Inheritance taxAn inheritance tax is levied upon an individual’s estate at death or upon the assets transferred from the decedent’s estate to their heirs. Unlike estate taxes, inheritance tax exemptions apply to the size of the gift rather than the size of the estate. es date back to the Roman Empire, which collected 5 percent of inherited property to pay soldiers’ pensions. Today, the practice is widespread.
The majority of European countries covered in today’s map currently levy estate, inheritance, or gift taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es. These countries are Belgium, Bulgaria, Croatia, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Lithuania, Luxembourg, the Netherlands, Poland, Portugal, Slovenia, Spain, Switzerland, Turkey, and the United Kingdom.
Estate taxAn estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits, at the time of death. The tax is paid by the estate itself before assets are distributed to heirs. es are levied on the property of the deceased and paid by the estate itself. Inheritance taxes, in contrast, are only levied on the value of assets transferred and are paid by the heirs. Gift taxA gift tax is a tax on the transfer of property by a living individual, without payment or a valuable exchange in return. The donor, not the recipient of the gift, is typically liable for the tax. es are levied when property is transferred by a living individual.
Countries typically charge only estate or inheritance tax. However, estates can be double-taxed if they fall under two jurisdictions that apply different taxes. For this reason, European Union Member States have installed mechanisms intended to prevent or relieve double taxationDouble taxation is when taxes are paid twice on the same dollar of income, regardless of whether that’s corporate or individual income. if such a situation occurs.
As tempting as inheritance, estate, and gift taxes might look—especially when the OECD notes them as a way to reduce wealth inequality—their limited capacity to collect revenue and their negative impact on entrepreneurial activity, saving, and work should make policymakers consider their repeal instead of boosting them.
The tax rates applied to estates, inheritances, and gifts often depend on the level of familial closeness to the inheritor as well as the amount inherited. For example, in France, different rates are applied to transfers to ascendants and descendants, transfers between siblings, blood relatives up to the fourth degree, and everyone else. For transfers to ascendants and descendants as well as between siblings, higher rates are applied to larger sums of money.
In some countries—such as Belgium, Spain, or Switzerland—estate, gift, and inheritance tax rates also vary by region. Most European countries do not tax transfers below a certain amount.
|Country||Estate /Inheritance/Gift Tax||Tax Rate|
|Belgium (BE)||Yes||3-80% (depends on region)|
|Czech Republic (CZ)||Yes||Income tax applies (inheritances are fully tax-exempt, but gifts may be taxed)|
|Latvia (LV)||No||No tax on inheritances/estates, but income tax can apply to gifts|
|Malta (MT)||No||No inheritance/estate/gift tax, but 5% transfer duty can apply|
|Romania (RO)||No||No inheritance/estate/gift tax, except in relation to transfer of real estate in certain circumstances|
|Spain (ES)||Yes||7.65-87.6% (depends on region)|
|Switzerland (CH)||Yes||0-50% (depends on canton)|
|United Kingdom (GB)||Yes||20-40%|
Sources: EY, “Worldwide Estate and Inheritance Tax Guide 2022,” July 22, 2022, https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/tax/tax-pdfs/ey-final-worldwide-estate-and-inheritance-tax-guide-2022.pdf; and PwC, “Worldwide Tax Summaries,” accessed April 20, 2023, https://taxsummaries.pwc.com/.