Germany–Switzerland · Wealth succession
Inheritance · Gifts · Swiss AGInheriting or receiving shares in a Swiss AG: German inheritance and gift tax
If a person living in Germany inherits or receives shares in a Swiss company limited by shares (AG) as a gift, Germany may generally subject the value of the shareholding to inheritance or gift tax. In an inheritance, the separate Germany–Switzerland inheritance tax treaty coordinates the taxing rights. However, this treaty generally does not apply to an ordinary lifetime gift. Another frequently overlooked point is particularly important: shares in a typical Swiss AG with both its registered office and place of management in Switzerland generally do not meet the geographical requirements for German business asset relief under Sections 13a and 13b of the German Inheritance and Gift Tax Act (ErbStG).
Starting point
Swiss company — shareholder or recipient in Germany
Shares in a Swiss AG may pass to a person living in Germany through an inheritance, a legacy, an advance on an inheritance or a gift.
For German tax purposes, the fact that the company has its registered office in Switzerland is not initially decisive. If the recipient has a residence or habitual abode in Germany, this alone may trigger unlimited German inheritance or gift tax liability.
The shareholding must then be valued, personal allowances and previous acquisitions taken into account, and any Swiss taxes and international relief provisions examined.
Section 2 ErbStG
The recipient’s German residence may bring the entire shareholding within the scope of German tax
Both an inheritance and a gift may give rise to unlimited German tax liability if the recipient qualifies as a German resident for inheritance and gift tax purposes at the relevant time.
For an individual, a residence or habitual abode in Germany is generally sufficient.
Germany may therefore generally include shares in a company resident exclusively in Switzerland in the tax base.
- Recipient resident in Germany
- Swiss AG
- Foreign shareholding
- Generally within the scope of German tax
- Additional treaty assessment for inheritances
Inheritance
The Germany–Switzerland inheritance tax treaty is central to an inheritance
Germany and Switzerland have a separate agreement for the avoidance of double taxation with respect to estate and inheritance taxes.
Shares in a Swiss corporation generally do not constitute Swiss immovable property merely because the company has its registered office in Switzerland. Nor do they automatically constitute assets of a permanent establishment belonging to the shareholder.
An ordinary shareholding in a Swiss AG therefore generally constitutes other property within the meaning of Article 8 of the inheritance tax treaty.
Article 8(1) generally allocates taxing rights over such property to the deceased’s state of residence. If the deceased was resident in Switzerland, Switzerland therefore generally has the primary taxing right under the treaty.
An heir resident in Germany may nevertheless trigger additional German taxing rights
Article 8(2) generally permits additional German taxation if the beneficiary had a permanent home or habitual abode in Germany at the time of the deceased’s death. Switzerland retains the taxing rights permitted under the treaty.
Treaty classification
Shares in a Swiss AG generally do not constitute assets of a Swiss permanent establishment belonging to the shareholder
Article 6 of the inheritance tax treaty concerns business assets forming part of a permanent establishment of an enterprise belonging to the deceased.
A corporation is, however, legally distinct from its shareholder. If an individual holds shares in a Swiss AG, the AG’s assets and permanent establishments are not attributed to the shareholder merely because of that shareholding.
The fact that the Swiss AG operates a business therefore does not automatically make the shares held by the shareholder permanent establishment assets within the meaning of Article 6.
| Asset | Typical treaty provision on inheritance | Classification |
|---|---|---|
| Shares in a Swiss AG | Article 8 | Generally other property |
| Swiss real estate belonging to the deceased | Article 5 | Immovable property |
| Business assets of the deceased’s own Swiss permanent establishment | Article 6 | Permanent establishment assets |
| Interest in a partnership with a permanent establishment | Article 6 | An express special rule applies |
An AG and a partnership should not be treated as equivalent
Article 6 of the inheritance tax treaty expressly extends the permanent establishment rule to partnership interests. There is no corresponding general attribution rule for shares in a corporation.
Double taxation on inheritance
Swiss inheritance tax is generally credited where Germany also taxes the inheritance
If the deceased lived in Switzerland and the heir lives in Germany, Switzerland may tax the AG shares under the general rule in Article 8.
Germany may also have taxing rights under Article 8(2) because the beneficiary is resident in Germany.
For this situation, the treaty refers to the relief provisions in Article 10(1). For AG shares, the credit method generally comes into consideration.
Inheritance tax properly levied in Switzerland is credited against German inheritance tax within the limits set by the treaty.
