More and more people own property in more than one country in the European Union. It is estimated that about ten percent of successions in Europe have an international or European dimension, with an estimated value of over more than EUR 120 billion a year.* Consequently, an increasing number of inheritance cases have the potential to raise cross-border issues. Since succession law varies considerably from one EU country to another, a major step to facilitate cross-border successions was taken with the adoption on 4 July 2012 of the European Succession Regulation (or “Brussels IV”).
This regulation harmonises the rules of International Private Law regarding the court holding jurisdiction and the applicable law for international successions. It ensures that the estate is handled under one single legal system and by one single authority. The default rule in the regulation is that the jurisdiction and the succession law that applies to an individual's entire estate is determined by his last place of habitual residence. However, citizens can choose that the law that should apply to their succession should be the law of their country of nationality. These regulation is applicable since 17 August 2015.
Although Brussels IV attempts to harmonise the approach to succession across the EU, it should be brought to the attention that it expressly does not apply to any tax issues related to inheritance. Tax issues related to the succession assets are thus still governed by national rules. This means that, when owning estates in different countries, it can occur that heirs are taxed in both countries. This conflict arises because an heir will be taxed for the total estate he inherits in the country where the deceased was resident, but he will also be taxed in the country where the estate is located. Some national regulations tackle this problem by allowing unilateral relief for foreign paid taxes.
Belgian inheritance law for example, as a rule does not grant any relief for double taxation, except for inheritance tax paid abroad for real estate property. This means that the inheritance tax for a foreign real estate property can be offset against the inheritance tax due in Belgium. However, it is also possible that there is an exemption in the country where the property is situated. In Spain for example, many regions have high exemptions in inheritance tax for real estate. In that case, the property will again be fully taxed in Belgium of course. Other than that, Belgium has only signed double taxation treaties relating to inheritance tax with France and Sweden to prevent double taxation.
Conclusion: the owner of property in a foreign country should thus always bear in that mind that, although the European Succession Regulation aims at facilitating cross-border successions, this regulation has nothing to do with tax issues and does not change national inheritance tax rules. Since there can be huge differences in inheritance taxation between Member States and the risk of double taxation, it is important for the owner of property in a foreign country to be well informed in order to avoid that the tax bill of the heir is enormous.
* Conducted by a study by European Commission in 2009 (http://europa.eu/rapid/press-release_MEMO-09-447_en.htm)