Foreign Inheritance Taxation: the habitual residence of the deceased

Within the European Union, matters of succession are governed by Regulation (EU) No. 650/2012, which does not repeal national laws. Therefore, Italian Law No. 218/1995 remains applicable to aspects not regulated by the Regulation.

Pursuant to Article 46 of Law No. 218/1995, succession is governed by the national law of the deceased. Consequently, for example, the succession of an Italian citizen residing in Brazil is governed by Italian law. The testator may nonetheless opt for the law of the country of residence. Yet, this choice is ineffective if, at the time of death, they no longer reside there. In any case, the choice of a different law may not prejudice the rights of Italian forced heirs.

Regulation (EU) No. 650/2012 and its impact on foreign inheritance taxation

Regulation (EU) No. 650/2012 does not directly harmonise the rules governing foreign inheritance taxation. On the contrary, it introduces the so-called European Certificate of Succession (ECS). The Regulation is based on the principle of unity of succession. According to it, a single governing law must apply to the entire succession process, and a single jurisdiction must be competent. The determination of applicable law and jurisdiction often affects which authority is entitled to assess and collect the relevant taxation.

To this end, the Regulation introduces harmonised criteria for both jurisdiction and applicable law. They are generally based on the habitual residence of the deceased at the time of death (see judgment of 7 November 2024, Case C-291/23, Court of Justice of the European Union).

The main objectives are:

• to ensure that succession is governed by a predictable law closely connected to the deceased’s life;
• to avoid conflicting decisions between different legal systems.

The CJEU has emphasised this principle of unity in various judgments. For instance, it stated that the Regulation “enshrines the principle of the unity of the succession by conferring jurisdiction on a single Member State for the entirety of the succession” (judgment of 12 October 2017, Case C-218/16).
In this sense, where general jurisdiction is established in one Member State, another jurisdiction cannot claim competence based solely on individual assets. This is because the first forum’s jurisdiction extends to the entirety of the estate, reflecting the principle of concentration. Consequently, only one foreign inheritance tax law will be applicable.

Applicable Law and Its Effects on Foreign Inheritance Taxation

Article 20 of Regulation (EU) No. 650/2012 lays down the principle of universal application. This entails that the law governing the succession may belong to an EU Member State or to a third country. This determination is crucial, as differing national tax regimes influence the actual burden of foreign inheritance tax.

Where the identified lex successionis is that of a non-Member State, it must be determined whether the doctrine of renvoi applie. This determination is necessary to establish the applicable foreign inheritance tax. Under Article 34, where the relevant foreign law provides for renvoi—that is, a reference back to the law of a Member State or to that of another third country which, in turn, would apply its own law to the succession. Such renvoi must be consistent with the principles of international compatibility.

Foreign inheritance taxation: the habitual residence rule

Article 21 provides that “the law applicable to the succession as a whole shall be the law of the State in which the deceased had his habitual residence at the time of death. If, by way of exception, it is clear from all the circumstances of the case that, at the time of death, the deceased was manifestly more closely connected with a State other than the State of habitual residence, the law of that other State shall apply.”

According to Recital 23 and following, habitual residence must be determined through an overall assessment of “the life circumstances of the deceased in the years prior to death and at the time of death, taking into account all relevant factual elements, in particular the duration and regularity of the deceased’s presence in the State concerned and the conditions and reasons for that presence. The habitual residence thus determined should reflect a close and stable connection with the State concerned, considering the specific objectives of this Regulation.”

In some cases, determining habitual residence may be difficult. For instance, when the deceased lived abroad for work but maintained strong family and social ties with their country of origin. Here, habitual residence may still be found in the State of origin. Similarly, if the deceased lived in several States without establishing permanent residence, factors like nationality/the location of the principal assets may be considered.

In exceptional cases, if the transfer to the State of habitual residence occurred shortly before death and the closer connections lie with another State, the applicable law may be that of the latter. However, this exception must be applied restrictively.

The professio iuris and foreign inheritance taxation

The Regulation introduces an important innovation: the right of the testator to choose the law governing their succession. Article 22 allows the professio iuris, enabling the testator to designate the law of the State whose nationality they possess at the time of the choice or at the time of death. In the case of dual nationality, either national law may be selected to rule the tax on overseas inheritance.

This choice, to be made through a will, is a useful tool for estate planning, particularly for individuals with ties to multiple countries or assets in different jurisdictions.

However, the freedom of choice is not absolute. The designated law must correspond to an actual nationality and apply to the legal system as a whole, unless the country has a multi-unit legal system (e.g., Spain, Canada, the USA, Brazil), in which case a specific territorial unit may be chosen (Article 36). The choice is effective only for the future and applies upon the opening of the succession, provided the disposition is validly made and complies with the formal and substantive requirements of private international law.</p>

The professio iuris enables individuals, within the limits outlined above, to select a jurisdiction suitable for effective estate planning and the applicable taxation.

Succession agreements under European private international law

Italian law prohibits succession agreements (patti successori), whether constitutive, dispositive or renunciatory.

• A constitutive succession agreement is a contract by which a person disposes of their own succession for the time after their death.
• A dispositive succession agreement is an instrument whereby a person disposes of rights that may accrue to them from another’s future succession.
• A renunciatory succession agreement is an agreement by which a person pre-emptively waives rights that may arise from a future succession of another person.

However, Regulation (EU) No. 650/2012 recognises succession agreements as valid, as they are permitted in most European countries. Under the Regulation, a succession agreement is governed by the law applicable if death had occurred on the agreement’s conclusion date. Under Article 21, this law corresponds to the State of habitual residence.

When an agreement involves multiple prospective deceased persons, it is valid only if all hypothetically applicable laws permit it. In other words, these are the laws that would apply if death occurred at the time of conclusion. For example, an agreement between a German and an Italian citizen may be governed by German law. German law recognises succession agreements, thereby overcoming prohibitions under Italian law.

This flexibility, without altering national laws, facilitates estate planning. At the same time, it does not oblige States to grant full recognition to succession agreements.

The European Certificate of Succession (ECS) and the foreign inheritance taxation

From a practical standpoint, the ECS is a non-mandatory administrative instrument under EU law. It is designed to improve legal certainty in identifying heirs and their respective shares throughout the EU.

The ECS may be requested by anyone needing to prove their status as:

• heir;
• legatee;
• executor of the will;
• administrator of the estate.

The application must be submitted to the court or competent authority of the Member State dealing with the succession.

In Italy, pursuant to Article 32 of Law No. 161/2014, competence to issue the European Certificate of Succession lies with the notary.

Why is the ECS useful?

Possession of the certificate allows heirs to have their status recognised abroad without needing additional validation or recognition procedures.
With the ECS, it becomes easier to:

• access bank accounts of the deceased located in other EU countries;
• manage inherited assets located across borders;
• collect sums or securities;
• execute bequests or obligations provided for in the will;
• undertake legal actions to protect the estate.

In summary, the European Certificate of Succession is a practical, EU-wide recognised document. It simplifies and speeds up international successions while reducing costs and delays.

It makes it possible to act beyond national borders without undergoing special procedures to be recognised as an heir. Moreover, the certificate facilitates:

• obtaining bank balance statements;
• collecting funds held in the deceased’s name;
• administering inherited assets;
• paying requests;
• initiating legal actions to protect the estate.

For a more detailed analysis, please refer to the dedicated article.