The case

Judgment of 2 November 2023 (9C_102/2023) – for publication: Inheritance tax canton of Berne (inter-cantonal double taxation): The deceased, who died in the canton of Vaud, left her two heirs both movable assets as well as a property in the canton of Berne. In the present case, the tax differentiation of the Canton of Berne has been disputed. According to Bernese practice, a notional inheritance tax amount is calculated on the entire net estate (including the non-cantonal share), which is subsequently distributed to the cantons in proportion to the net assets adjusted by the repartition values, in order to avoid inter-cantonal double taxation. The canton of Vaud, on the other hand, essentially carries out the inheritance tax differentiation according to the basic principles of wealth tax differentiation and only determines the cantonal assessment basis.
As a result, this led to an effective double taxation of the two heirs. The Federal Supreme Court supported the position of the Canton of Vaud and stated that the inter-cantonal tax differentiation for inheritances is essentially the same as for wealth tax. The Bernese practice does not serve to effectively avoid inter-cantonal double taxation, as the chosen mechanism depends on the application of cantonal law with regard to tax calculation and this naturally differs between the cantons. The taxpayer’s appeal was upheld.

Source: taxlawblog and 9C_102/2023 of 2 November 2023 

The commentary

In the case at hand, the repartition value was (only) used by the canton of Berne for the transfer of debt between the cantons: the value was repartitioned upwards, then the percentage debt allocation took place, and the value was repartitioned downwards again. The same rule applies to income taxes and wealth taxes. Nevertheless, taxation was apparently levied at a rate that exceeded 100%, which means that there is always a violation of inter-cantonal double taxation.
Ultimately, double taxation does not occur because of the application of repartition values, but because inheritance taxes have not been harmonised. The canton of Berne assesses them according to the rules for harmonised income taxes and wealth taxes, whereas the canton of Vaud assesses them according to its own cantonal rules, which is permitted because inheritance taxes have not been harmonised. – One tax and two valuation mechanisms.
In this specific case, it is difficult for the canton of Berne to understand why, as a harmonising canton, it has lost out and has to correct its tax. According to the judgement of the Federal Supreme Court, the Administrative Court deviated from the distribution criteria established by case law and thus violated the constitutional principle of the prohibition of inter-cantonal double taxation (Art. 127 para. 3 BV). The appeal must, therefore, be upheld and the ruling of the Administrative Court of 27 December 2022 set aside. The matter is referred back to the Bern tax administration for reassessment, which must make a new decision, taking into account a taxable assessment basis (excluding deductions under cantonal law) of CHF 2,000,269 in the Canton of Bern (Reasons 7.5).

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