Switzerland levies taxes on three different levels, namely the federal, cantonal and municipal. For most residents, tax liability arises on their worldwide income and worldwide net assets. Real estate located abroad, as well as foreign business operations, are exempt from Swiss taxes.

Whilst the federal tax is the same all over Switzerland, cantonal taxes vary considerably, as do the available tax deductions (effectively lowering the taxable basis). The lowest marginal tax rate can be found in the Canton of Schwyz, at 22%. Geneva comes in last with 45%. Furthermore, the cantons levy a wealth tax on net assets, ranging from a marginal tax rate of 0.128% in the Canton of Nidwalden to 1% in Geneva.

Investment income (dividend and interest income) is taxed together with other income sources at the marginal tax rate. Swiss-sourced investment income is subject to a 35% Swiss withholding tax. Swiss residents can apply for a full refund of the Swiss withholding tax, foreign tax residents may be able to claim back part of the Swiss withholding tax based on a double taxation agreement. Switzerland has an extensive network of double taxation agreements, which allow investors to claim back foreign withholding taxes. A Swiss tax credit may also be available.

Capital gains on movable assets are generally not taxable. Cantons do, however, impose tax on capital gains made from real estate. The tax rate depends on the gain and on the holding period. Furthermore, many cantons levy a property transfer tax when a real property changes ownership.

Most cantons levy a gift and inheritance tax, except the cantons of Schwyz and Obwalden. The canton of Lucerne does not charge gift tax, unless the donor dies within a five-year period after the donation.

Spouses are exempt from taxation in all cantons and direct descendants are in most cantons, the canton of Vaud being a prominent exception. The tax rate depends on the relationship between the donor/testator and the recipient/heir. In cases where complex structures such as foundations and trusts are involved, it is recommended to obtain a tax ruling prior to moving to Switzerland.

Lump-Sum Taxation

In most cantons, it is possible to pay taxes under the lump-sum taxation regime, provided that, in general terms, the person is not a Swiss citizen and does not carry out an economic activity in Switzerland. Instead of paying taxes on actual income and assets, the basis of taxation is calculated according to living expenses.

As described in 1.1 Tax Regimes, there is a gift and inheritance tax in Switzerland. There is no exemption for payments for certain purposes, such as health and education. However, depending on the degree of kinship of the heir/donee and the canton of domicile of the deceased/donor, there are some exemptions available or, at least, a reduced tax rate.

Furthermore, taxation is triggered in the canton in which the deceased was last domiciled, or the canton of residence of the donor. Therefore, gifts and inheritances from a foreign testator/donor are not subject to Swiss inheritance or gift tax.

There are a few options available for income tax planning or, at the least, to minimise the income tax exposure, such as:

• opting for capital gains instead of income where possible since, as described in 1.1 Tax Regimes, capital gains on movable assets are generally not taxable;
• making donations to charities in order to reduce the income tax basis;
• contributing to the second or third pillar as described in 8.3 Elder law, to reduce the income tax basis;
• relocating to a more favourable canton; and
• in the case of property ownership, carrying out maintenance costs to reduce the income tax basis as described in 1.4 Taxation of Real Estate Owned by Non-residents.

As described in 1.1 Tax Regimes, the cantons levy a wealth tax on net assets, including real estate, regardless of the residence or nationality of the owner. Non-resident real estate owners are liable to pay taxes on their Swiss real estate at the tax rate corresponding to their worldwide net assets and income. In most cantons, non-resident real estate owners can opt for taxation at the marginal tax rate, instead of declaring all sources of income and wealth. Foreign real estate is only taken into account for tax rate determining purposes.

There is, as such, no planning strategies or structures commonly used for this purpose. The tax value of the property is subject to wealth tax. It is generally considerably lower than the purchase price, and the mortgage is fully deductible. Rental payments or, if the property is not rented out, a notional rental value is taxable as income. The notional rental value is much lower than a market rent. Mortgage interest and maintenance costs incurred to conserve the value of the property are deductible from the taxable income. Maintenance costs that increase the value of the property can be off-set against the real estate capital gains tax.

At present, there are no plans to introduce a federal inheritance and gift tax.

Based on the Common Reporting Standard proposed by the OECD (CRS), Switzerland has implemented the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA) and the International Automatic Exchange of Information in Tax Matters (AEOI). Switzerland has, to date, entered into more than 70 bilateral agreements on exchange of account information, with the EU, UAE, UK, Hong Kong and Singapore, among others.

With the USA, Swiss financial institutions are obliged to report US bank accounts to the IRS. The EU Reporting requirements according to DAC-6 are relevant if a cross-border tax arrangement between two EU member states, or between a member state and a third country, exists. Swiss companies with subsidiaries in the EU, or Swiss companies that are part of an EU group of companies, may be impacted.

According to the Federal Statistical Office, the Swiss have a high life expectancy of 85 years on average. In 2018, the marriage rate in Switzerland was only 4.8 per 1,000 inhabitants. The notions of family and marriage have changed considerably, since the Swiss Civil Code came into force at the beginning of the 20th century. Numerous households are blended families, and many couples are cohabiting.

Cohabiting partners are treated as third parties and have no automatic rights of succession. In accordance with the amendment of the Swiss Civil Code that came into force on 1 January 2023, a testator will be free to dispose of a larger share of their estate in favour of their partner, as set out in 2.3 Forced Heirship Laws.

