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02 November 2011

Hey, Progs! Wanna Be Like Europe? How 'Bout You Start By Eliminating Estate Taxes?

1. BELGIUM: Droits de succession or successierechten (Inheritance tax). Collected at the federal level, but distributed to the regional level.

INHERITANCE TAX: BRUSSELS REGION

If the deceased was resident in the Brussels region, the spouse, direct descendants and direct ascendants are entitled to a tax-free allowance of €15,000 each. For children below 21 years of age, the allowance is increased by €2,500 for each year below the age of 21. For other beneficiaries, inheritances not exceeding €1,250 are not taxable.




TAX BASE  (€)  Tax Rate


Up to €50,000 3%
€50,000 - €100,000 8%
€100,000 - €175,000 9%
€175,000 - €250,000 18%
€250,000 - €500,000 24%
Over €500,000 30%


The rates for brothers and sisters vary between 20% and 65%, where the minimum rate applies to inheritances up to €12,500 and the maximum rate applies to inheritances exceeding €250,000.

The inheritance rates vary between 25% and 70% for uncles, aunts, cousins, nieces and nephews. For all other individuals, the tax is levied between 40% and 80%. The minimum rate applies to inheritances up to €50,000 and the maximum rate applies to inheritances exceeding €175,000.



INHERITANCE TAX: FLEMISH REGION


The inheritance is split into immovable and movable parts, which are then taxed at progressive rates. A maximum reduction of €500 is granted if the taxable share does not exceed €50,000.


TAX BASE  (€)  TAX RATE


Up to €50,000 3%
€50,000 - €250,000 9%
Over €500,000 27%


The rates for brothers and sisters vary between 30% and 65%. For all other individuals, the tax is levied between 45% and 65%. In all these cases, the minimum rate applies to inheritances up to €75,000 and the maximum rate applies to inheritances exceeding €175,000.


INHERITANCE TAX: WALLOON REGION

If the deceased was resident in the Walloon region, the spouse, direct descendants and direct ascendants are entitled to a tax-free allowance of €12,500 each. The allowance is increased to €25,000, if the inheritance does not exceed €125,000. For children below 21 years of age, the allowance is increased by €2,500 for each year below the age of 21. For other beneficiaries, inheritances not exceeding €620 are tax-exempt.






















Source: Global Property Guide  

The rates for brothers and sisters vary between 20% and 65%. The rates vary between 25% and 70% for uncles, aunts, cousins, nieces and nephews. For all other individuals, the tax is levied between 30% and 80%. In all these cases, the minimum rate applies to inheritances up to €12,500 and the maximum rate applies to inheritances exceeding €175,000.


2.  CZECH REPUBLIC: Dan dÄ›dická (Inheritance tax)



For purpose of calculation of the inheritance tax, persons are divided into three categories depending on relationship of the decedent and the acquirer. The categories / relationships are as follows:



Category I: Direct relatives (in the direct line) and spouses.



Category II: (i) Other relatives (in the collateral line), namely siblings, nephews, nieces, uncles and aunts, (ii) children’s spouses (sons-in-law and daughters-in-law), husband’s children, husband’s parents, and (iii) individuals living with the acquirer in a common household for at least a year prior to the decedent’s death, and who for that reason took care of the common household or who were dependent on the acquirer or decedent for their support (maintenance).



Category III: Other individuals and legal entities not falling into the Category I and/or Category II.

No inheritance tax is payable by Category I and Category II beneficiaries; otherwise, inheritance tax is levied at the gift tax rates, multiplied by a coefficient of 50%.


Subject to certain exemptions, inheritance tax is chargeable on the net value of all assets, except real estate abroad (if the deceased was a Czech citizen with permanent residence in the Czech Republic). Otherwise, inheritance tax is chargeable only on assets located in the Czech Republic.



In the case of most tax exemptions, the obligation to file the inheritance tax return does not arise; however, certain tax exemptions must be claimed within the inheritance tax return.


3. FINLAND:  Perintövero (Inheritance Tax)
 
Beneficiaries are divided into two categories, depending on their relationship with the deceased.



