Germany–Switzerland · Inheritance tax
Swiss property · Heir resident in GermanyInheriting Swiss real estate while living in Germany
When a person living in Germany inherits a house, an apartment or a plot of land in Switzerland, German inheritance tax and Swiss cantonal inheritance tax overlap. The Swiss property may be taxed in Switzerland. At the same time, Germany may generally tax the entire inheritance because the heir is resident in Germany. However, the separate Germany–Switzerland double taxation agreement for estate and inheritance taxes contains important relief provisions. The deceased’s nationality is particularly relevant: where the deceased was a Swiss national, Swiss real estate may have to be exempted from German inheritance tax, while its value may still affect the German tax rate.
Starting point
Swiss real estate in the estate — the heir lives in Germany
A typical case involves a Swiss holiday home, a detached house, an owner-occupied apartment or other Swiss real estate passing to an heir resident in Germany.
From a German perspective, the beneficiary’s residence alone may trigger unlimited inheritance tax liability. This generally brings the entire inheritance within the scope of German tax, including foreign real estate.
At the same time, Swiss real estate is closely connected to the canton in which it is located. Switzerland may therefore also have inheritance taxing rights.
Whether the property is ultimately taxed in Germany or merely affects the tax rate on other assets depends significantly on the inheritance tax treaty and the deceased’s nationality.
Section 2 ErbStG
An heir’s German residence generally triggers unlimited tax liability
If the beneficiary has a residence or habitual abode in Germany at the time of death, they generally qualify as a German resident for the purposes of the German Inheritance and Gift Tax Act (ErbStG).
Germany may therefore initially bring the entire inheritance within the scope of its tax rules. This generally includes real estate located in Switzerland.
However, these taxing rights under domestic law are restricted or coordinated by the separate Germany–Switzerland inheritance tax treaty.
- Beneficiary resident in Germany
- Worldwide inheritance generally within scope
- Swiss real estate initially included
- Tax treaty then applied separately
- Deceased’s nationality must be checked
Switzerland as the property’s location
Swiss real estate generally falls within the tax jurisdiction of the canton where it is located
Switzerland does not levy a general federal inheritance tax. Inheritance taxation is primarily a matter for the cantons and, in some cases, the municipalities.
Under Swiss intercantonal taxation practice, inherited real estate is generally taxed in the canton in which it is located.
For example, a property in the canton of Graubünden may be assessed under that canton’s inheritance tax rules, even if the deceased lived in another Swiss canton or the heir now lives in Germany.
Canton where the property is located
For Swiss real estate, the relevant canton is generally the one in which the property is situated.
Family relationship
Whether Swiss inheritance tax arises depends heavily on the relationship between the deceased and the heir.
Real estate
Houses, apartments and other real estate must be valued and allocated separately.
Children are exempt from inheritance tax in many Swiss cantons
Direct descendants are exempt from inheritance tax in numerous cantons. However, whether Swiss tax actually arises must be assessed under the law of the specific canton in which the property is located.
Inheritance tax treaty
Swiss real estate has a special position under the treaty
Germany and Switzerland have a separate double taxation agreement covering estate and inheritance taxes.
Article 5 deals with immovable property. If a property is located in the contracting state other than the deceased’s state of residence, the state in which the property is situated may tax it.
Article 8(2) also provides for special German taxing rights based on the beneficiary’s residence. Germany may generally tax estate assets even where the deceased lived in Switzerland, if the beneficiary had a permanent home or habitual abode in Germany.
However, these additional German taxing rights are restricted by the relief provisions in Article 10.
For Swiss real estate, the heir’s German residence alone does not determine the outcome
To establish Germany’s ultimate taxing rights, the deceased’s residence and nationality must be considered together with Articles 8 and 10 of the inheritance tax treaty.
A particularly important exception
Deceased with Swiss nationality: Swiss real estate may be exempt from German tax
If the deceased was a Swiss national at the time of death, Article 10 of the inheritance tax treaty provides a particularly important exemption for immovable property located in Switzerland.