In practice, children often incur no Swiss inheritance tax
Swiss inheritance tax on movable assets is generally levied in the canton where the deceased last resided. Direct descendants are exempt from tax in many cantons. If no Swiss tax arises there, there is consequently no foreign tax that could be credited against German inheritance tax.
Special case: both the deceased and the beneficiary are Swiss nationals
Germany’s additional taxing rights under Article 8(2) do not apply if both the deceased and the beneficiary were Swiss nationals at the time of death. In such cases, the full personal circumstances and treaty position should be assessed separately.
Lifetime gifts
The inheritance tax treaty generally does not apply to gifts of shares in a Swiss AG
The Germany–Switzerland agreement on estate and inheritance taxes generally covers acquisitions on death, but not ordinary lifetime gifts.
For example, if a parent living in Switzerland gives shares in their Swiss AG to a child living in Germany, German taxation is generally governed directly by the German Inheritance and Gift Tax Act.
At the same time, gift tax may arise under Swiss cantonal law. For movable assets, the canton where the donor resides generally has jurisdiction.
The special rule for gifts of businesses should not automatically be applied to AG shares
The German ordinance implementing consultation agreements with Switzerland provides for the corresponding application of the inheritance tax treaty to gifts of businesses. Whether a particular transfer falls within this rule must be examined separately. A gift of shares in a Swiss AG should not automatically be treated as a gift of a business without further analysis.
Swiss tax
AG shares generally constitute movable assets for Swiss inheritance and gift tax purposes
In Switzerland, inheritance and gift taxes are generally levied by the cantons rather than the federal government.
For an inheritance of shares and other movable assets, the canton where the deceased last resided generally has jurisdiction.
For a gift of movable assets, cantonal taxation is generally linked to the donor’s residence at the time of the gift.
Inheritance
Movable assets are generally taxed in the canton where the deceased last resided.
Gifts
For movable assets, the canton where the donor resides generally has jurisdiction.
Registered office of the AG
For an ordinary share transfer, the canton where the company has its registered office is not automatically the canton responsible for inheritance or gift tax.
Sections 13a and 13b ErbStG
Shares in a Swiss AG are generally not eligible for German business asset relief
German business asset relief can, in principle, also cover shares in corporations. However, specific requirements must be met.
Under Section 13b(1) no. 3 ErbStG, the corporation’s registered office or place of management must be in Germany, a European Union member state or a state within the European Economic Area.
Switzerland is neither an EU member nor part of the EEA. A typical Swiss AG with both its registered office and place of management in Switzerland therefore does not meet this requirement.
- Switzerland is not an EU member state
- Switzerland is not part of the EEA
- A 25% shareholding alone is insufficient
- A shareholder pooling agreement does not overcome the geographical requirement
- Standard business asset relief is therefore typically unavailable
A shareholding of more than 25% in a Swiss AG is not sufficient
The commonly known minimum shareholding of more than 25% is only one of the requirements under Section 13b ErbStG. If the AG’s registered office and place of management are exclusively in Switzerland, the required connection to Germany, the EU or the EEA is already missing.
Exceptional cases require separate assessment
If a Swiss company’s actual place of management is, for example, in Germany or another EU or EEA state, the classification may differ. However, this would also create a significantly different position under company law and income taxation compared with an AG ordinarily managed in Switzerland.
Business valuation
The fair market value of the Swiss AG shares is decisive for German tax
For German inheritance or gift tax purposes, the transferred shares must be valued as at the relevant valuation date.
For unlisted shares in corporations, the relevant measure is generally fair market value under Section 11 of the German Valuation Act (BewG).
If that value can be derived from sales between unrelated third parties within the relevant period, those transactions may provide a direct basis for valuation.
Otherwise, the company’s value must be determined, in particular, by reference to its earnings prospects or another recognised valuation method commonly used in ordinary business transactions.
| Situation | German valuation approach |
|---|---|
| Sale between unrelated third parties close to the valuation date | May provide direct evidence of fair market value |
| Unlisted operating AG | Income-based valuation or another recognised market-standard method |
| Holding company or AG managing its own assets | The asset structure and a market-standard valuation method are particularly relevant |
| Minority shareholding | Take account of the specific rights and ownership structure |
| Controlling shareholding | Control may affect the value of the shareholding |
The Swiss tax value is not automatically the German inheritance tax value
A Swiss cantonal tax valuation of unlisted shares may provide useful information for German purposes, but it does not replace an independent valuation under the German Valuation Act.