Due to globalisation and the ensuing increase in the mobility of people between various jurisdictions, many face a potential tax liability in more than one jurisdiction. As a result, the transfer of property upon death often gives rise to complex questions, not only from a succession law perspective (eg, which state is responsible for the handling of the estate and which law applies) but also from a tax point of view. In order to avoid the risk of double taxation or lengthy administrative procedures, transfer of assets upon death or during one’s lifetime involving two or more jurisdictions must be carefully reviewed.

Gift and Inheritance Taxes

Depending on the applicable tax laws, gift and inheritance taxes can be based on one of the following bases:

• the residency of the recipient of the gift/heir;
• the residency of the donor/testator;
• where the assets that are transferred are located; or
• in some cases, the nationality of the testator.

If, for instance, one state taxes the heir whilst another state taxes the testator, double taxation may occur.

Switzerland has concluded several double taxation agreements on inheritance tax, including with the UK, Germany, the Netherlands, Austria, Sweden and the USA, amongst others. These treaties, however, do not cover gift taxes.

Rules of Swiss Private International Law

In the absence of a treaty applicable in this matter, the rules of Swiss Private International Law (PILA) apply to cross-border estates.

Under Swiss Law, the Swiss authorities are permitted to deal with movable assets belonging to Swiss residents, as well as with immovable property located in Switzerland owned by Swiss or foreign residents.

Swiss law governs the estate of a person who had his or her last residence in Switzerland. Foreign citizens may, however, submit their estate by will or contract of succession to the law of nationality. Swiss dual-nationals may also soon have the option of subjecting their inheritance to the law of their foreign nationality, as a revision of the PILA is currently being considered by the Swiss Parliament.

Switzerland recognises the form of foreign testamentary dispositions, in accordance with the Hague Convention of 5 October 1961 on the Conflict of Laws Relating to the Form of Testamentary Dispositions.

International Planning

Tailor-made matrimonial property regimes by agreement, succession contracts and foundations or trusts are useful planning tools (see 4.2 Succession Planning).

Swiss Succession Law

Compulsory legal system

Swiss succession has been substantially revised. The new law came into force on 1 January 2023.

Swiss law provides forced heirship laws that protect the statutory heirs. According to Article 471 et seq of the Swiss Civil Code, the descendants, spouse or registered partner are entitled to a compulsory portion of the estate. The statutory entitlement represents a portion of the heir’s statutory succession right (the share to which they would be entitled if the deceased died intestate) and comprises:

• half for the descendants; and
• half for the spouse or registered partner;

The testator may freely dispose of the part of their property that exceeds the statutory entitlement of the survivor(s) by drafting testamentary dispositions as wills or an inheritance contract, as set out in 4.2 Succession Planning (Article 470, Swiss Civil Code).

In the event of death before the end of divorce proceedings or proceedings for the dissolution of a registered partnership, the survivor will, in principle, lose their status as an heir entitled to a compulsory share.

Right to dispose

The new succession law increased the testator’s freedom to dispose of their assets. For example, the testator is now able to favour their surviving spouse or registered partner more by granting them half of the estate in full ownership and the usufruct on the other half. In addition, greater provision can be given to a life partner.

Where the testator has exceeded their testamentary freedom, the heirs who do not receive the full value of their statutory entitlement may take legal action to have the disposition abated to the permitted amount (Article 522, Swiss Civil Code).

Advances against a person’s share of the succession and gifts that were freely revocable by the deceased, or made in the five years prior to his or her death, with the exception of customary occasional gifts, are subject to abatement in the same manner as testamentary dispositions (Article 527, Swiss Civil Code).

An heir is entitled to renounce their statutory succession right in advance by concluding a renunciation contract with the testator.

A testator can deprive an heir of their statutory entitlement by means of a testamentary disposition when an heir has committed a serious crime against the testator or a person close to them, or has seriously breached their duties under family law towards the testator or the latter’s dependants.

Swiss marital property law provides for three regimes:

• participation in acquired property;
• community of property; and
• separation of property.

The Swiss marital property regime of the spouse/registered partner affects the disposition of their estate, as well as in a divorce or dissolution context.

Ordinary Property Regime

Under Swiss law, the ordinary (default) property regime for married couples, including same-sex couples, is that of participation in acquired property during the marriage. This applies unless the spouses have agreed otherwise in a marital agreement.

Each spouse is free to dispose of his or her property during the marriage.

This marital property regime includes the property acquired during the marriage and their individual property, which remains the individual's property.

By contrast, for same-sex couples who are in a registered partnership, the default regime is separation of property.

Property acquired

The acquired property of a spouse consists of the income earned during the marriage by each spouse.

Unless proven otherwise, all assets of a spouse are deemed to be acquired property and will be shared between the spouses.

Individual property

Individual property includes:

• personal effects used exclusively by a spouse;
• assets belonging to one spouse at the beginning of the marital property regime or acquired later at no cost by inheritance;
• claims for satisfaction; and
• acquisitions that replace individual property.

By marital agreement, the spouses may requalify their acquired property and individual property to limit or extend the assets to be shared between spouses, based on Article 199 of the Swiss Civil Code.

Liquidation of the regime

In the case of a spouse’s death, divorce, annulment of the marriage or separation of property by court, the marital regime is liquidated. The survivor’s spouse will receive half of the benefit of the deceased spouse (that is, their acquired property after deduction of any debts). The remaining half, and the individual property of the deceased, will constitute the estate.

Choice of Regime

By marital agreement, spouses may opt for the community of property regime or the separation of property regime to apply instead. Registered partners can also opt for a different regime to apply.

