European Commission Launches Consultation on Cross-Border Inheritance Tax

The European Commission has launched a public consultation on "tackling cross-border inheritance tax (IHT) obstacles within the EU."

Prior to 2003, the European Commission did not think it was necessary to examine whether member states' IHT laws were compatible with the EU Treaty. However, it has now revised its opinion because, since that date, (1) a number of IHT cases have been referred from national courts to the European Court of Justice, and (2) it has received a growing number of complaints from EU citizens about problems arising from cross-border inheritance.

The consultation paper identifies two main areas in which individuals and businesses may face obstacles:

Discriminatory application of IHT rules. Member states' IHT laws tend to be less favourable to citizens whose assets or beneficiaries are in another country. This fact is particularly evident when you consider that in the eight IHT disputes that have been referred to the European Court of Justice since 2003, the Court ruled in six of them that the IHT laws of the member state in question were incompatible with EU rules on the free movement of capital; and Double or multiple taxation of an estate. Most EU Member States levy IHT upon the death of a person; however, problems can occur because some member states (such as the UK) tax the deceased's estate, while other member states tax the deceased's heirs, who may be living in another member state to the deceased. This problem is...