3.1.1.5.1 Determination of critical terms by civil law

Several terms used by death and gift tax laws are usually determined by civil law (family law, matrimonial property law and the law of succession) whereas other terms are defined by the inheritance and gift tax legislation itself. In an internal situation, this may not give rise to problems, but it can be bothersome in a cross-border setting. The civil laws differ noticeably from state to state and contain a mixture of rules, which range from ownership law (which considers issues such as the identification of assets owned by the deceased upon his death) and matrimonial law (whose concerns include same-sex marriage, the rights of couples outside marriage and prenuptial agreements) to contract law (which deals with issues such as succession pacts).1

For example, as noted in section 3.1.1.1.1, the interpretation of the concept of residence may result in double taxation in the event of a cross-border inheritance since the states concerned may have different parameters for evaluating whether a person is a resident of their territory. I note that this is true even if the states concerned apply the civil law concept of residence. There are also other terms that are usually defined by the applicable civil laws, e.g. “death”,2 “estate”, “heirs/beneficiaries”, “surviving partner”, “habitual abode”, “permanent home”, “movable property”, “immovable property” and “receivable”. Furthermore, the deadline for the acceptance of the inheritance, as determined by the law of succession, is often considered also for death tax purposes with regard to the time limit for the payment of the death tax. Finally, the applicable law of succession determines the fraction of the deceased’s property, which each beneficiary is entitled to receive in the context of intestate taxation.

Finally, within the purview of the gift taxes, the applicable civil law usually defines the concept of donation and other terms of gift tax laws.