Community of property regime

Under the community of property regime, only some assets are considered as the individual property of each spouse. The other assets are common property, which are jointly owned by the spouses during the marriage. In the event of the death of one of the spouses, this regime enhances the (financial) position of the surviving spouse at the liquidation of the marital regime, as they are entitled to half of the common property, which may constitute most of the assets of the deceased spouse.

Separation of property regime

Under the separation of property regime, each spouse administers and enjoys the benefits of their own property and has power of disposal over it, unless the spouses agree otherwise.

In principle, there is no splitting of property in the event of the death of a spouse married under the regime of separation of property, since each spouse has remained the owner of their property during the marriage.

However, when one spouse shows an overriding interest in gaining sole possession of an object or asset in co-ownership, they may request that said object or asset be allocated to them, in return for compensation.

Marital Property Agreements

The form of a marital property agreement is valid if it fulfils the requirements of the law applicable to its substance, or of the law of the place where the agreement was entered into. If a nuptial agreement electing a matrimonial regime is entered into in Switzerland, it must be in the form of a notarial act (pursuant to Article 184, Civil Code).

The binding effect of agreements on marital and post-marital maintenance is very restricted. In practice, however, if the financial situation of the spouses has not fundamentally changed between the time of the signing of the agreement and the divorce, and its outcome is not unfair, the Swiss courts might approve the agreement. The judge may decide not to approve the agreement because it is considered to be manifestly unfair or because a spouse/registered partner objects to it at the time of the divorce/dissolution.

Marital agreements entered into abroad are recognised in Switzerland if they were drawn up and executed in a valid form, the choice of law is valid and the arrangements do not violate Swiss public policy.

As described in 1.1 Tax Regimes, the transfer of property may give rise to gift or inheritance tax. The assets are valued at the fair market value. Some cantons allow for a reduction on the fair market value if real estate is transferred. In some cantons, the fair market value dating back twenty years is relevant if the real estate has been held for longer than this period. If the recipient is exempt from gift/inheritance tax, the real estate capital gains tax is deferred. In this case, the recipient/heir takes over the holding period and applicable values, but a property transfer tax may still apply.

There is, generally speaking, no tax planning mechanism available to help transfer assets to younger generations free of tax as, in most cantons, there is no inheritance tax for direct descendants or, if there is a tax, it is relatively minor.

That said, there are a few options available to minimise tax exposure (if any), including:

• choosing the appropriate matrimonial property to increase/decrease the size of the estate passing to a surviving spouse;
• relocating to a more favourable canton; and
• having recourse to legal constructions, such as the usufruct or the fideicommis.

Cryptocurrencies

Swiss law does not define digital assets, or set statutory provisions or regulatory guidelines governing estate planning for digital assets.

In the event of death, heirs inherit the estate as a whole and assume the testator’s legal position upon their death. Subject to the universal succession are the testator’s heritable corporeal and incorporeal assets and liabilities (real estate, claims, etc) (Article 560, Swiss Civil Code).

For the division of the estate, the value of any cryptocurrencies must be determined. Bearing in mind that cryptocurrencies are subject to considerable fluctuations in value between the date of death and the date of division of the estate, the heirs must agree on the valuation date. If no agreement is reached, the crypto-assets must be valued at the market value at the time of division.

Data

Digital assets are, as a general principle, considered as transmissible upon death (Article 560, Swiss Civil Code). However, this applies only to certain categories of digital assets and assets over which the user has full control (which is less and less the case).

Transmissible data

The following are all transmissible.

• Works protected by copyright law.
• Data relevant from a pecuniary/contractual point of view. An example of this would be the balance of a PayPal account or a homepage left by the deceased, and is tied to the particular contractual relationship (eg, a webhosting contract). Most contracts regarding digital assets are of a commercial and standard type, and are concluded regardless of the user’s personality. From a Swiss law point of view, in the absence of any contrary provision, these contracts should be regarded as not ending with the user’s death, as the rights and obligations contained therein are in principle transmitted to the heirs. This would, for instance, be the case of contracts relating to the online secured storage of files or provision of streaming services.
• Data that is saved locally on hardware (a PC, tablet, mobile phone, etc). This is a type of digital asset that will, in principle, be transmissible upon death with its data carrier; it is considered as a “regular” movable asset. The situation is not clear regarding digital assets over which the user has acquired full control (eg, books downloaded from Amazon or songs downloaded from iTunes).
• Licences. Contracts relating to the downloading of intangible assets are generally qualified as licences. This might lead to a conclusion that only a right to use the said digital assets is granted. According to Swiss authors, however, when the downloading of a digital asset corresponds, from an economic point of view, to a sale – ie, the “licence” is not limited in time and the price is fixed and is completely paid at the time of downloading – these digital assets should be considered as being part of the estate.

Non-transmissible data

Data that only features a personality rights element but has no pecuniary element is non-transmissible.

Swiss law provides that rights and obligations of the deceased that are intrinsically linked to the deceased’s personality are extinguished with their holder’s death, and are not transmissible to the heirs. For some Swiss authors, most data posted by a user on social media falls into this category.

In this respect, it should be noted that the digital assets themselves are not transmissible when the deceased only had a limited right to use them (eg, streaming services). Furthermore, some digital services are subject to the personal use by a specified user (eg, email services or social media profiles). It would not make much sense for these accounts or profiles to be used continuously by third parties after the user’s death.

