3.1.2.1.4 Qualification issues

Qualification issues can give rise to double or multiple non-taxation of the cross-border inheritance and donation. In that regard, the 2015 inheritance tax report states the following: “Differences of characterisation may occur not only where ownership is split but also by virtue of the fact that some Member States, such as France, may treat certain entities as transparent or semi-transparent and others may treat them as opaque. This may result in duplication of tax claims, or double non-taxation, with one state taxing the land and the other, for example, the shares in the entity.” (Italics, VD)1

For instance, the deceased A is a resident of State A that establishes a personal nexus based on the deceased’s nationality. The deceased A is not a national of State A. The deceased’s property includes an interest in partnership operating in State B. The partnership holds immovable property in this state. State A will not establish a personal nexus as the deceased is not a national of this state. Furthermore, it will not establish an objective nexus as the property held by the partnership is located in State B. This state, however, may also not seek to tax the property if it considers the partnership opaque and interests in partnerships are not considered “domestic assets”. As a result, the cross-border inheritance at hand is not taxed anywhere.