Personal allowances
The ordinary German tax allowances generally remain available for Swiss AG shares
Where unlimited German inheritance or gift tax liability applies, the personal allowances under Section 16 ErbStG generally apply.
| Recipient | Personal allowance |
|---|---|
| Spouse or registered civil partner | EUR 500,000 |
| Child | EUR 400,000 |
| Grandchild whose relevant parent is still alive | EUR 200,000 |
| Grandchild whose relevant parent has predeceased | Generally EUR 400,000 |
| Other persons in tax class I | EUR 100,000 |
| Tax class II | EUR 20,000 |
| Tax class III | EUR 20,000 |
When making gifts, take account of earlier acquisitions within the past ten years
Multiple acquisitions from the same person within ten years are generally aggregated under Section 14 ErbStG. A planned business succession should therefore not be assessed as an isolated transfer.
Example
An entrepreneur in Switzerland transfers 100% of their AG to a child in Germany
An entrepreneur lives in Switzerland and holds all the shares in a Swiss AG. Their adult child lives permanently in Germany.
The shares are to be transferred either as a lifetime gift or later by inheritance.
Germany
The child’s German residence generally gives rise to unlimited tax liability.
Valuation
The fair market value of the 100% shareholding must be determined.
Business asset relief
A typical Swiss AG does not meet the EU/EEA requirement under Section 13b ErbStG.
International tax
Apply the treaty to an inheritance; for a gift, assess cantonal tax and Section 21 ErbStG separately.
German tax compliance
The acquisition of Swiss AG shares generally has to be notified
Taxable acquisitions on death and gifts must generally be notified to the competent German inheritance tax office within three months of becoming aware of the acquisition.
In the case of a gift, both the recipient and the donor generally have notification obligations.
For shares in foreign companies, the notification should in particular identify the company, the ownership percentage, the transfer date, the legal basis for the acquisition and an initial indication of value.
Completing the Swiss succession process does not replace the German notification
Commercial register entries, Swiss estate documents, shareholder registers or notifications to a cantonal tax authority do not automatically satisfy German inheritance tax reporting obligations.
Documentation
Which documents are needed for Swiss AG shares?
| Document | Purpose |
|---|---|
| Articles of association of the Swiss AG | Assess the company’s legal structure and shareholder rights |
| Share register or evidence of ownership | Establish the ownership percentage |
| Annual financial statements | Prepare the business valuation |
| Current management accounts or interim financial statements | Reflect the circumstances at the valuation date |
| Business valuation or transaction evidence | Determine fair market value |
| Shareholders’ agreements | Analyse transfer and voting rights |
| Gift agreement or estate documents | Establish the legal basis and date of acquisition |
| Evidence of residence and nationality | Assess German tax liability and treaty application |
| Swiss tax assessment | Assess a potential foreign tax credit |
| Details of earlier gifts | Review Section 14 ErbStG and remaining allowances |
After the transfer
The tax assessment does not end with inheritance or gift tax
Following the acquisition, the shareholder living in Germany owns an interest in a foreign corporation.
Future dividends from the Swiss AG may trigger Swiss withholding tax and German income tax. The general Germany–Switzerland double taxation agreement must be taken into account.
On a subsequent sale, Section 17 of the German Income Tax Act (EStG) may be particularly relevant if the statutory ownership requirements are met.
For larger or controlling shareholdings, German reporting obligations and potential international corporate tax issues should also be examined.
Succession planning should combine inheritance tax analysis with future ongoing taxation
A tax-efficient transfer depends on more than the one-off inheritance or gift tax. Future dividends, capital gains, company management and the wider ownership structure may also be significant for the recipient resident in Germany.
Frequently asked questions
Swiss AG shares received by inheritance or gift
Do I have to pay German tax if I inherit shares in a Swiss AG?
Do I have to pay German tax if I receive shares in a Swiss AG as a gift?
Are shares in a Swiss AG business assets under the inheritance tax treaty?
May Germany tax the inheritance if the deceased lived in Switzerland?
What if both the deceased and the heir are Swiss nationals?
Is Swiss inheritance tax credited in Germany?
Does the inheritance tax treaty also apply to gifts of AG shares?
Can shares in a Swiss AG qualify for German business asset relief?
Does a shareholding of more than 25% help?
How are unlisted Swiss AG shares valued?
Can the Swiss tax value of the shares be used?
What is the personal allowance for a child?
Can parents give Swiss AG shares in several instalments?
Where is a gift of shares taxed in Switzerland?
Where are the shares taxed in a Swiss inheritance?
How are dividends treated after the transfer?
Further tax insights
Inheritance, gifts & shareholdings: Germany–Switzerland
Germany–Switzerland tax advice
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