EUROPEAN COMMISSION 
Brussels, 15.12.2011 
SEC(2011) 1490 final 
  
COMMISSION STAFF WORKING PAPER 
EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 
Accompanying the document 
COMMISSION RECOMMENDATION 
regarding relief for double taxation of inheritances 
{C(2011) 8819 final} 
{SEC(2011) 1488 final} {SEC(2011) 1489 final} 
 
 
EN   
 EN EXECUTIVE SUMMARY 
This impact assessment has been prepared to  analyse problems of discrimination and double 
taxation of inheritances within the Internal Mark et and decide on the best solution on the basis 
of which the Commission will make a proposal.  
More EU citizens than ever are moving abroad w ithin the Internal Market to find work, marry 
or retire, leaving family members behind in th eir country of origin. Others are purchasing 
property and investing in assets abroad. In thes e circumstances, the app lication of inheritance 
taxation to bequests made across borders is becoming an increasingly important issue.  
Problem definition 
EU citizens and businesses can potentially face two types of inheritance tax problems in 
cross-border situations. First, they may be exposed to tax discrimination. Second, there is the 
risk of taxation of a single inhe ritance by several Member States with no relief or only partial 
relief for the double taxation.  
This problem may lead to  overall levels of ta xation appreciably higher than those applicable 
in situations that are purely internal to one or  the other Member Stat e involved. An increased 
tax burden may negatively affect the value of an inheritance and may cause great difficulties for citizens and businesses who ta ke advantage of their right to move and operate freely 
across borders within the Internal Market.  
The problems can arise not just fr om Member States' inheritance tax laws but also from their 
private laws on inheritances, or from a combination of both sets of laws. 
As for the discrimination problem, when indivi duals inherit property or other assets across 
borders, they may be subject to inheritance tax rules that are less favour able than those that 
would apply if there was no cross-border element.  
As for the problem of double or even multiple taxation, this can arise essentially because of 
differences between Member Stat es' rules concerning who should be  taxed and the type of tax 
applied. In addition, this double taxation can in many cases not be relieved. This is because 
Member States' domestic relief mechanisms are not comprehensive and they have few 
bilateral conventions in this area and do not s eem to be negotiating more in recent years.  
As for the quantification of th e problem, the impacts are not significant at macro level. 
Member States' revenue from domestic and cr oss-border inheritances taxes together account 
for less than 0.5% of total tax revenues in EU  Member States so cross-border cases alone 
must account for far less than that figure. Howe ver, at micro level, both discrimination and 
double taxation, when it happens, might have an e normous impact on the individuals actually 
concerned because of the high ra te of taxation that might resu lt. This is notwithstanding the 
trends towards lower general le vels of inheritance taxation. 
All EU citizens, businesses and other entities subjec t to inheritance taxes are potentially 
affected by these issues. With a steadily in creasing tendency in migration and cross-border 
ownership of assets within the EU, it can be expected that the number of complaints and 
 
