolios

Value shares, funds, bonds and structured products separately

Each position in a Swiss securities portfolio must generally be recorded in accordance with the tax valuation rule applicable to it.

Position	Typical valuation approach
Listed share	The relevant quoted price or market value at the valuation date
Investment fund	Generally the redemption price under section 11(4) BewG
Bond	Market value or the applicable securities valuation rules
Unlisted shareholding	Fair market value under section 11(2) BewG
Cash balance	Nominal amount, converted into euros where necessary
Receivable	Generally face value, unless particular circumstances justify a lower or higher value

Section 12 BewG

Bank deposits, loans and other receivables

Monetary claims that are not already governed by specific securities valuation rules are generally recognised at face value under section 12 BewG.

Particular circumstances may nevertheless justify a higher or lower value. This may be relevant, for example, where interest terms are unusual, the debtor’s creditworthiness is impaired or the claim cannot be recovered.

Irrecoverable receivables are disregarded under section 12 BewG.

Bank

Account balances

Generally the nominal amount at the valuation date.

Loan

Loan receivables

Generally face value, although particular terms may affect the value.

Risk

Credit risk

Doubts about recoverability may justify a lower value.

Foreign currency

Swiss francs must be converted into euros for German tax purposes

German inheritance and gift tax is assessed in euros. Swiss assets valued in CHF must therefore be converted into euros as at the relevant valuation date.

The conversion used should be documented transparently and relate to the valuation date. For high-value assets, even small differences in exchange rates may significantly affect the German tax base.

Do not use today’s exchange rate to value an earlier transfer

For earlier inheritances or gifts, the value at the original valuation date is generally decisive. Subsequent exchange rate movements do not change the original tax value.

Section 31 BewG

Swiss business assets

Under section 31 BewG, foreign business assets are also valued under the general valuation rules, in particular at fair market value.

This is relevant, for example, where a German sole trader business has a Swiss permanent establishment or where Swiss business assets are held directly as part of the estate.

Whether these assets are eligible for relief under sections 13a and 13b ErbStG is a separate question.

Valuation and eligibility for tax relief require separate assessments

An asset may be fully valued yet still fail to qualify for German business asset relief because of the geographical restrictions in section 13b ErbStG.

Switzerland and Germany

Why Swiss tax values may differ from German values

Swiss cantons value assets for their own tax purposes. These values may reflect different valuation objectives, methods and administrative principles from those used under the German BewG.

A cantonal property tax value, a wealth tax value for unlisted shares or another Swiss tax value therefore cannot automatically be used in the German inheritance tax return.

Swiss document	Usefulness for German purposes
Cantonal property tax value	An indication and source of information, but not automatically fair market value under German law
Swiss market valuation report	May provide an important basis for determining fair market value
Tax value of unlisted shares	A useful comparison, but section 11 BewG remains decisive
Annual financial statements of the Swiss company	A key source of data for the business valuation
Portfolio statement at the valuation date	Important evidence of securities, cash balances and quantities held

Swiss and German tax assessments may use different values for the same assets

This does not automatically indicate an error. The two states may arrive at different tax values for the same asset under their respective valuation rules.

Valuation assessment procedure

Foreign assets are not subject to a separate valuation assessment

The German Valuation Act provides separate assessment procedures for German real estate, business assets and certain shareholdings.

Section 151(4) BewG, by contrast, expressly states that foreign assets are not subject to a separate assessment of their value.

The value of Swiss real estate or other foreign assets is therefore generally taken into account within the inheritance or gift tax assessment itself. No separate German valuation assessment notice is issued for those foreign assets.

Practical consequence

Valuation documents for Swiss assets should be available in a clear and verifiable form for submission with the inheritance or gift tax return, or upon request by the responsible German tax office.

Documentation

Which documents are typically required?

