Criteria of a joint household for determining inheritance tax

In the event of an inheritance, inheritance taxes are due depending on the canton. For example, in the canton of Aargau, the tax is calculated based on the amount of the inheritance and the degree of kinship to the deceased person. Siblings and grandparents pay more than individuals who have lived in a domestic community with the testator for at least 5 years. A case therefore went to the Federal Court.

On February 6, 2018, the Federal Court ruled in case 2C_685/2017, where the determination of the inheritance tax rate based on the degree of kinship was disputed. A taxable woman from the canton of Aargau lived until the death of her brother with him in the house of their deceased parents, however, in two fully equipped apartments. When the brother died, the taxable woman inherited his estate of 1.8 million Fr. as the sole heir. The Cantonal Tax Office Aargau (KStA) levied an inheritance tax of 368,132.35 Fr. This amount corresponds to the tax rate that inheriting siblings and grandparents have to pay. The taxpayer filed an objection and requested the application of the lower tax rate for persons who lived in a domestic community (same residence) with the deceased person for at least 5 years. Thus, she would have owed only 148,434.40 Fr. in inheritance tax. This was denied, however, as it was not considered that a common household existed due to the two fully equipped apartments. The dismissed objection was then taken to the Special Administrative Court, where she prevailed. The KStA then took the case to the Administrative Court of Aargau, which sided with the tax authorities, prompting the taxpayer to present the case to the Federal Court.

She argued that the Administrative Court should have relied on the federal residential identifier (EWID) to clarify whether a common household had existed or not. The EWID is the identification number of the apartment in which the person lives. The Administrative Court of Aargau did not use the EWID, as there were two fully equipped apartments (except for the washing machine) and the question of a common household was sufficiently clarified. The Federal Court protected the procedure of the Administrative Court, as there was no violation of legal hearing when a court refuses to take requested evidence because it has formed its conviction based on the evidence already taken and could assume without arbitrariness in anticipated assessment of evidence that its conviction would not be changed by further evidence collection. A domestic community in two completely equipped apartments is to be excluded, as in this situation, life could at any time be fully limited to one's own apartment. Thus, the judgment of the Administrative Court was correct and the complaint of the taxpayer was dismissed.

‍Private tax returns made easy – with Taxea.ch

‍You can easily have your private tax return prepared using our tax app, taxea. Learn more about taxea here www.taxea.ch