Cross-border successions and gifts are becoming increasingly common. But anyone inheriting a holiday home abroad should clarify important questions at an early stage.
A holiday home is often associated with beautiful childhood memories. This is where families come together and spend their holidays. It might be for a summer holiday in France or Spain or a skiing holiday in Austria or Switzerland. Unfortunately, a holiday home can sometimes be the cause of an inheritance dispute. If the holiday home is located abroad, this can also have serious tax consequences.
Mr. Müller is the owner of a beautiful holiday home near St. Moritz. Lately, he finds the journey from Frankfurt too long and he starts to think about how to get on with the holiday home. He is thinking that he would actually like to pass the holiday home on to his nephew. Unlike his own children, the nephew and his family are keen skiers.
Since each country has its own inheritance law, it is questionable whether German or Swiss law would be applicable. Under German law, the EuErbVO stipulates that German law is generally applicable to the entire estate, provided that the testator had his/her last habitual residence in Germany.
If Mr. Müller bequeaths the holiday home to his own children, there are relatively few problems. No inheritance tax is due in the canton of Graubünden for his own descendants. The own children will not have any problems with the swiss authorisation requirement for the acquisition of real estate by foreigners.
Unfortunately, the situation is different with the nephew. He may have to pay property taxes in Switzerland as well as in Germany. But in this case, at least the German-Swiss double taxation agreement may help. The problem is, that the nephew is only granted permission to ”purchase” the holiday home under the condition that the property is sold again within two years. Only if the heir can prove a close relationship to the property worthy of protection, the permission can be granted without this condition. In addition to inheritance tax, he/she must then also pay capital transfer tax. And different than planned, he cannot use the holiday home for skiing at all.
In this case it might make more sense for Mr. Müller to pass the house on to his own son.
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