Deductibility of inheritance tax

Business-related expenses also include federal, cantonal, and municipal taxes, but not tax penalties. According to the Federal Court, this includes inheritance tax. Therefore, a provision for payable inheritance taxes can be deducted as an expense, but the capital gain from the inheritance must be recorded in a neutral way.

In the decision 2C_1135/2016, 2C_1136/2016 from November 30, 2017, the Federal Court dealt with the deductibility of inheritance tax. In 2012, A. AG inherited properties valued at 51‘501‘998 Fr. from a shareholder, which they entered into the assets in their annual accounts. The mortgages of 1‘500’000 Fr. weighing on them were entered into the liabilities, resulting in an extraordinary profit of 50‘001‘998 Fr. For the inheritance taxes, they recorded a provision of 18‘062‘674 Fr. This resulted in a commercial legal profit of 31‘985‘793 Fr. To neutralize future profits for tax purposes, this was reduced by 50‘001‘998 Fr. in the tax declaration, resulting in a loss of 18‘016‘205 Fr. This was not accepted by the Cantonal Tax Office Zurich. The Federal Court assessed the case as follows: It affirmed the possibility of deducting inheritance taxes as business-related expenses according to Art. 59 para. 1 lit. a of the Federal Law on Direct Taxes (DBG). Furthermore, no taxable profit arises through capital gains from inheritance according to Art. 60 lit. c DBG. However, such a capital gain from inheritance is considered - contrary to what A. AG had done - not the full value of the inherited properties, but only the net increase in capital through the inheritance. In this case, it would be the value of the inherited properties minus the mortgages and the paid inheritance tax. Art. 60 lit. c DBG is intended to handle the inheritance as one of the listed transactions in a tax-neutral manner, since this capital gain had not been generated by the company itself. But if the full value of the inheritance is deducted from the commercial profit, this is not the case because the amount of the inheritance tax is double-corrected in the result and the taxable profit is too low, or the loss too high. Correctly, the loss of A. AG should thus be not 18'016'205 Fr., but 15'521 Fr.Findea helps you keep your taxes simple and hassle-free.