Trusts

There is no Swiss domestic trust law. However, the Swiss Parliament is currently reviewing the possible introduction of a Swiss trust law. In January 2022, the Federal Council initiated a public consultation on a draft bill aimed at introducing trusts into Swiss law. Trusts will be a specific legal instrument, included in a new chapter of the Swiss Code of Obligations, that can be used, among other vehicles, to structure private assets. It remains to be seen whether the attempt to introduce trusts into Swiss law will succeed this time, in particular due to the tax implications (see 3.3 Tax Considerations: Fiduciary or Beneficiary Designation).

Foreign law trusts are used for estate planning purposes in Switzerland, although the benefits that they bring in purely domestic situations are limited.

A Swiss private trust company (PTC), as trustee of a foreign law trust, can be used for planning purposes.

From 1 January 2020, the Swiss Financial Institutions Act (FinIA) and the Swiss Financial Services Act (FinSA) introduced a regulatory regime for trustees operating in Switzerland, obliging trustees to obtain an authorisation to carry out their activities. Note that there are exemptions (eg, for certain PTCs).

Family Foundations

Swiss law provides for specific legal provisions regarding foundations, including private foundations known as family foundations. A family foundation is characterised as a foundation established for the benefit of beneficiaries who are members of the founder’s family. According to Article 335 of the Swiss Civil Code, as interpreted by the Swiss Supreme Court, there is an exhaustible list of purposes for which a family foundation may be set up: education, welfare and health. Foundations granting a beneficial interest (eg, to allow a beneficiary a higher standard of living) are considered null and void.

Foundations are also commonly used for charitable purposes (see 10. Charitable Planning).

Foreign Law Trusts

Switzerland is a Contracting State to the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition (the “Hague Trust Convention”), which became applicable in Switzerland on 1 July 2007. The Hague Trust Convention:

• designates the law applicable to a trust;
• requires contracting state parties to “recognise” the effects of trusts validly settled, provided that the trust meets the minimum standards prescribed by the Hague Trust Convention; and
• accepts that certain effects of a trust may conflict with applicable mandatory provisions protecting creditors, spouse, heirs, bona fide third parties, etc, under Swiss law.

Note also that Switzerland is a contracting state party to the 2007 Lugano Convention on the Enforcement of Judgments in Civil and Commercial Matters, which sets out rules of jurisdiction in proceedings against Swiss domiciled trustees. The Hague Trust Convention sets out the jurisdiction of Swiss courts in matters falling outside the 2007 Lugano Convention.

Foreign Law Foundations

Private foundations governed by the laws of another jurisdiction are recognised in Switzerland provided that they satisfy the publicity or registration provisions of the law of establishment or, in the absence thereof, that they are established in accordance with the laws of that state. This is regardless of the fact that they might support, even entirely, the living costs of their beneficiaries.

In 2008, the Swiss tax conference, consisting of the heads of the cantonal tax authorities, published a circular on trust taxation. The trust itself is not taxable under Swiss tax law. The tax treatment of the beneficiary or the settlor depends on the structure of the trust. If, from a Swiss tax perspective, the trust qualifies as a revocable (transparent) trust, the trust’s assets and income derived thereon are attributed to the settlor for tax purposes. The trust deed or the letter of wishes alone are not relevant for the qualification of the trust and the entire circumstances are taken into account. The key criterion is whether the settlor has irrevocably given up their rights over the trust’s assets.

As long as the settlor is in a position to control the trustees – to instruct and to replace them – or remains the main beneficiary, the trust is disregarded for Swiss tax purposes and the trust’s assets as well as any income thereon is attributed to the settlor for income and wealth tax purposes. Distributions from a revocable trust to the settlor are not taxable upon them. Distributions from a revocable trust to a beneficiary are subject to gift tax depending on the degree of kinship between the settlor and the beneficiary. In principle, a trust established by a Swiss resident settlor is regarded as a revocable trust.

Distributions from an irrevocable and fully discretionary trust (as qualified for Swiss tax purposes) are subject to income tax at the level of the beneficiary. Assets of an irrevocable fixed-interest trust, as well income derived thereon, are taxable for the beneficiaries in proportion to their share.

It is strongly recommended to seek a tax ruling to confirm the qualification of the trust, as well as the taxation of future distributions, with the competent cantonal tax administration prior to moving to Switzerland.

The draft bill currently under discussion in the Swiss Parliament also introduces detailed provisions on the taxation of trusts. Under the draft bill, the distinction between revocable and irrevocable trusts would remain. However, the draft bill would introduce new rules for irrevocable discretionary trusts:

• upon the creation of such a Swiss trust, cantonal inheritance or gift tax will be due;
• if a beneficiary is a Swiss resident or if the settlor was a Swiss resident at the time the trust was created, the trust will be subject to corporate income tax; and
• income tax will be levied upon distribution to Swiss resident beneficiaries.

These rules would apply both to Swiss trusts and foreign trusts with a Swiss nexus.

It remains to be seen whether this heavy taxation will be maintained in the final draft bill, at the risk of derailing the introduction of Swiss trusts.

In accordance with the law, Swiss foundations are irrevocable and independent legal entities. A legal entity is only disregarded as a last resort in cases of tax evasion.

If a foreign foundation has been legally established and there are no grounds for a pass-through, the company is to be recognised in accordance with the incorporation theory prevailing in Switzerland. However, a foreign foundation may be taxed in Switzerland if its effective place of management and control is deemed to be in Switzerland. Furthermore, if it is apparent that the foundation is used to evade taxes, it may be disregarded and its assets may be attributed to the founder for income and wealth tax purposes.