According to the case law of the German Federal Fiscal Court (BFH), this rule also applies where the deceased lived in Switzerland and Germany would have additional taxing rights under Article 8(2) solely because the beneficiary was resident in Germany.
In this situation, Germany must generally exempt Swiss immovable property from inheritance tax.
BFH: Swiss real estate inherited from a Swiss national must be exempted
The German Federal Fiscal Court has expressly confirmed that the reference in Article 8(2) to Article 10(1) restricts Germany’s supplementary taxing rights. If the deceased was a Swiss national, immovable property located in Switzerland is generally exempt from German inheritance tax.
Other nationalities
If the deceased was not a Swiss national, a tax credit may apply instead of an exemption
The special exemption under Article 10(1)(a) is expressly linked to the deceased’s Swiss nationality.
If the deceased was, for example, a German national or held another nationality, the exemption for Swiss real estate cannot therefore be assumed without further examination.
Where Germany is entitled to tax the property and Swiss inheritance tax is also levied, the credit method under Article 10(1)(b) may generally apply.
| Situation | Switzerland | Germany |
|---|---|---|
| Deceased with Swiss nationality, Swiss property, heir resident in Germany | Swiss taxation under cantonal law is possible | The property is generally exempt; it may still affect the tax rate |
| Deceased without Swiss nationality, Swiss property, heir resident in Germany | Swiss taxation is possible | German taxation may apply; Swiss tax may be creditable |
| Deceased with German nationality, Swiss property | Article 5 grants Switzerland taxing rights | German inheritance tax generally applies; assess a credit or exemption based on nationality and the treaty |
Nationality can lead to a different tax outcome for the same property
When assessing Swiss real estate, residence and the property’s location should therefore never be considered in isolation. The deceased’s nationality must form part of the treaty analysis.
Section 19(2) ErbStG
Tax exemption does not always mean there is no effect on German tax
If Swiss real estate is exempt from German taxation under the inheritance tax treaty, its value may still affect the tax rate applied to the remainder of the inheritance that is taxable in Germany.
Article 10(1)(a) expressly allows Germany to apply the tax rate that would have applied if the Swiss property had not been exempted when taxing assets over which Germany retains taxing rights.
German law implements this exemption with progression through Section 19(2) ErbStG.
Example
An heir resident in Germany inherits both Swiss real estate and other assets from a deceased Swiss national. The other assets remain taxable in Germany. The Swiss property may be excluded from the German tax base, but its value may increase the tax rate applied to the remaining taxable inheritance.
German valuation rules
Even exempt Swiss real estate may need to be valued for German tax purposes
Special German valuation rules apply to foreign real estate. Under Section 31 of the German Valuation Act (BewG), foreign real estate must generally be valued in accordance with the general valuation principles in Part One of that Act.
The key measure is generally fair market value. This is based on the price that could be obtained on a sale in the ordinary course of business.
An official Swiss tax value or insurance value therefore does not automatically correspond to the value required for German inheritance tax or for determining the applicable tax rate under the progression rule.
Foreign assets are not subject to a separate valuation determination
Unlike German real estate, foreign assets are generally not subject to a separate valuation determination under Section 151 BewG. Their valuation is therefore addressed directly as part of the inheritance tax assessment.
Mortgages & debts
Property-related debts are generally allocated to the property under the treaty
Swiss real estate is often subject to mortgages or other property-related liabilities.
Article 9 of the inheritance tax treaty contains specific rules for allocating estate debts. Debts economically connected with a particular asset are generally deducted from the value of that asset.
A mortgage on a Swiss house is therefore generally allocated to the Swiss property.
Property value
The starting point is the property’s value for the relevant tax purposes.
Mortgage
Debts economically connected with the property are allocated to it.
Estate value
The gross value before liabilities is not necessarily the decisive amount for tax purposes.
Example
Swiss father — child living in Germany — holiday apartment in Graubünden
A Swiss national lives in Switzerland until his death. His child lives permanently in Germany. The estate includes a holiday apartment in the canton of Graubünden.