Category I – close relative of the deceased/donor such as the spouse (including a cohabiting partner if the partners have a common child or if they have previously been married to each other), any lineal descendant or ascendant (including adoptive child relation) of the decedent and any lineal descendant of the decedent´s spouse



Category II – all other beneficiaries



The spouse may deduct €60,000 from his inheritance as personal allowance. Any lineal descendant under 18 years of age may deduct €40,000 if he is the closest beneficiary of the deceased. 



TAX BASE(€)………………......CLASS I…………..……….....CLASS II

Up to €20,400……………………...0%…………………......….........0%.....
€20,000–€40,000............................10%.............................................20%.....
€40,000–€60,000............................13%.............................................26%.....
Over €60,000..................................16%.............................................32%.....
4. SWEDEN:  Arvskatt (Inheritance tax) was ABOLISHED IN 2005.


5. FRANCE:  Droits de succession (Inheritance tax)

There is (since 22 August 2007) no succession tax on inheritances between spouses and PACS partners, but tax is still due on life-time gifts over the available allowance (see below). This inheritance tax exemption extends to sisters and brothers who are single, widowed or divorced providing that at the time of succession they are aged more than 50 or are suffering from an illness which prevents them from working, and they were living with the deceased during the five years preceding the death.

Succession tax rates for 2010

Taxable inheritance to spouses and PACS partners (gifts only):

.........A...............................B..........................C..........................D…..

Less than €7,953……......….......5%………………….....398............................398.....
€7,953 to €15,697...................10%............................774..........................1,172....
€15,697 to €31,395.................15%..........................2,345........................3,527....
€31,395 to €544,173..............20%.....................102,556.....................106,083...
€544,173 to €889,514............30%.....................103,602....................209,685...
€889,514 to €1,779,029.........35%.....................311,330.....................521,015...
Over €1,779,029.....................40%..........................................................................

Key:

A:  Taxable Inheritance
B:  To Spouses & PACS partners (gifts only)
C:  Tax on Band (€)
D.  Cumulative Tax (€)


Taxable inheritance in the direct line, including adopted children, but not step-children unless adopted:

.........A...............................B..........................C..........................D…..

Less than €7,953……......….......5%………………….....398............................398.....
€7,953 to €11,930...................10%...........................398............................796.....
€11,830 to €15,697.................15%...........................565...........................1,361....
€15,697 to €31,395.................20%.....................105,695.................... 107,056...
€31,395 to €544,173 ..............20%.....................102,556.....................106,083...
€544,173 to €889,514............30%.....................103,602.....................210,658...
€889,514 to €1,779,029.........35%......................311,330.....................531,998...
Over €1,779,029.....................40%...........................................................................

Key:

A:  Taxable Inheritance
B:   In The Direct Line
C:  Tax on Band (€)
D.  Cumulative Tax (€)


Taxable inheritance: siblings and other relatives and non-relatives:

.........A...............................B..........................C..........................D…..

Less than €24,069……......…....35%…………………....55%...........................60%...
Above €24,069......……......…....35%…………………....55%...........................60%...


Key:

A:  Taxable Inheritance
B:   Brothers & Sisters

C:  Other Relatives to the 4th Degree
D.  More Remote and Non-Relatives


Allowances For 2010:
1.  Spouses - gifts (inheritances exempt):  €79,533

2.  Partners under PACS - gifts (in heritances exempt): €79,533

3.  To each natural or adopted child from each parent: €156,974

4.  To each natural or adoptive parent: €156,974

5.  To children on your divorce (up to age 18): €2,700 pa, per child

6.  To a grandchild (gifts only): €31,395

7.  To a great-grandchild (gifts only): €5,232

8.  Cash gifts to a child, grandchild or possibly nephew/niece
.............A.  Subject to donor's/donee's ages
.............B.  Non-renewable: €31,395
9.  To unmarried brother/sister
............. over 50 or invalid
............. who has lived with deceased for at least the last five years (gift only): €79,533
10.  To a sibling not covered above €15,697
11.  To a nephew/niece (gifts and inheritances) €7,849
12.  To a nephew/niece by representation of a sibling €15,697
13.  To any other person €1,570
14.  To any disabled person - additional to above €156,974


The living representatives of a deceased descendant share that descendant's allowance between them in addition to their own allowances.


