#61 US estate tax: Why non-Americans may also be liable for tax

According to figures from the US Department of the Treasury, US securities worth 1.2 trillion US dollars were held in Switzerland in mid-2024. Not all of these investments belong to Swiss investors, as the Swiss financial center also manages large foreign assets.

Things get interesting when it comes to inheritance – even if no American citizens are involved. The reason for this is an outdated inheritance tax agreement that Switzerland concluded with the US in 1951.

Reporting requirements for US assets

If a deceased person leaves behind US real estate, securities, or accounts worth more than 60'000 US dollars, the heirs are required to report this. These assets are referred to as «US situs assets».

The heirs must complete two special forms for the US tax authorities, known as 706-NA and 8833. These should be submitted by the surviving dependents within nine months. If there is a will, an English translation is recommended.

Double tax treaty between Switzerland and the US

The double tax treaty between Switzerland and the US (1996) ensures that Swiss heirs of US assets are treated similarly to US citizens. Changes to US estate tax regulations may affect the tax liability of heirs.

Tax allowances and tax calculation

There is an exemption limit, which is adjusted annually in line with inflation. It currently stands at just under 14 million US dollars. US estate tax is applied to the entire estate, not just to individual heirs.

• For an estate consisting entirely of US assets: Taxable base = estate minus exemption.
• For an estate that consists partly of US assets: The exemption is calculated in proportion to the amount of US situs assets. The tax base is calculated as US situs assets minus the correspondingly reduced exemption.

A progressive tax rate of between 18 and 40 percent is applied to this tax base.

Example: Taxable estate

Suppose your grandmother leaves behind Swiss real estate worth 10 million US dollars and an American Bitcoin ETF worth 10 million US dollars.

• Total estate: 20 million
• US situs assets: 10 million
• Exemption: 50 percent (half of the estate) of 14 million = 7 million
• Tax base: 10 (US situs assets) – 7 (exemption) = 3 million

Due to the progressive tax rate, the maximum rate of 40 percent is applicable to this 3 million. The US tax authorities therefore charge 1.2 million US dollars.

Significance of the US estate tax

The revenue from this tax for non-US citizens is low: according to data from the 2014 tax year, revenue amounted to less than 0.03 billion US dollars, with total annual revenue of around 5'000 billion US dollars. The tax is therefore negligible for the US, but it can be complicated for the heirs affected.

For non-Americans, the following applies: 60'000 US dollars or more in US assets must be reported, but this does not necessarily mean that tax is payable. It is worth filling out the relevant forms correctly and meeting the deadlines.

What do you think of extraterritorial tax laws? And did you know about this reporting requirement for assets worth 60'000 US dollarsor more? Leave a comment or send an email.