Switzerland
The property is assessed under the law of the canton in which it is located.
Germany
The child’s German residence generally establishes German tax liability.
Tax treaty
Article 10(1)(a) is relevant because the father was a Swiss national.
Outcome
The Swiss property is generally exempt in Germany, but may affect the tax rate on other inherited assets.
After the inheritance
Inheriting the property and selling it later are two separate tax events
Assessing inheritance tax does not complete the tax analysis of a Swiss property.
If the heir resident in Germany retains the property, ongoing Swiss taxes on the property may arise, as may rental income. The income tax treatment of any rental income must also be coordinated between Germany and Switzerland.
If the property is subsequently sold, Swiss real estate capital gains tax may arise in particular. Separately, it is necessary to examine whether the sale has tax consequences under German income tax law.
The inheritance tax treaty does not cover a subsequent sale
The separate inheritance tax treaty governs the transfer of assets on death. Ongoing income and a subsequent sale are governed by income tax law and the general Germany–Switzerland double taxation agreement.
German tax compliance
Swiss real estate must be included in the German inheritance tax assessment
An acquisition within the scope of inheritance tax must generally be notified to the competent German inheritance tax office within three months of becoming aware of it.
This also applies where the Swiss property may ultimately qualify for exemption under the inheritance tax treaty.
In particular, the potential exemption, the progression rule and the different valuation requirements make it important to disclose the property transparently and provide the necessary documents for the German assessment.
An exemption is no reason to omit the property
Whether the treaty exempts the property from German tax is a legal conclusion. To reach that conclusion, the property’s location and value, the deceased’s nationality and the other estate details must first be fully disclosed and examined.
Documentation
Which documents are needed?
| Document | Purpose |
|---|---|
| Certificate of inheritance, certificate of heirship or will | Establish the legal basis and the beneficiary’s share |
| Death certificate | Document the relevant date of death |
| The deceased’s passport or proof of nationality | Assess the exemption under Article 10 |
| Evidence of the deceased’s residence | Determine residence for treaty purposes |
| Land register extract | Establish ownership, ownership share and encumbrances |
| Property valuation | Substantiate the value at the date of death |
| Mortgage documents | Allocate property-related debts |
| Swiss inheritance tax assessment | Document cantonal tax and treaty treatment |
| Documents relating to the rest of the estate | Calculate the overall German tax and the effect of progression |
| Details of earlier gifts | Assess previous acquisitions and German tax allowances |
Assessment sequence
Swiss real estate inherited by a German resident: eight steps
Residence
Establish the residence of the deceased and the beneficiary.
Nationality
Document the deceased’s nationality.
Property
Identify the canton where the property is located and the ownership share.
Switzerland
Examine cantonal inheritance tax and local rules.
Germany
Establish whether unlimited German tax liability applies.
Tax treaty
Apply Articles 5, 8 and 10.
Valuation
Determine fair market value and the associated debts.
Reporting
Coordinate the German notification and, where required, the tax return.
Frequently asked questions
Inheriting Swiss real estate while living in Germany
Do I have to pay German tax on inherited Swiss real estate?
Is Switzerland entitled to tax Swiss real estate?
What if the deceased was a Swiss national?
Does this make the Swiss property completely irrelevant for German tax?
What if the deceased was not a Swiss national?
What does Article 8(2) of the inheritance tax treaty mean?
Is there an exception if both the deceased and the heir are Swiss nationals?
Which value does Germany use for a Swiss property?
Can the Swiss tax value be used?
Is foreign real estate subject to a separate valuation determination in Germany?
Can a Swiss mortgage be deducted?
Are children exempt from inheritance tax in Switzerland?
Does the German EUR 400,000 allowance for children still apply?
Must I notify the German tax office of the Swiss property if it is exempt under the treaty?
What are the tax consequences if I later rent out the inherited property?
What happens if I sell the property later?
Further tax insights
Inheritance & real estate: Germany–Switzerland
Germany–Switzerland tax advice
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