Change of matrimonial property regime and gift tax: beware of a little-known risk for Geneva taxpayers who have been subject to expenditure-based taxation.
In the canton of Geneva, gifts between spouses are generally exempt from tax, except for taxpayers subject to expenditure-based taxation. This exception can have adverse tax consequences when a couple of lump-sum taxpayers or former lump-sum taxpayers decides to change their matrimonial property regime.
It is important to understand that moving from lump-sum taxation to ordinary taxation has no immediate effect in terms of exemption from gift tax between spouses. Indeed, couples who were previously subject to expenditure-based taxation are only released from this tax after having been ordinarily taxed for three consecutive years. Consequently, a couple taxed on a lump-sum basis since 1 January 2023 could benefit from this exemption only from 2026 at the earliest, after having been definitively assessed for three consecutive years, from 2023 to 2025.
It is therefore crucial to take into account this gap between the end of lump-sum taxation and the exemption from gift tax, since it depends on an uncertain event in time: the moment when the tax authorities close the three tax years following the abandonment of expenditure-based taxation.
It is generally possible to defer a gift between spouses until it can benefit from the exemption, or to find a temporary alternative solution. However, it is essential never to lose sight of the fact that certain transactions, such as a change of matrimonial property regime or a modification of the existing regime, can trigger gift tax without one being aware of it.
Under the law, any change of matrimonial property regime in the canton of Geneva, regardless of any actual liquidation, is subject to gift tax calculated on the value of the assets to which the change of regime gives one and/or both spouses a new claim.
Take the example of a couple of former lump-sum taxpayers who will be ordinarily taxed from 1 January 2023. If these taxpayers decide to change their matrimonial property regime before having been definitively assessed for the years 2023, 2024 and 2025, they will end up with a heavy and probably unexpected tax burden.
It is very likely that many taxpayers have already faced this kind of tax problem, and it is better to avoid falling victim to it, whether personally or as a representative.
If you need advice or further information on this subject, please do not hesitate to contact us. We are SuisseFidu and we would be delighted to help: https://www.suissefidu.ch/
