Taxation of the Repayment Amount from a Life Annuity Insurance

Facts

A., who was resident in the Canton of Bern, entered into a contract for an old-age annuity insurance with the Swiss Life Insurance and Annuity Institution at the end of 1997. After his death in September 2000, his two sons X. and Y. each received an amount of CHF 91,134.- as a repayment amount from the insurance. The Canton of Bern subjected this amount to inheritance tax with X., while the Canton of Zurich taxed the same amount as a separate capital payment for income tax purposes.

Considerations

The Federal Supreme Court decided that there was an inadmissible double taxation, as the repayment amount was subject to both inheritance tax in the Canton of Bern and income tax in the Canton of Zurich. It determined the jurisdiction for taxation as follows:

• 40% of the repayment amount is subject to income tax in the canton of residence of the recipient (here Canton of Zurich).
• 60% of the repayment amount is subject to inheritance tax in the canton of the last residence of the deceased (here…