Inheritance and gift tax in the Canton of Zurich – on a house

The tax is paid by whoever receives something. With an inheritance, that is each heir for their own share, not the community of heirs as a whole.¹ Fully exempt are spouses, registered partners and descendants, meaning children, grandchildren and great-grandchildren.¹

For everyone else, closeness to the person the house comes from is what matters. Many receive an allowance (Freibetrag), an amount that stays tax-free before the calculation. Nieces, nephews and step-parents receive none. Stepchildren do not count as descendants. They receive an allowance of CHF 15,000 and then pay twice the base rate.¹ The allowance applies only once per giver or deceased. Several gifts are added together.¹

If the house is in the Canton of Zurich, Zurich taxes the transfer. This holds even if the deceased or the giver lived in another canton or abroad.^{1 2} Property is taxed where it is located.

What this means for you: when children inherit their parents’ house, no inheritance tax is due. It becomes noticeable for siblings, nieces, nephews and partners.

The calculation has three steps. First, the tax office deducts the allowance from the value. It then applies a banded rate of 2 to 7 per cent to the rest. The result is called the base tax (einfache Steuer).¹ Finally, this base tax is multiplied according to the relationship. Parents pay it once, siblings three times, nieces and nephews five times, unrelated people six times.¹

Above CHF 1.5 million, a special rule applies. The base tax is then 6 per cent of the whole amount, not 7 per cent of the rest.¹ Up to CHF 1.5 million, the bands add up to exactly CHF 90,000, which is also 6 per cent.

What counts is the market value (Verkehrswert) on the date of death or of the gift.^{1 2} The usually lower tax value from your tax return does not count here.

What this means for you: every calculation starts with a solid figure for the value of the house.

Unmarried partners are not exempt. They receive an allowance of CHF 50,000.¹ The condition: both lived together in the same household for at least five years. In addition, no other allowance may be claimed.¹

Then comes the catch. Partners do not appear as a group of their own in the list of multipliers. They fall under «other persons entitled to inherit and unrelated persons» and pay six times the base tax.¹ That is the highest multiplier, the same as for a stranger, as example 2 shows.

The same applies to godchildren, foster children and fiancé(e)s, unless they are related anyway.¹ Their allowance of CHF 15,000 does not change the six-fold rate. A godchild who is also a niece, by contrast, pays five times.

What this means for you: an unmarried couple living in their own house should know this figure. The tax office confirms which documents prove the five years.

As far as gift tax is concerned, yes. Children and grandchildren are exempt, whatever its value.¹ No gift tax return is needed.³ Property gains tax (Grundstückgewinnsteuer) is not due on the gift either. It is deferred.⁴

Deferred means: it comes later. If the child sells the house one day, the parents’ purchase counts. Their price and period of ownership matter, not the date of the gift.⁴ If that purchase was more than twenty years ago, the market value from twenty years ago may replace the old price.⁴

Tax-free does not mean free of consequences. Under civil law, such a gift is usually brought into account (Ausgleichung) between siblings when the estate is divided, unless the parents expressly decided otherwise.⁷ The land registry also reports every gift of a property to the canton on its own initiative.¹

What this means for you: tax is only one of three questions; the others are siblings and care. If you want to stay in the house, see right of residence and usufruct.

Some parents sell the house to their children cheaply. If they deliberately set it below market value to give the child the difference, this is a mixed gift (gemischte Schenkung).⁶

For the tax deferral, the Zurich Administrative Court uses a rule of thumb. If the total consideration is at least 25 per cent below market value, a mixed gift is presumed.⁶ The value of a reserved right of residence counts as part of the consideration.⁵ The presumption can be rebutted, and a gift can be proven with a smaller gap.⁶ Zurich then defers it for the whole house.⁵

On a later sale, the earlier acquisition counts, usually the parents’ purchase. The price the child paid is not recognised as acquisition cost, so the taxable gain is higher.⁵ In the federal court case, it rose from CHF 5,592 to around CHF 52,000.⁵

What this means for you: the 25 per cent is not a target for setting the price. Weigh deferral, later sale and care costs together.

No. The ten-year period people often mention does not apply here. For waived assets, the law on supplementary benefits sets no such period.⁸ This is about supplementary benefits (Ergänzungsleistungen): state top-ups when pension and assets do not cover a care home.

A transfer counts as waived assets if the consideration is less than 90 per cent of market value.⁹ The difference is counted as if the assets were still there.^{8 9} This amount falls by CHF 10,000 each year.⁹ It never expires.

An example: with the reduced price from example 4, CHF 400,000 counts as waived. Ten years later, around CHF 300,000 still counts. The 90 per cent here and the 25 per cent for property gains tax are two separate rules. A transfer can be tax-free and still count as waived assets.

What this means for you: if you hand over the house with later life in mind, first work through care in later life. Another route: selling and renting back.