3.1.1.6 Qualification issues

According to the 2015 inheritance tax report, the number of different claims that the EU Member States may make with respect to assets may be multiplied because states might characterise the same property differently. The report provided the example of interests in the land, which some states may regard as real property and some other states as personal property. In cases where the land is held in an entity with a legal personality – such as a real estate company – a state may look through the entity and tax the land according to the situs principle. Another state may seek to tax the shares in the company1 instead, based on the place of the domicile of the company. Differences of characterisation may thus occur if the states treat certain entities as transparent or opaque. This could result in double taxation, with one state taxing the real estate and the other the shares in the hybrid entity.2