The Inheritance Tax Treaty signed between France and Switzerland provides some specific provisions for Swiss tax residents owning real estate assets in France.  The Treaty provides that French inheritance tax is due on the transfer on death of real estate assets by a French tax resident.  However, the transfer of shares in a predominantly real estate company remain solely taxable in Switzerland, even if the underlying real estate asset is located in France.

At France’s request, a revised agreement was negotiated but the Swiss Council of States asked for a renegotiation.  As France and Switzerland did not reach an agreement, France rescinded the Tax Treaty with effect 31 December 2014.

As a result, with effect from 1 January 2015, French domestic inheritance tax rules will apply.

Going forward, France will have the right to tax assets located in France no matter where the deceased and the heirs are tax resident.  This will mean that shares of a predominantly real estate company (such as a SCI) held by a deceased Swiss tax resident will be taxed in France, even if the heirs are not tax French tax resident.

Our recommendation

We encourage Swiss tax residents who have interests in French real estate companies to review their individual tax situation in order to take the appropriate measures in consequence of the termination of the Inheritance Tax Treaty.