Legislative proposal on simplification of corporate succession under Swiss inheritance law
In August 2018, the Federal Council has adopted the dispatch on the revision of Swiss inheritance law. The key changes of the modernized law act refer to the benefits of a factual life partner of the decedent and the reduction of the compulsory portions.
On 10 April 2019, the Federal Council has sent an additional proposal to the parliament for consultation consisting of measures facilitating corporate succession. The proposal includes the following measures:
- Integral allocation of a company: Heirs may demand the integral allocation of a company or the shares therein, respectively, if the testator has not disposed of the corporate succession. In the case that several heirs claim this right, the court may allocate the company or shares to the heir who appears to be most suited as manager of the company.
- Deferment of payment: Should the heir, who has been granted the allocation of the company or the shares either during the testator’s life or at the time of the division of the estate, not be in a position to pay the other heirs their part of the estate, he may be granted a deferment of payment of up to 5 years. The deferred amount must be secured and interest must be payed thereon.
- Fair market value at time of transfer: The relevant fair market value of the company or the shares is no longer calculated at the time of the succession, being the time of the testator’s death, but at the time of the transfer of the assets which may already be made during the testator’s life. Consequently, coheirs will not participate in a profit or loss resulting from the business activities of the overtaking heir(s).
- Exclusion of allocation of minority interests: Heirs, who are granted their compulsory portion by way of a minority interest in a company, do not have to accept such allocation, if another heir has the control over the company.
Gift and inheritance tax aspects have been left aside in the proposal, as they fall within the legislative competence of the cantons. However, if the overtaking heir is not a descendant or spouse of the testator, gift and inheritance taxes may be of such extent that a corporate succession is significantly more difficult.
The consultation of the parliament on the latest proposal will last until 30 August 2019.
Beat BaumgartnerPartner Attorney at law, Swiss certified tax expert
Beat Baumgartner, attorney at law and Swiss certified tax expert, is a partner in our Zurich office. He focuses on Swiss and international taxation, M&A, financing and capital market transactions.T: +41 43 434 67 10 M: +41 79 930 63 52 E: email@example.com