3.2.2 The 2015 inheritance tax report

Back in 2014, an expert group was set up with the primary task to assist the EC in identifying and finding practical ways to remove any tax problems faced by individuals who move from one EU Member State to another in order to live, study, work or retire, or who invest in other EU countries or inherit property across borders within the EU. The group consisted of 21 members – representatives of different sectors who were selected based on responses received to a public call for applications. The group decided to divide the work into two reports: one with a focus on direct taxes (mainly income taxes) and the other on inheritance taxes. Despite the similarities of the problems between income and inheritance taxes, the EC’s expert group decided to address the inheritance tax problems in a separate report. According to the group, the differences concerning the tax event, the persons involved, and the applicable rates justify the consideration of inheritance tax obstacles in a separate report.

The first report was called “Ways to Tackle Cross-Border Tax Obstacles Facing Individuals within the EU” (“the 2015 income tax report”). It discussed the practical problems that individuals face with regard to income taxes in the EU, which the CJ could not address. The 2015 income tax report considered both the problems arising from mismatches between taxation rules that lead to higher taxation in cross-border situations (“substantive tax provisions”) and the problems resulting from the absence of suitable practical and administrative procedures (“procedural tax problems”).

This second report was entitled “Ways to Tackle Inheritance Cross-Border Tax Obstacles Facing Individuals within the EU” (the “2015 inheritance tax report”). Under this report, “[t]he number of people leaving property situated in two or more Member States when they die is growing rapidly. Many of their families will soon discover that tax on inheritance can often be claimed by each of the Member States concerned. It does not take long for multiple taxation, even at low rates, to amount to expropriation.”1

The group identified the following inheritance tax obstacles in a cross-border situation:

I observe that the report regarded the nature and design of national inheritance taxes as an obstacle of a cross-border inheritance. Although differences in the national inheritance tax laws of the states seeking to tax a cross-border inheritance can often give rise to double taxation and administrative difficulties, I do not consider those differences a problem of cross-border inheritances and donations. On the contrary, the nature and design of national inheritance taxes is a domestic problem that thus, is taken as a fact in this study.

I consider the report an important point of reference of this study that confirms that cross-border inheritances and donations can be subject to double or multiple taxation and non-taxation and administrative difficulties. Furthermore, the report, drafted by distinguished scholars and practitioners, becomes a primary source of information on inheritance (and by analogy, gift tax laws) to which I will refer extensively in my study. Finally, in its report, the group proposed the innovative concept “one inheritance – one inheritance tax”, which has been a great source of inspiration in my research as presented in chapter 8 of this study.