EN   
 EN referrals to the Court about disc riminatory aspects of Member States' inheritance tax laws will 
increase, as will double taxation.  
Analysis of subsidiarity 
It is appropriate for the Commission, in the lig ht of its responsibility  for ensuring the smooth 
functioning of the Internal  Market and promoting the general interest of the Union to examine 
and consider action when soluti ons to cross-border tax proble ms cannot be found at national 
level.  
There are currently no EU harmonisation rules in th e area of inheritance taxes. In the absence 
of such rules, inheritance taxation falls w ithin the competence of the Member States. 
However, in the exercise of th is comptetence, they must resp ect the fundamental freedoms of 
EU law and are therefore not allo wed to discriminate on the basi s of nationality or to apply 
unjustified restrictions to these freedoms. The Court of Justice has confirmed the application 
of these principles to inheritance tax in severa l recent cases. However, the Court of Justice has 
also stated that Member States are not oblig ed to eliminate double ta xation arising through the 
parallel exercise of their taxing rights.  
Given the recent increase in cour t cases and in complaints, enquiri es and responses to relevant 
public consultations, it appears necessary for th e Commission to consider  what kind of action 
could complement and support ongoing infringeme nt proceedings and, at the same time, to 
propose appropriate solutions  to the double taxation of cross-border inheritances. 
The objectives 
The general objective of the initiative is to allo w citizens to exercise their right to move and 
operate freely within the Internal Market and not be deterred by cross- border inheritance tax 
obstacles. To this end, th e initiative would aim at: 
promoting the elimination of discrimination in the area of inheri tance taxation; and 
reducing the double taxation of i nheritances within the EU, 
in particular in order to avoi d an excessively high tax burden or even confiscatory rate of 
overall taxation. 
The policy options 
Policy Options A to address tax discrimina tion related to cross-border inheritances   
Policy Option A1 - Continuation of current situation  
Policy Option A2 – Publication of principles for non-discriminatory inheritance tax systems 
Under this option, the a staff working paper could be published that would assemble the 
principles flowing from the cas e-law on inheritance taxes that  should govern the design of 
inheritance tax systems. Following the publicati on of these principles, EU citizens would be 
more aware of the rules which Member Stat es must respect when taxing cross-border 
inheritances. The document could also assist Me mber States in bringing their inheritance tax 
provisions into line with EU law.  
 
EN   
 EN Policy Option A3 - Compulsory rules on abolishi ng of discriminatory features of Member 
States' domestic inheritance tax legislation Under this option, the Commission would 
propose the principles set out in the relevant European case law for adoption as compulsory 
rules at EU level.  
Policy Options B to address unrelieved doubl e taxation of cross- border inheritances  
Policy Option B1 - Continuation of current situation 
Policy Option B2 – Commission recommendation regarding (unilateral) national 
provisions designed to relieve do uble taxation of inheritances The Commission could 
identify the elements that would make national tax rules interact more coherently with each 
other so as to eliminate double taxation in a comprehensive way and invite Member States to make changes to their laws on that basis. 
Policy Option B3 – Commission recommenda tion regarding relief for double taxation 
through bilateral agreements between Member States designed to relieve double taxation of 
inheritances The Commission could recommend that Memb er States complete a full network 
of bilateral double taxation treaties on inheri tances, based either on the OECD model 
convention on inheritance taxes of 1982 ( Policy Option B3.a ) or an alternative model such as 
an EU model treaty ( Policy Option B3.b ) , or else include inheri tance tax provisions within 
the scope of existing bilateral income tax treaties ( Policy Option B3.c ) The first sub option 
(B3.a) was considered less appropriate from th e start because the relevant OECD Model has 
not been amended to address shortcomings iden tified and therefore woul d not resolve all the 
problems effectively. Another reason why the cu rrent Model might not be  an ideal point of 
departure is the fact that the  OECD  is currently considering its update. 
Policy Option B4 – Binding rules governing bilateral arrangements: Adoption into EU law 
of a) a single basis for determining the tax liab ility, such as the locati on of assets or the 
residence of the deceased, etc in bilateral rela tions, or b) minimum standard common rules 
for bilateral conventions.  Although suggested by some stakeholders, drawing up these rules 
would take a disproportionate amount of effort given that they would have to be unanimously 
adopted and this option would not be likely to solve the problem as  long as Member States are 
not prepared to enter into bilateral inhe ritance tax agreements in the first place. 
Policy Option B5– EU- wide multilateral double tax convention As suggested by some 
stakeholders and commentators, Member States  could conclude a multil ateral double taxation 
convention on estates and inher itances. However this option wa s considered less appropriate 
from the start as it is unlikely that Member States would agree on such a convention given a 
previous failed attempt at such a solution fo r income tax. Moreover, such a convention if 
proposed by the Commission could only be proposed in the form of a Directive which would 
fall within Policy Option B.6.  
Policy Option B6 – Binding EU legislation An EU-wide binding instrument, taking the form 
of a Directive, could provide for i) a singl e harmonised basis for taxation, e.g. taxing only 
where the assets or the deceased were located ( Policy Option B6.a ); ii) a combination of 
 