Unmarried couples are taxable as "strangers" and so have an allowance of only a €1,570 unless they have entered into a PACS agreement, the French version of a civil partnership, open to both same and opposite couples in France. If a PACS agreement is broken before the end of the year following the year it was entered into, for motives other than marriage of the couple or death of one of the partners, the allowance will be denied and the tax relief clawed back. PACS partners are entitled to a deduction of 30% from the value of the main residence in the same way as a married couple is.


The allowances (with the exception of the one-off cash gift allowance) all renew every six years for lifetime gifts. Gifts up to the available allowances can thus be made every six years tax-free.


6. GERMANY:  Erbschaftssteuer (Inheritance tax)


Inheritance tax is levied on transfers of property or assets after death. This duty is paid by the beneficiary. Applicable inheritance tax rates vary depending on the relationship of the beneficiary to the deceased. There are three relevant classes of relationship and exemptions applicable:

Transfers of property are subject to inheritance tax at graduated rates depending on the value of the property and the classes of family relationship.


CLASS I..........................EXEMPTION AMOUNT..............TAX RATE

Spouse.................................................€ 500,000.................................7%-30%...

Children/Step-Children...................€ 400,000.....................................7%-30%...


Grandchildren...................................€ 200,000......................................7%-30%...

Grandchildren...................................€ 200,000......................................7%-30%...

Parents/Grandparents
Great-grandchildren........................€ 100,000.......................................7%-30%...



CLASS II.................EXEMPTION AMOUNT......................TAX RATE

Siblings & their children,
Step-parents,
Brothers-in-law,
Sisters-in-law,
Divorced spouse...........................€ 20,000............................................15%-43%...



CLASS III................EXEMPTION AMOUNT......................TAX RATE

All other individuals...................€ 20,000............................................30%-50%... 




The lower rates for each category apply to properties or assets up to a value of €75,000 while the higher rates apply to acquisitions exceeding €26 million. 



7.  IRELAND:  Cáin Oidhreachta (Inheritance Tax) 


For a surviving spouse OR surviving civil partners taking an inheritance from a deceased spouse or civil partner, the inheritance is completely exempt and, no matter how valuable, will not be liable to inheritance tax. 

For a child (and in some cases, a parent), called a "Group A" beneficiary, the first €332,084 is tax-free.  Any remainder is taxed at 25%.

For a parent, in most cases, brother, sister, niece, nephew or grandchild, called a "Group B" beneficiary, the first €33,208 is tax-free and the remainder is taxed at 25%.

For a heir other than a a Group A or Group B beneficiary, the first €16,604 is tax-free.  The remainder of the inheritance, if any, is taxed at 25%.



8. ITALY:  Tassa di successione (Inheritance tax).  Abolished in 2001 and reestablished in 2006.  There is a €1,000,000 exemption on a bequest to a spouse or child, and a maximum rate of 8%.  The new Italian inheritance tax is now levied at three different flat rates, on the whole or part of the estate, with reference to the legatees or devisees as follows:


At the rate of 4% where the Estate or part of the Estate devolves to the decedent's spouse or children, subject to an €1,000,000 exemption for EACH beneficiary.  In the case of a widow and three children, the so-called "Franchigia" would be worth $5,538,401 and, if a family business is involved - say something along the lines of a Gucci or an Agnelli - it could be worth hundred of millions or even billions of euros.

Where the Estate or part of the Estate devolves to one or more disabled children, the exempt amount is increased to 1,500,000.
 
Subject to an exempt amount of 100,000 each, inheritances are taxed at 6% where they devolve to brothers, sisters and to other relatives of the decedent up to the 4th degree.  After the 4th degree, beneficiaries are still taxed at 4%, but there is no "exempt amount."

Where the estate, in whole or in part, devolves to unrelated parties, inheritances are taxed at 8%.

In practice, this means that the small / medium estates in Italy are not subject to inheritance taxes and even very large estates can escape massive tax bills if a great bulk of the estate is invested in a business or substantial shareholding in a company, whatever its amount.  Finanziaria 2007 now states that where the estate includes a business or a substantial stake in an ongoing concern, whatever its value, said assets shall not be taxed; provided, they are passed onto the children of the decedent and the said children undertake to continue to carry on the business or control the company for at least 5 years.

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