Tax Treatment of Children Adopted under Foreign Law

Facts

A deceased German national domiciled in the canton of Basel-Landschaft bequeathed the majority of his estate to his two natural daughters whom he had adopted under German law in 1933. The cantonal tax administration calculated the inheritance tax owed by the two heirs at the rate of 4% applicable to adopted children (Art. 10(1)(3) of the Basel law on inheritance and gift taxes). The heirs appealed this decision, requesting the application of the 1% rate provided for descendants (Art. 10(1)(1) of the law). They argued that the assimilation of natural paternal filiation to legitimate filiation provided for in Art. 10(2) of the law does not apply to foreigners, as their status is governed by their national law. They contended that adoption under German law was equivalent to recognition with civil status effects under Art. 303 CC, which should have resulted in the application of the 1% rate. The Administrative Court of the Canton of Basel-Landschaft dismissed the appeal, finding that adoption under German law was closer to Swiss adoption than to recognition with civil status effects, so that the 4% rate for adopted children was applicable.

Considerations

The Federal Tribunal considers that the question of whether the 1% or 4% rate applies does not concern the interpretation and application of the invoked international treaty law, but the interpretation and application of the cantonal tax law. It can therefore only examine this issue from the perspective of arbitrariness and equal treatment (Art. 4 Cst.).

According to the Federal Tribunal, the cantonal tax law expressly provides for a 4% rate for adopted children, without exception. This difference in treatment between adopted children and children recognized with civil status effects is justified by the fact that the former have a better inheritance status than the latter. The Tribunal…