Asset	Typical documents
Swiss real estate	Land register extract, purchase agreement, land and floor areas, year of construction, tenancy agreements, market valuation report and comparable sales
Swiss AG / GmbH	Articles of association, share register, annual financial statements, current management accounts or financial reports, forecasts, ownership structure and sales to unrelated parties
Securities portfolio	Portfolio statement at the valuation date, quantities held, ISINs and evidence of quoted prices
Bank account	Account statement or balance confirmation at the valuation date
Loan receivable	Loan agreement, outstanding balance, interest terms, maturity and creditworthiness information
Business assets	Asset inventory, annual financial statements, permanent establishment records and market value information
Foreign currency	Verifiable evidence of the exchange rate at the valuation date

Assessment sequence

Value Swiss assets in eight steps

Valuation date

Determine the precise tax valuation date.

Type of asset

Classify the asset as real estate, a shareholding, a security or a receivable.

BewG provision

Identify the applicable German valuation rule.

Swiss data

Obtain market and company data as at the valuation date.

Fair market value

Determine an appropriate market value under German law.

CHF/EUR

Convert foreign currency values as at the valuation date.

Evidence

Document the valuation method and supporting records.

Tax treaty

Then assess whether the value is taxed or exempted in Germany.

Frequently asked questions

Valuing Swiss assets

Which law governs the valuation of Swiss assets for German inheritance tax?

Generally, German inheritance tax and valuation law. Section 12 ErbStG refers to the BewG. For foreign real estate and foreign business assets, section 31 BewG is particularly relevant.

Which date is relevant for the valuation?

Generally, the date on which the tax liability arises. For an inheritance, this is usually the date of death; for a gift, it is the date on which the gift is completed.

Can I use the Swiss tax value of a property?

Not automatically. For German purposes, fair market value under section 31 in conjunction with section 9 BewG is generally decisive. A cantonal tax value may merely serve as a source of information.

Is Swiss real estate valued using the German cost or income approach?

The special provisions for valuing German real estate are not directly applied to foreign real estate. Section 31 BewG refers to the general valuation rules, particularly the fair market value standard.

How are unlisted shares in a Swiss AG valued?

Generally at fair market value under section 11(2) BewG. Suitable recent sales between unrelated third parties must be taken into account. If no such sales exist, the value is determined by reference to earnings prospects or another recognised valuation method commonly used in the market.

Can the Swiss practitioner method be used?

It may provide information for the valuation, but that does not make it binding for German inheritance tax purposes. The requirements of section 11 BewG remain decisive.

Is there a minimum value for unlisted companies?

Yes. Under section 11(2) BewG, the value must generally not fall below the net asset value defined in that provision.

How are investment funds valued?

Under section 11(4) BewG, units or shares in investment funds are generally valued at their redemption price.

How are bank deposits valued?

Bank deposits and other monetary claims are generally recognised at face value, unless particular circumstances justify a different value.

How are loan receivables valued?

Generally at face value. However, interest terms, maturity, creditworthiness and recoverability may result in a different value.

What happens to irrecoverable receivables?

Irrecoverable receivables are disregarded under section 12(2) BewG.

How are Swiss francs converted?

The asset value determined in CHF must be converted into euros for German tax purposes. The conversion must be verifiable and relate to the relevant valuation date.

Is a separate German valuation assessment issued for Swiss assets?

Generally not. Section 151(4) BewG provides that foreign assets are not subject to a separate valuation assessment.

Do Swiss AG shares automatically qualify for business asset relief?

No. Valuation and eligibility for relief under sections 13a and 13b ErbStG are separate questions. For a typical Swiss corporation, the EU/EEA requirements impose significant restrictions.

Does an asset exempt under the treaty still need to be valued?

This may be necessary. In particular, exempt assets may remain relevant when determining the German tax rate or carrying out other parts of the tax calculation.

Valuation, tax treaties & Swiss assets

Germany–Switzerland tax advice

Do you need to value Swiss assets for German inheritance or gift tax?

We assess the applicable German valuation rules for Swiss real estate, unlisted business interests, securities portfolios, accounts and receivables. We also review currency conversion at the valuation date and the implications of the valuation for German inheritance or gift tax and the Germany–Switzerland tax treaty.

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