EN   
 EN common definitions plus a single harmonised basis (Policy option B6.b); (iii) the relief of 
double taxation alone, by way of a binding unilateral relief provi sion coupled with a binding 
dispute resolution mechanism without making any changes in Member States' inheritance tax 
rules ( Policy Option B6.c ); (iv) a combination of features of Policy Options B6.a, b and c i.e. 
single harmonised basis, common definitions and a binding dispute settlement mechanism (Policy Option B6.d). The first sub option (B6.a) was consid ered inappropriate as such, as it 
would be ineffective unless combined with commo n definitions such as of assets and with 
rules to deal with dual residence/nexus,  as proposed in another sub option (B.6.b). 
Assessment of the most significant impacts 
The following impacts have been analyzed: 
Fundamental freedoms Costs to taxpayers and tax administrations Social effects Economic effects As regards the social and economic effects, we  focus on the individuals concerned, because at 
macro level it is unlikely that the impact of th e adoption of solutions to address cross-border 
inheritance tax problems would be significant, given the low share that inheritance taxes 
represent of Member States' total revenues. 
In terms of possible solutions to the tax disc rimination problem of cr oss-border inheritances 
(Policy Options A), both the publication of a set of principles  and co mpulsory rules could 
promote the respect of fundamental freedoms to a greater extent; and, in  case of compulsory 
rules, lead to a high degree of  legal certainty which could re duce the need for court actions. 
For the reasons given, both solutions could also reduce the cost for taxpayers and tax 
administrations. As for the social and econom ic effects, both options should bring about 
increased confidence about the implications of cross-border movement and more trust in the 
Internal Market. 
As regards the policy options to  address unrelieved  double taxation of inheritances (Policy 
Options B), the 'Do nothing' option would mean  that double taxation would continue, which 
makes the exercise of the fundamental freedoms more difficult. The lack of availability of 
relief can be costly in indivi dual cases. Regarding social eff ects, the lack of comprehensive 
solutions is most likely to impact on the middl e classes as the wealthy are likely to have tax 
advisers to help with tax planning and poorer individuals are not as likely to i nherit across 
borders. The economic effects of such double taxation do not at pr esent appear to affect an 
important percentage of citizens but can seriously affect those citizens who make use of their 
right to engage in cr oss-border activity.  
Both the option of a Commission recommendation on action to be taken by Member States 
regarding national relief mech anisms (Policy Option B.2) and relief for double taxation 
through bilateral agreements between Member States (Policy Option B.3) could help to 
reduce the number of instances in which cros s-border inheritances are subjected to double 
taxation. This would ease the exercise of f undamental freedoms. Extending the level of 
double taxation relief available in cross-border inheritance tax cases could mean a reduction 
 
EN   
 EN of costs for taxpayers and could over time be nefit an increasing number of taxpayers who 
make use of their ri ght to engage in cr oss-border activity.  
Binding EU legislation which woul d compel Member States either to design their tax systems 
in such a way as to prevent the likelihood of dou ble taxation, or to give double taxation relief, 
would be likely to lead to more certain  effects than the previous options.  
Comparing the policy options 
In order to assess the policy options to eliminate discrimi nation (Policy Options A), the 
following criteria were used: 
Incentive:  Incentive for Member States to change their discriminatory rules  
Effectiveness : in terms of achieving the objective of enforcing EU law and increasing 
certainty regarding the types of pr ovisions that are discriminatory 
Proportionality : Going no further in terms of EU measures than is necessary to achieve the 
objective 
Efficiency:  The extent to which the objectives can be achieved for a given level of 
resources/at least cost 
Flexibility: Ease of adjustment to reflect change s in case law and domestic legislation 
The following tables provide a comparison of th e ratings of the policy options as negative, 
neutral or positive. 
Comparison of policy options A  
Criteria 
 A1 – status 
quo A2 – 
publication 
of a set of 
principles A3 - 
legislation 
Incentive to change law 
Effectiveness Proportionality Efficiency Flexibility 0 
0 
+ 
- 
n/a 
 + 
+ + + 
+ + 
+ 
0 0 
0 
Conclusion:  The preferred option is Policy Option A.2  because, by supporting the 
Commission's infringement acti ons, it would address the current tax discrimination problems 
efficiently, flexibly and in a cost-effective way. 
 