As described in 3.3 Tax Considerations: Fiduciary or Beneficiary Designation, if the settlor of a trust reserves too much power over the trust’s assets, the Swiss tax administration may consider the trust to be transparent for tax purposes. As a consequence, the assets and income derived from them is attributed to the settlor for tax purposes.

Switzerland’s political stability, its sound legal system, the high level of expertise of its financial sector and the levels of confidentiality therein mean that Switzerland continues to be a desirable jurisdiction for asset protection planning.

International trusts, family foundations, life insurance wrappers, lifetime gifts and personal holding structures are the most commonly used vehicles.

However, careful considerations need to be given when setting up these structures and vesting funds in them, both in terms of tax consequences and in understating their strength and weaknesses (taking into account the various legal means available in Switzerland and abroad to creditors/heirs, etc, in light of the location of the assets in particular).

Foundations (Swiss or foreign) are commonly used succession planning vehicles and foreign law trusts, can, in specific cases, also be used for Swiss residents. In this context, two legislative initiatives should be noted.

Swiss Law of Trust

Currently there is no (substantive) Swiss trust law (see 3.1 Types of Trusts, Foundations or Similar Entities). However, an expert commission is now reviewing the regulatory and legal framework in an attempt to introduce a proper Swiss domestic law on trusts.

This would allow, among other advantages, the strengthening of Switzerland’s competitiveness as a financial market concerned with the preservation of one’s privacy and wealth, without the restrictions on the use of Swiss family foundations.

Amendment of the Swiss Civil Code

In addition to the introduction of the revised Swiss succession law (see 2.3 Forced Heirship Laws), which will, in particular, give the testator greater freedom of disposal, another revision is currently being considered by the Swiss Parliament in order to further facilitate the transfer of businesses by succession.

The Federal Council is planning four key measures to facilitate such transfers.

• The draft bill seeks to grant heirs a right to the full allocation of a business in the division if the deceased did not make provision for this. In other words, the judge would be able to allocate a business in its entirety to an heir upon request. This should prevent the splitting up or closure of businesses.
• The draft bill would introduce the possibility for the successor heir to obtain a deferral of payment from the other heirs, in order to avoid liquidity problems.
• The draft bill would establish specific rules on the value of businesses. The definitive value would no longer be that at the time of the opening of the succession, but the value at the time of the transfer. This is a way of taking account of the entrepreneurial risk assumed by the transferee, without placing other heirs at a disadvantage with regard to assets that can easily be separated from the business.
• The draft bill would strengthen the protection of heirs with forced heirship rights by excluding the possibility of their reserved share being allocated to them against their will, in the form of a minority share in a company controlled by another heir.

This revision is expected to come into force in 2026.

The shares of companies not listed on the stock exchange are valued based on rules set out by the cantonal tax administration. This valuation is relevant for wealth tax purposes. The fair market value of the shares is not adjusted to reflect a discount for lack of marketability and control in the case of a transfer of the shares during one's lifetime or at death. However, the fair market value can be reduced by 30% in the case of a minority shareholding.

Where real estate is transferred during one's lifetime or at death, real estate capital gains tax is deferred. However, the donee/heir takes over the relevant tax values.

As described in 1.1 Tax Regimes, most cantons do not tax spouses and lineal descendants on gifts and inheritances.

Two key trends can be observed:

• increasing attacks on trusts or foundations in family or succession law disputes; and
• increasing requests for information to a foreign court.

Trusts and Foundations

Trusts and foundations are challenged in the context of divorce disputes when one spouse claims that assets have been settled onto a trust or a foundation by the other spouse without their consent, such that the assets are to be included in the liquidation of the matrimonial regime upon divorce.

In divorce proceedings, a spouse has a statutory duty to inform the other spouse about their financial situation and the court can, upon request, order the other spouse or a third party (eg, a Swiss bank) to provide the requested information.

A Swiss judge is not competent to grant provisional measures where foreign divorce proceedings are pending and there are assets in Switzerland. However, an exception applies in emergency situations according to Swiss doctrine.

As discussed at 2.3 Forced Heirship Laws, Swiss succession law allows protected heirs to claw back the gifts or legacies that are in breach of their compulsory portion, under certain conditions. This includes assets settled onto a trust or foundation perceived by an heir to have been settled with a view to breaching their forced heirship rights.

Disclosure of Information to a Foreign Court

Switzerland has very strict rules on giving evidence in foreign court proceedings. If these rules are not respected, there are potential criminal consequences for any person who carries out activities that are the responsibility of a Swiss public authority or official. A foreign authority obtaining evidence in Switzerland (such as witness statements, the production of documents, expert opinions, or a hearing by video conference of a party or witness located in Switzerland) constitutes an international judicial assistance act by a public authority on Swiss territory, and is prohibited unless authorised.

Switzerland is a Contracting State to the Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters and a number of other bi/multilateral treaties relating to civil procedure. It makes provision for obtaining evidence by means of letters of request, through diplomatic or consular officers and through commissioners. In cross-border divorce or succession proceedings, information from a Swiss bank, for example, needs to be obtained through legal assistance proceedings.

Foreign parties (including foreign lawyers, bankruptcy receivers and investigation companies) may underestimate the difficulties Swiss law will cause when attempting to gather evidence or examine a witness in Switzerland.

Transferring data abroad, or submitting it to foreign courts, may also trigger other legal considerations, such as data protection, banking secrecy laws and legal privilege under Swiss law.

