3.1.2.1.1 Variety of concepts determining the personal nexus between a person and a state

As discussed in section 3.1.1.1, the application of different concepts for the determination of the personal nexus and their different interpretation by the states may often lead to double or multiple taxation of the cross-border inheritance and donation. In the same vein, the application of those concepts and/or their divergent interpretation can also give rise to double or multiple non-taxation in situations where the states concerned cannot establish a personal nexus and/or an objective nexus.

Consider, for example, a situation where the deceased is a resident of State A that levies inheritance tax on a worldwide basis based on the deceased’s nationality. The deceased is a national of State B. His beneficiaries reside in State B. State B levies inheritance tax on a worldwide basis based on the deceased’s residence. The deceased’s property is located in State C that does not consider the deceased’s property a “domestic asset” and therefore, it does not establish an objective nexus.

It follows from the above example that the cross-border inheritance at hand will not be taxed anywhere. State A will not seek to tax it because the deceased is not a national of this state. State B will also not seek to tax the inheritance at hand since the deceased is not a resident of its territory. The fact that the beneficiaries reside in this state is immaterial for State B tax purposes. Finally, State C will not seek to tax the cross-border inheritance because it does not consider the property at hand a “domestic asset” for which an objective nexus is established.