Proposed Change of Inheritance Tax in the EU

Martin77

Registered User
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173
Saw this link on Dutch news today. It could have really deep consequences for members of this forum.

Apparently the EU has adopted a proposal to make the default applicable law for inheritance tax to be decided based solely on the habitual place of residence of the deceased.

That could potentially mean that if you normally lived in Spain before you died, all of your possessions (including those in Ireland) could fall under Spanish inheritance tax law, even if you'd put in place other legal constructions like holding companies (assuming you also owned the holding company).

However there would appear to be an important opt out clause to have the free choice of opting for the inheritance laws to be applied based on your nationality (e.g. opt to have everything dealt with in Ireland, including the Spanish property).

This one may keep a lot of tax consultants busy if it gets implemented. Could potentially make things very much simpler. But equally it could also open up a huge liability if you're not careful to make your choice clear in advance. Especially in popular retirement locations like Spain that have inflexible inheritance laws and high taxes, the consequences could be very large.....

Source (in English): [broken link removed]

It's not law yet, but well worth keeping an eye out for how this develops.

Disclaimer: I'm neither a lawyer nor a tax consultant.
 
I have looked quickly at the potential impact of this change for my own situation. Being able to optimize the inheritance tax liability by choosing for the law to be applied based purely on my nationality could potentially lead to a difference (saving) of several hundred thousand euros of tax liability for my heirs. You can be sure I'll be following up on this with my accountant.