EN   
 EN In order to assess the polic y options to reduce double taxa tion (Policy Options B), the 
following criteria were used: 
Effectiveness : in terms of achieving the objective of reducing double taxation and ensuring 
certainty in this regard 
Proportionality:  Going no further in terms of EU measures/EU harmonisation than is 
necessary to achieve the objective 
Efficiency, in particular ease of implementation : The extent to which the objectives can be 
achieved for a given level of resources/at leas t cost, in particular  regarding ease of 
implementation 
Flexibility:  in terms of scope, ease of adjustability to reflect changes in laws and practices 
Comparison of policy options B  
Criteria B1  
no 
change B2 
improved 
unilateral 
relief B3.b  
Inheritance 
tax treaties 
based on EU 
Model B3.c 
Income tax 
treaties with 
inheritance 
provisions B6.b  
Binding 
common 
definitions 
and basis B6.c 
Binding 
relief plus 
dispute 
settlement B6.d  
B6.b 
+ 
B6.c 
Effectiveness 
Proportionality Efficiency/ease 
implementation 
Flexibility - 
0 0 
n/a + 
+ 
++ 
++ + 
+ 
-- 
- + 
+ 
-- 
- ++ 
- - - - 
- - ++ 
- - 
- 
 ++ 
- - - - 
- - 
Conclusion:  The preferred option is Policy Option B.2 , as an effective and certainly 
proportionate way to tackle doubl e taxation. Other options woul d be significantly less cost-
effective and more time-consuming and ther e is a question mark over their political 
feasibility. Option B.6.c is one that  may be considered at a later date if necessary in the light 
of the review of the implementation of Op tion B.2.  The preference for Option B.2 over 
Options B3.b and B3.c, both of which concern solutions via bilateral actions by Member 
States, is also based on the fact that Member States do not seem to prioritise the conclusion or 
revision of double taxation tr eaties on inheritances. 
The preferred option 
The preferred option, which is a combination of  policy options A.2 and B.2, is, in brief:  
The principles flowing from th e case-law on inheritance taxes that should govern the design 
of inheritance tax systems could be assemble d in a single, published document. The idea 
 
EN   
 EN would be to make EU citizens more aware of the rules which Member States must respect 
when taxing cross-border inheritances. The do cument could also assist Member States in 
bringing their inheritance tax rules into line with  EU law.It would, for example, describe the 
types of rules which the Cour t has identified as breaches of the fundamental freedoms.  
In addition, the Commission could adopt a R ecommendation (under Article 292 of the TFEU) 
identifying the elements that would eliminate double taxation in a co mprehensive way while 
not requiring Member States to change their substantive inheritance tax rules. It would suggest that Member States make changes to  their domestic mechanisms for double taxation 
relief on that basis. The ultimate aim could be to  ensure that the overall tax burden on a cross-
border inheritance would not be higher than in an internal situation by making already-
existing unilateral reliefs work better.  
Monitoring and evaluation 
The Commission could prepare regular evalua tion reports focusing on data on cross-border 
migration; ownership of cross- border assets (including fi nancial assets and immovable 
property); domestic inheritance tax rates as  well as on amendments to Member States' 
domestic law to remove discrimination and re duce double taxation; the e volution of bilateral 
agreements; and the relevant Court cases. 
The Commission's right to present a legislative proposal in the future if deemed appropriate 
would of course remain unaffected.