Inheritance Tax in Other Countries
Inheritance Tax is as ubiquitous as most taxes, with only a few countries opting out of taxing people on their estates at the point of their death (see Inheritance Tax – The Basics, for a full list of these countries). Of the countries that do take inheritance tax, there are many variations in the way people are taxed. You may well wish to research how various countries differ in applying their laws before choosing where to buy a second home abroad.
How Systems Differ
Many countries and states of America follow a similar principle in applying taxes upon Death as the U.K. does.
Bermuda applies a ‘Stamp Duty’, whilst Canada, and many other Countries, applies a form of Capital Gains Tax, whereby each of the valuable items inherited by the beneficiary are liable to be valued and taxed accordingly, as opposed to the UK system whereby the Estate as a whole is taxed.
Many countries, including France, Germany and the Netherlands, apply a tax on the beneficiaries instead upon the Estate of the deceased. Of course, this in itself serves to change little in terms of what might be gained by the state, but it at least puts the burden of tax upon the living rather than the dead, something that may be seen as in better taste than the usual inheritance tax.
The system in Belgium is typically complex, with taxes being collected by the federal tax officer, yet being redistributed regionally.
How You May Be Affected
You may wish to know the inheritance tax laws for a different country as you may find yourself in one of the following situations: you live in that country; are a citizen of that country; have a holiday home in that country, or are due to inherit either from a citizen of that country or from someone who owns property in that country. In many of these cases laws can be complex and will often depend on individual circumstances, so it is always well worth checking as soon as the matter becomes relevant (in many cases as soon as you buy a property abroad). Not checking the details can be a costly mistake, with the Spanish taxing overseas property at up to 85% of its value for non relatives, and taxing all other overseas beneficiaries at alarmingly low threshold rates, for example.
Note that Portugal and Greece do not charge inheritance tax on property, whilst Spain and France do not guarantee that your Estate will pass to your spouse.
Note that unless you have registered as being domicile in another country you will still be liable to taxation by the British government. If you wish to change where you are ‘domiciled’ you must fill out a ‘DOM1’ form. Some countries have Tax agreements with the U.K. that allow you to pay tax only in one country, with tax in the other country being written off.
Remember that the high standard of living and social provision in some countries come at a price. For your part you may wish that you don’t end up footing the bill, especially if you haven’t spent much time in that country.