In succession and family disputes, there might be cases where an invalid transfer will result in the relevant assets being qualified as still forming part of the matrimonial assets or the inheritance.

In the event that the transfer of matrimonial assets by one spouse without the other spouse’s consent infringes Swiss marital property rules, such transfer is not valid under Swiss law. This issue does not fall under the scope of the Hague Trusts Convention because it is a preliminary issue governed by the law applicable to the matrimonial property regime. A spouse could pursue a vindication claim.

To the extent that the remaining assets of a spouse are not sufficient to compensate the other spouse in case of divorce, the entitled spouse has a direct claim against the third party (eg, a trustee).

A Swiss judge does not have the power to vary a foreign law trust instrument and can only make property adjustment orders in limited cases.

The use of corporate fiduciaries is prevalent in Switzerland, and many trust companies are active in Switzerland.

Trustees are subject to a higher standard of conduct according to the Financial Institutions Act (FinIA), the Financial Institutions Ordinance (FinIO) and the Anti-Money Laundering Act (AMLA).

FinIA and FinIO

The FinIA and FinIO came into force in 2020 and require trustees to obtain an authorisation from the Swiss Financial Market Supervisory Authority (FINMA) to operate.

Persons who solely manage the assets of persons with whom they have business or family ties are not subject to the FinIA. Requirements to be met to obtain the authorisation include, notably:

• being legally classified as either a sole proprietorship, a commercial enterprise or a co-operative;
• being entered as such in the commercial register; and
• having a proof of affiliation to a supervisory organisation (SO). These are licensed and supervised by FINMA, but not government agencies.

AMLA

Trustees who are subject to the FinIA are considered as financial intermediaries and, as such, subject to the AMLA. This triggers, notably, the following duties:

• to identify and document the customer and the beneficial owner of the trust (and renew such identification process in case of doubts about the identity);
• to clarify the economic background and the purpose of a transaction or business relationship if the transaction or business relationship appears unusual, unless its legality is clear, or if it carries a higher risk (which is always deemed to be the case for business relationships with politically exposed persons and their family members);
• to keep records of transactions carried out and of clarifications required under the AMLA; and
• to file a report with the Money Laundering Reporting Office Switzerland in the event of a suspicion of money laundering.

A revision of the AMLA came into force on 1 January 2023. The parliament finally decided not to include new obligations for lawyers and fiduciaries who provide services to (domiciliary) companies or trusts, although this is a long-standing recommendation of the Financial Action Task Force. Critics say that the revised AMLA is actually only a transposition in the legislation of standards that are already applied by financial intermediaries in practice with the sole proper improvement being that associations that collect or distribute funds abroad for charitable, religious, cultural or social purposes will be required to be more transparent.

Legal entities (eg, companies) that comply with the corporate rules applying at the place where they are incorporated benefit from limited liability. For trusts, their recognition will be exclusively dealt with by the foreign trust law designated by the Hague Trust Convention.

Piercing the corporate veil is restrictively admitted by Swiss courts and requires it be demonstrated that:

• either there is, from an economic viewpoint, identity between two formally independent legal entities, or the legal entity that shall be disregarded is, at least, economically controlled by the other entity; and
• invoking the formal independence of the two legal entities is abusive in light of all relevant circumstances.

Liability exoneration clauses can be used, but any agreement purporting to exclude liability for unlawful intent or gross negligence in advance is void under Swiss law. In the case of delegation to an independent associate, the delegating party is liable for the damage caused by the associate unless the principal accepted to exonerate the delegating party from any liability by prior agreement. In this case, the exoneration clause is not subject to any restriction.

There are no specific laws regulating a fiduciary’s investment of assets. The relation between a principal and a fiduciary will be regulated by their contractual agreement, usually a mandate agreement, which may contain instructions as to the type of investments that can be made.

In the case of trust structures, the trust instrument and the governing law of the trust will often contain rules.

There is no recognised investment theory or standard that applies to the fiduciary investment of assets in Switzerland, and no diversification is required.

Trusts and foundations can hold active businesses and run those business effectively. Trustees who run businesses will be subject to the supervision of their supervision organisation (if they are subject to the supervision requirement). Foundations will be supervised by their supervisory bodies (either the federal or the cantonal supervisory authority), which will check that such business remains within the purpose of the foundation. Good governance will also be expected from the members of foundation councils. Regarded as the benchmark for best practice, the Swiss Foundation Code includes detailed recommendations on investment strategy.

Residency

Conditions for obtaining a residency permit in Switzerland depend on the citizenship of the applicant. The following are most usual forms of permits.

• The L permit – residency of up to 364 days a year.
• The B permit – residency of more than a year.
• The C permit – granted after five or ten years of residency depending on the citizenship and the level of integration of the permit holder.
• The G permit – for cross-border workers.

No residency permit is required for stays up to 90 days where there is no intention of gainful activity.

EU and EFTA member states citizens

Citizens from all EU and EFTA member states benefit from freedom of movement and only have to show that they have a place to live and sufficient financial means to support their living expenses in Switzerland.

Third-country citizens

Citizens from other countries are subject to stricter conditions.

Without gainful activity, two main options are available.

• A pensioner permit is available to applicants over the age of 55 with ties to Switzerland and sufficient financial means to support their living expenses in Switzerland. Such individuals will not be allowed to carry out any economic activity either in Switzerland or abroad
• Individuals with a certain level of income/taxable basis, regardless of age and despite no particular ties to Switzerland, may be granted a residency permit based on financial criteria – some cantons will allow such permit holders to carry out gainful activity abroad.

