Wealth taxation differs significantly between France and Switzerland. While France concentrates its taxation on real estate via the IFI, Switzerland retains a tax on all assets, with rates varying from canton to canton. For taxpayers with assets in both countries, it is essential to understand the applicable rules, valuation methods, reporting obligations and the effects of tax treaties. This knowledge enables them to structure their assets in compliance with regulations.
French and Swiss tax regimes: logic, basis and territoriality
In France, the abolition of the ISF in favor of the IFI has refocused taxation on real estate assets alone, whether held directly or via companies. Financial investments are excluded from the tax base. Switzerland, on the other hand, continues to tax wealth at cantonal and municipal level, including all assets, whether real estate, accounts, securities or valuables. Thresholds and rates vary considerably from canton to canton.
Tax residence determines the scope of taxation. A French resident declares all his worldwide real estate assets for IFI tax purposes, while a Swiss resident is subject to cantonal rules on all his assets. In the case of assets located in the other country, tax treaties regulate the respective taxation rights.
Valuation and base exclusions
Tax is calculated on the basis of the net taxable value, after deduction of justifiable debts. In France, only property-related debts are allowed. In Switzerland, personal debts can be deducted, but conditions vary from canton to canton.
Certain assets benefit from special treatment. Life insurance policies, for example, can be excluded from the IFI if they contain no real estate. Shares in operating companies held by executives may, under certain conditions, be exempt in whole or in part. Particular attention must be paid to the qualification of professional assets.
Optimizing without contravening: tools and practices
Strategies do exist to modulate the impact of taxation, provided they are properly managed and documented. For example, dismemberment of ownership can reduce the declared value of a transferred asset. In the case of securities, shareholders’ agreements can also influence the valuation applied.
Wealth structuring via holding companies, foundations or other legal vehicles must be conducted with caution. Compliance with anti-abuse rules in both France and Switzerland requires full transparency regarding the asset purpose of the structures used.
Tax treaties and cross-border cases
When property is located in both countries, tax treaties come into play. A property located in Switzerland may still be taxable under the IFI for a French resident, even if it is already declared for Swiss cantonal tax purposes. Bilateral tax treaties make it possible to avoid double taxation, notably through a tax credit mechanism.
Conversely, a Swiss resident owning an asset in France may be liable for the IFI, if the tax threshold is exceeded. The location of the property, the qualification of the taxpayer and the type of asset held influence the analysis.
Declaration, control and adjustment
Reporting obligations vary according to the country of residence and the type of assets held. In the event of an audit, the tax authorities require detailed documentation of valuations, debts and any arrangements. Failure to do so may result in automatic taxation, penalties and reassessment.
It is possible to regularize a situation in the event of an oversight or error, as long as you do so on time and provide the required supporting documents. A spontaneous procedure can avoid the more serious consequences of an a posteriori control.
Wealth and tax support
The taxation of wealth requires a clear vision of the rules applicable in both countries, but also a structuring adapted to the nature of the assets, the mobility of the taxpayers and their long-term projects. BERGEOT PAOLI Associés offers tailor-made support, from analysis of tax residence to optimization of asset flows and coordination with banking, notary and accounting partners. Each situation is studied on its own merits, in compliance with French and Swiss tax law, with particular attention paid to the consistency of declarations and the traceability of choices made. The entire strategy is based on a rigorous framework of private wealth taxation.