EU: Wealth and transfer taxes

On November 20th, 2014 the European Commission published a study about a Cross-Country Review about wealth taxes and taxes on the transfer of wealth. The study compares the following categories of taxes:

• Inheritance and gift taxes
• Real estate and land taxes
• Net wealth tax

The conclusion of the Commission: 

The Study concludes that real estate and land taxes are the only significant source of wealth tax income. Their design is simple and they target many potential taxpayers who cannot do much to legally avoid taxation. The main problem with these taxes is the difficulty of determining a reliable and accurate tax base for taxes on possession and setting the least obtrusive rate in the case of real estate transfers.

In respect of inheritance and gift taxes, the Study points out that although in theory most Member States tax inheritances and gifts, in practice the design of these taxes (i.e. offer large exemptions to family members) means that such taxes are not comprehensively applied. There also seems to be a general consensus that family members and family businesses should be left out from the scope of the taxes.

Net wealth taxes have been abolished by most Member States as the revenue obtained did not justify the high compliance costs and negative side effects.

Notice:

The EU commission proposed in its recommendation on 15 December 2011 that double taxation scenarios in regard to inheritance and gift tax should be eliminated in the EU. However, there does not seem any political will of European politicans to tackle a situation where estates may be taxed with a combined tax rate up to 80%.

Author: Peter Scheller, German Tax Adviser – Master of International Taxation

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