The Double Taxation Relief (Taxes on Estates of Deceased Persons and Inheritances) (Switzerland) Order 1994

Explanatory Note

(This note is not part of the Order)

The Convention with Switzerland is set out in Part I of the Schedule to this Order.

The Convention defines the scope of fiscal domicile separately for the United Kingdom and for Switzerland. In the case of the United Kingdom, this includes the deemed domicile rules contained in section 267 of the Inheritance Tax Act 1984. Where domicile is claimed by both countries, a deceased person’s status is determined under special rules, but subject to the Protocol set out in Part II of the Schedule (Article 4).

Immovable property which forms part of a deceased person’s estate may be taxed in the country of domicile and in the country of situs (Article 5).

The Convention gives secondary taxing rights to the country where an enterprise has a fixed place of business (Article 6), and where the management of ships and aircraft operating internationally is situated (Article 7), where such property forms part of the estate of a person domiciled in the other country.

Other property is generally taxed solely in the country of domicile or, where domicile is claimed by both countries, in the country of situs, but subject to three exceptions. The United Kingdom retains a secondary taxing right notwithstanding domicile in Switzerland: on shares in United Kingdom companies; on property situated in Switzerland where the deceased person was domiciled in the United Kingdom at death or had been so domiciled within the previous 5 years, and was a national of the United Kingdom and was not a Swiss national; on property situated in a third country if at any time within 5 years of the death the deceased had been domiciled in the United Kingdom, and was a national of the United Kingdom and was not a Swiss national (Article 8).

Where property is taxable in both countries by virtue of any of the above Articles, the Convention resolves potential double taxation: by providing for the United Kingdom to give credit for Swiss tax on immovable property and business property situated in Switzerland, and on ships, aircraft and other property where Switzerland has the primary taxing rights; by providing for Switzerland to exempt immovable property and business property situated in the United Kingdom, and ships and aircraft of United Kingdom enterprises (Article 9).

The Convention gives an exemption from the tax charge in the United Kingdom of up to 50 per cent on property in the estate of a deceased person who is either a national of Switzerland or is domiciled there under Article 4, which passes on death to his or her spouse domiciled outside the United Kingdom (Article 10).

There are provisions safeguarding nationals and their enterprises of one country against discriminatory taxation in the other country (Article 11), and for consultation (Article 12) and limited exchange of information (Article 13) between the taxation authorities of the two countries.

A Protocol to the Convention is set out in Part II of the Schedule to this Order. The Protocol clarifies certain parts of the Convention as set out in Part I of the Schedule, as follows.

Deceased persons who are nationals of and domiciled in one country (and their dependants) cannot be treated as domiciled in the other country simply because of residence there for employment purposes.

The particular rules of Swiss civil law are identified for the purpose of domicile in Switzerland.

The situs of any property affected by Article 8 of the Convention shall be determined by the law of the United Kingdom in effect at the date of entry into force of this Convention.

The Convention and the Protocol will enter into force 30 days after the date on which instruments of ratification thereof are exchanged and will apply to deaths and other chargeable events occurring after that date.