International inheritance tax

What is international inheritance tax?

International inheritance tax comes into play when a person passes away and their estate could fall under more than one country’s tax system. An estate means everything left behind at death, after settling all debts. The country that collects inheritance tax is not always where the heir lives or where the asset sits.

Inheritance tax is based on the value that gets passed on, and payment usually happens before heirs receive anything. You might also see it called estate duty or succession duty, which mean roughly the same thing, but the details differ by jurisdiction. What counts as an estate can include a home in your name, any bank balance, stocks, bars of gold, or digital assets such as cryptocurrency (where and how each one’s held might all matter).

Which country taxes the estate: the deceased, the heir or the asset?

There are three main rules countries follow to decide who collects inheritance tax. Some use a mix, so multiple tax bills can show up for the same inheritance.

• Residence of the deceased: several countries will tax everything a resident owns, even if some assets are offshore.
• Residence of the heir: in some places, heirs get taxed on whatever they inherit, wherever it comes from.
• Location of the asset: many governments tax things that sit within their borders (for example, a vacation house), even if the owner or heir was never a resident.

Here's one illustration: the United States applies its estate tax to all assets owned by a US citizen or resident, worldwide. It also claims tax from certain US-based assets belonging to people living elsewhere. Germany looks at the place of residence of both the person who died and the heir, so it can get involved if either one lived there. For assets such as crypto and gold, questions of value and access can be more complicated; see how inherited crypto and gold are valued for details.

How double taxation happens and how relief works

Double taxation starts when different countries decide to tax the same piece of an inheritance. This might happen if the deceased was resident in one country, the heir in another, and each country applies its own tax to the full amount without automatically recognizing tax paid elsewhere.

Ways to reduce that effect include a tax treaty between both countries, a credit for foreign inheritance tax already paid, or an exemption in the country where the heir lives. Not every pair of countries has a formal agreement around inheritance tax; the details and protections can be limited. It's important to review any treaty and both countries’ domestic rules. More information about how foreign tax credits and exemptions work is at foreign tax credit vs exemption.

Worked example: a holiday home abroad and a bank account at home

Say someone in country A passes away. They own a holiday home located in country B, plus a bank account back home. The heir, meanwhile, lives in country C. Let’s assume country A taxes the worldwide estate of residents, country B levies inheritance tax on local property, and country C taxes its residents when they inherit.

Here’s where it gets messy: country B could tax the holiday home since it’s within their borders. Country A could also claim tax on the full estate, including the home in B. Country C might then tax the amount the heir receives. Sometimes the main relief is a tax credit for what’s paid in B, if country A’s rules allow. Which taxes get charged in the end comes down to the rules and treaties each country sets, and working out the best approach often calls for professional help.

Frequently asked questions