Permits for applicants looking to have a gainful activity in Switzerland are subject to quotas set each year by the Federal Council canton by canton, with the Confederation keeping a reserve. Three main options are available.

• To be hired as specialised employee by a company in Switzerland, if the latter can show that it was not able to find a Swiss or European employee that would match the criteria of the position offered.
• To apply for a permit in relation to the set-up of a company in Switzerland. A permit will be granted only if the applicant can show that the company will have a sustainable impact on the Swiss labour market and economy.
• To apply for a permit in relation to an investment in an existing company with financial difficulties. The applicant has to show that the investment saves existing jobs that would otherwise be at risk.

Since 1 January 2021, separate quotas for British workers hired by companies in Switzerland have been available.

Citizenship

C permit holders may apply for Swiss citizenship if they:

• have resided ten years in total in Switzerland, including three years in the five years preceding the application (years spent in Switzerland between the ages of eight and 18 count double with a minimum actual stay of six years);
• have resided for two years in the canton where they are applying, including the last 12 months preceding the application; and
• reside in Switzerland for the duration of the process.

Amongst other conditions, the candidate has to show that they are integrated in the canton in which they apply (language skills, knowledge of local customs, etc) and have not been dependent on social aid for the three years before the application is made and during the process.

There are no expeditious means for an individual to obtain Swiss citizenship. Some categories of people can apply for facilitated citizenship, including spouses of Swiss citizens (who have been married for at least three years and have resided in Switzerland for at least five years) and those who are under 25 years old, were born in Switzerland and are the third generation of their family living in Switzerland.

Given the compulsory application of the forced heirship right of an heir (with or without a disability), the planning options are limited.

Since 2013, there has been a new provision in the law that enables testators to appoint a reversionary heir if an heir is mentally incapable of judgement, is entitled to a compulsory share quota and has no spouse or children.

A family foundation or a trust could be established and the foundation board or the trustee could adapt distributions to the current needs of the beneficiaries. The establishment of a foundation for the satisfaction of the needs of a disabled person is an allowed purpose for a foundation. A tax ruling to confirm the tax treatment of distributions should be requested.

In Switzerland, guardians are appointed by the competent Children and Adult Protection Authority, which are organised by the cantons. In Geneva, the competent authority is the Tribunal de protection de l’adulte et de l’enfant (TPAE).

The Authority appoints the guardian and must take into account the wishes of the person concerned.

The competent Authority can order one or more of the following.

• Guardianship support, to assist a person in performing certain acts on a voluntary basis.
• Guardianship by representation, to represent this person in performing certain acts. A special form is that of the asset-management guardianship, which includes any act that, by its nature, is able to preserve or increase that person’s estate, or achieve its intended purpose, such as contracting an obligation, selling property or initiating a lawsuit.
• A general guardianship for the person who needs assistance.

Guardians are under the ongoing supervision of the Authority (an exception applies if the guardian was appointed based on an advance care directive).

The Authority monitors the guardian’s activity, consents to certain actions, reviews reports and approves accounts.

The competent Adult Protection Authority has a comprehensive set of protective measures that it can exercise, including guardianship, in cases of incapacity.

Swiss law also provides for two preventive measures to address issues of incapacity: advance care directives/patient decrees, and mandates in case of incapacity.

Switzerland has an excellent social security system that is based on three pillars. The first pillar is the mandatory state system, covering old age and survivor’s benefits (AHV/AVS) as well as disability (IV/AI). The first pillar is intended to cover basic needs. Contributions are due on the entire salary and are borne half by the employer and half by the employee. The self-employed pay the entire contribution on their net income. Individuals who do not work either pay contributions based on their net wealth or, if they are married or living in a registered partnership, are covered by the contributions of their spouse/partner.

The occupational pension scheme is the second pillar. Benefits from the second pillar should allow, together with benefits from the first pillar, the standard of living to be maintained. Pension schemes are provided by the employer. The employer must pay at least 50% of the contributions. Apart from certain legal minimal standards, the employer is free to offer additional pension benefits to its employees. The self-employed can also join an occupational pension scheme, or take advantage of the possibility to make greater contributions towards the third pillar.

The third pillar is private savings plan for retirement. The contributions are tax deductible up to CHF7,056 for individuals covered by an occupational pension scheme and up to 20% of the net income (maximal CHF35,280) for individuals not covered by an occupational pension scheme (all figures as of 2023).

Savings from the second and third pillar can be withdrawn or pledged to finance the purchase of a home that serves as the individual's main residence.

Furthermore, Swiss social security covers unemployment and social welfare. If the combined benefits from all three pillars is not sufficient to cover a person’s need after retirement, additional benefits can be received from the first pillar.

All Swiss residents must take up health insurance. The cantons allow for premium reductions for individuals in need.

Swiss law dictates who a child’s legal parents are and who has parental authority, irrespective of what the adults have agreed. A child can have no more than two legal parents. The birth mother is always the legal mother and will have parental authority. The other legal parent is either her spouse or the father/other mother who recognises the child.

Given the principles set out in the Swiss Federal Constitution, the Federal Law of 18 December 1998 on Medically Aided Reproduction (LPMA) is very restrictive regarding the types of assisted reproductive technology (ART) that are allowed and the persons eligible to make use of ART in Switzerland. The LPMA prohibits, for example, the donation of eggs and embryos and any sort of surrogacy.

