Some countries tax the deceased or the estate on death, and some tax the
beneficiary. There are also different bases for charging tax, such as
citizenship, domicile, residency or the location of the assets.
Most jurisdictions impose some type of death, succession or estate tax.
Canada, and a few other jurisdictions (including Australia, New Zealand,
and Denmark) are unique in taxing capital gains on death. And there is
growing talk in the U.S. of replacing its estate tax with a capital gains
regime on death similar to Canada’s.
It will be of increasing importance to understand how foreign taxes impact
your estate plan. For example, what if your child or other beneficiary of
your estate is subject to paying inheritance tax on the value of his or her
inheritance because he or she lives in a country that has an inheritance
tax? Countries that impose an inheritance tax include Croatia, Czech
Republic, Finland, France, Germany, Greece, Hungary, Ireland, Japan, Kora,
Luxemburg, Netherlands, Norway, Poland Serbia, Spain, Switzerland (some
cantons), and Venezuela.
If you are a Canadian resident, your assets could be exposed to paying tax
twice: Canadian capital gains tax on your death and inheritance tax by your
Most wills contain a “debts and death taxes” provision that provides for
all death taxes to be paid by the estate, so the beneficiaries receive the
same net amount notwithstanding local taxation. In particular, where
inheritance tax is at a high rate, this may produce an unintended result
and give rise to disgruntled beneficiaries who are not subject to
inheritance tax. It is important to address this issue as part of the will
planning process, in particular where there are existing beneficiaries
resident in a country with an inheritance tax. Should the beneficiary bear
the burden, or should the estate and thereby indirectly all of the
In Canada, we have some relief against double taxation on death but only
with two countries, the U.S. and France, where there are treaties in effect
to provide relief on death by allowing taxes paid in one country to be
credited against tax paid in the other.
In the European Union, the issue of multiple taxation on death is
recognized as urgent – progress is being made to address the problem and
adopt a solution such as a one tax system on death based on a deceased’s
habitual residence, “one succession – one tax” as advocated in a recent EU
expert report, but there is a long way to go.
As with many legal and tax issues affecting estate planning for global
families and any person with ties to another country, there is distinct
disharmony – not harmony – which creates challenges and potential
minefields. Multiple taxation on death is one – and the first step is
awareness and identification of the issue with professional assistance, and
then dealing with it.
is the principal of the Toronto-based trusts and estates law firm
O’Sullivan Estate Lawyers. She practices exclusively in the areas of estate planning, estate
litigation, advising executors, trustees and beneficiaries, and
administration of trusts and estates. This article originally appeared
O’Sullivan Estate Lawyers blog. Reprinted with permission.
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involving your individual situation, you should seek legal advice to ensure
it is appropriate to your particular circumstances.