Inheritance tax referendum spooks Swiss super-rich

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Lawyers and bankers in Switzerland are warning of a UK-style exodus of the wealthy ahead of a referendum on a 50 per cent inheritance tax for the super-rich.

The Alpine nation is due to hold a popular vote in November on the introduction of a federal tax on inheritances and gifts worth more than Sfr50mn ($61mn). Unlike existing cantonal duties that would still apply, the proposal does not include an exemption for spouses or direct descendants.

The looming vote comes after the UK sparked a rush for the exit among wealthy foreigners by making the global assets of non-domiciled residents liable to inheritance tax — a move it is now considering reversing. Meanwhile, jurisdictions such as Dubai and Italy have stepped up efforts to lure the rich.

“In terms of the chance for Switzerland to attract people leaving the UK, the damage has been done. The timing was terrible,” said Georgia Fotiou, a lawyer advising private clients at Staiger Law. “It hasn’t stopped everyone from coming but more have chosen Italy, Greece, the United Arab Emirates and elsewhere instead.”

The new tax was proposed by the far-left Young Socialists party in 2022 as a way of raising money to tackle the climate crisis. Under Swiss law, such proposals go to a public vote if they are backed by 100,000 signatures.

“The whole country has to vote on the proposal just as a sheer consequence of the proposal being made, which creates unnecessary uncertainty,” said Frédéric Rochat, managing partner of Geneva-based Lombard Odier. “The simple fact it exists is unhelpful.”

Peter Spuhler, owner of rolling stock giant Stadler Rail and one of Switzerland’s richest people, has publicly slammed the proposal as “a disaster for Switzerland”, saying his heirs could have to hand over as much as SFr2bn.

The prospect of the new tax risks further denting Switzerland’s reputation for stability, which has taken several hits in recent years including through the demise of Credit Suisse and the introduction of new financial regulations.

“Switzerland was always the country with an excellent environment when it comes to gift and inheritance tax. We have some bigger family companies we consult and they would have a big issue” if the proposal passes, said Stefan Piller, head of tax and legal for BDO in Zurich.

The new levy would place Switzerland above other jurisdictions such as Italy where inheritance taxes range between 4 per cent and 8 per cent, or Dubai and Hong Kong which have no inheritance or gift tax.

Business lobby group Economiesuisse said this week that the initiative “endangers Switzerland’s position as a reliable and stable business location internationally.”

As the vote approaches, some people are already departing, while others are deciding against relocating to the country.

Rochat said Lombard Odier had “seen Swiss-based families that have decided not to take any risk and to relocate ahead of the vote taking place”, while overseas clients had decided not to move to the country because the “extremely damaging” proposal had created uncertainty ahead of the vote.

Another Zurich-based private banker said a top client had relocated to Liechtenstein ahead of the vote because, even if the proposal does not pass, “the uncertainty around whether there will be another one in a few years made them want to move”.

However, other banks said plenty of wealthy people were still shifting money to Switzerland, long a haven in uncertain periods.

“We are seeing pretty big inflows from everywhere at the moment given global volatility,” said a third executive at a private bank, adding that Americans in particular had stepped up efforts to move money to the country under the Trump administration.

Christian Kälin, chair of Henley & Partners, a London-based consultancy that specialises in citizenship and residency through investment, said he did not “share the view that this has damaged Switzerland’s appeal”.

“We have seen some people waiting to see about the possible introduction, yes,” he said. “But frankly the people we deal with are intelligent and understand Switzerland will not introduce this easily.”

The federal council, the country’s executive branch, has rejected the initiative, as have the upper and lower houses of parliament, and experts have given the tax low chances of success in the November 30 referendum given Swiss citizens’ historic aversion to wealth taxes. To be passed, it requires majorities of both a majority of the population and a majority of the country’s 26 cantons.

However, Rochat said that if the proposal won or lost by a small margin the issue would probably be revisited in a few years, which would hurt Switzerland’s predictability. “It needs to be voted down with such an overwhelming majority [that this possibility can] be put to bed for 20 years.”