Adopted Children

Switzerland allows joint adoption of a child by a married couple, including those in a same-sex marriage (who must have been married for at least five years, are aged at least 35 years old and are between 16 and 45 years older than the child). Individual adoption by an unmarried person is also permissible, subject to conditions.

Since the revision of the adoption law in 2018, stepchild adoption is possible after three years of de facto cohabitation (ie, one cohabiting partner can adopt the child of the other partner) provided they have cohabited with the child for at least one year and have the consent of the natural parent.

Once a legal relationship has been established, the child (including one that was born out of wedlock or adopted) is treated as a child of legal parents and is entitled to the same share of their parents’ estate as a biological heir.

Surrogacy

Article 119 of the Federal Constitution of 18 April 1999 and Article 4 of the LPMA prohibit all forms of surrogacy in Switzerland. For surrogacy arrangements undertaken abroad, Switzerland does not always (automatically) recognise the legal parent-child relationship. The Federal Supreme Court distinguishes between genetic and non-genetic parents when deciding whether the parent-child relationship established abroad as a result of surrogacy is recognised in Switzerland. In a leading ruling issued in 2015, the court decided that only when genetically related to the child can one be recognised as the legal father in Switzerland. Non-genetic parents can establish legal parentage through (second parent) adoption.

Same-sex couples have been able to marry in Switzerland since 1 July 2022. From this date, same-sex couples can marry or convert their previously registered civil partnership into a marriage. Same-sex couples therefore now have the same rights as heterosexual couples (eg, in matters of inheritance law, naturalisation and joint adoption) and will be subject to ordinary participation in the acquired property regime, unless they enter into a marriage contract.

Since the entry into force of the new law, it is no longer possible to enter into new registered partnerships in Switzerland. Couples will only be able to opt for marriage. Existing registered partnerships will, however, be maintained for the partners who wish to do so and/or do not convert the partnership into a marriage.

Both foundations and associations are commonly used in Switzerland for charitable purposes.

The Swiss charity sector is highly regarded internationally, particularly due to its sound regulation and supervision. More than 13,000 charitable foundations are registered.

Charitable giving is mainly encouraged in Switzerland through a very favourable tax system.

Taxation of Charitable Swiss-Based Entities

As far as direct taxes are concerned, Swiss federal law and most cantons (the precise rules varying between them) exempt, under specific conditions, legal entities that are pursuing public service or public interest purposes from the federal income and wealth tax, provided that their capital and income are exclusively directed to such purposes.

Donor Taxation

Gifts made by individual or legal entities to non-profit organisations are generally exempted both at the federal and the cantonal level.

Furthermore, as far as individual taxation is concerned, federal law stipulates that such gifts are deductible from taxable income up to 20% of the taxpayer’s net income. At the cantonal level, rules vary from one canton to another.

The system is equivalent regarding the taxation of gifts made by companies to tax-exempted entities.

Cross-Border Donations

Gifts in favour of charitable entities established abroad are not deductible for a Swiss resident donor. Furthermore, such gifts are subject to gift and inheritance taxes, unless a reciprocity agreement is concluded with the country where the foreign charity is registered. In Geneva, it is possible to apply for a partial exemption, which may amount to at least 25%. However, the relevant rate is determined on a case-by-case basis. The Geneva government is also authorised to conclude reciprocity agreements with foreign countries.

In addition, certain private initiatives exist to facilitate/optimise the tax efficiency of cross-border donations throughout Europe (including Switzerland). Transnational Giving Europe is one of them.

In Switzerland, foundations and associations are commonly used for charitable planning. It is also common to see high net worth individuals residing in Switzerland using charitable trusts. As the latter are not governed by Swiss law, they will not be discussed here.

Foundations

A foundation is an autonomous legal entity consisting of a pool of assets irrevocably committed to one or more defined purpose(s). As an autonomous and separate legal entity, it benefits from full legal personality. Once constituted, the foundation becomes an autonomous legal entity, thus falling outside of the direct control of the founder.

A foundation can have any kind of clearly defined purpose(s) provided that it is lawful, and neither impossible nor immoral. As such, foundations are not required to pursue charitable purposes.

The supreme body of a foundation is the board of the foundation, which is vested with executive functions and, in particular, with the administration and representation of the foundation. The board have a fiduciary duty to act in accordance with the foundation’s best interest.

The purpose of a foundation can only be amended under extraordinary circumstances, unless the founder has retained, in the statutes, the right to do so under the condition that ten years have elapsed since the constitution of the foundation was either established or last amended.

Associations

An association is an autonomous separate legal entity formed by individuals or corporate members. An association acquires legal personality as soon as its intent to exist as an independent corporation is made apparent from its statutes.

Contrary to foundations, associations are composed of members. In practice, there must be a minimum of two members to constitute an association.

The main purpose of an association cannot be economical, which means that it cannot procure to its members an advantage directly linked to its commercial or industrial activities.

The supreme body of an association is the general assembly, which is also the general meeting of the members of the association.

The purpose of an association can be changed by the general assembly.

Pros and Cons

While an association can be established simply and cost-efficiently, the establishment of a foundation is more complicated, as it requires not only notarisation but also a substantial capital contribution. If desired, the purpose and statutes of an association can be changed by the members themselves, whereas changing the purpose or statutes of a foundation requires the approval of the supervisory authority. However, this provides the founder with greater security as to the use of its assets. Foundations are often used for long-term projects.