Double Taxation of Inheritances and the Recommendations of the European Commission

In December 2011 the European Commission ('EC') adopted a package of instruments to tackle the difficulties regarding cross-border inheritance tax. One of these difficulties concerns the existence of unrelieved double or multiple taxation. Tax treaties (if present) and unilateral systems of relief do not always effectively prevent this. By means of a Recommendation the EC suggests how Member States could improve their unilateral systems of relief and presses them to do so. The article starts by examining the possible causes of double or multiple taxation. In general there is an enormous variety of rules in Member States' inheritance tax systems; they all connect to a different factor for applying inheritance tax and use different concepts of residence and situs assets.

Subsequently the international order of priority of taxing rights is discussed. The State of situs normally has the strongest taxation rights, followed by the State in which the deceased was domiciled or resident. This order of priority can also be found in the EC Recommendation, which finally is considered and evaluated.