The topic of wills and inheritance crops up frequently in the British in Austria Facebook groups. The following provides an overview that people may find useful, along with some useful links.
- Austria abolished its Inheritance Tax (Erbschaftssteuer) in 2008.
- There are though notification requirements for some gifts (Schenkungen) both during life and on a death.
- Real estate property transfer tax may nevertheless apply to transfers of inherited Austrian real estate.
- Relief from customs duty and VAT may be available for some goods inherited in the UK and imported into the EU.
UK Inheritance Tax (IHT) may be levied on the worldwide assets of someone who dies while being domiciled in a UK jurisdiction (i.e. England/Wales, Scotland or Northern Ireland). IHT may also be levied on assets located in the UK of someone who is not domiciled in the UK. The tax rate of 40% is levied on the value of the relevant estate over £325,000. The rules are complicated and there are various forms of relief. The most common relief is that assets passing between spouses are generally tax free. This does not automatically apply when the surviving spouse is not domiciled in the UK. It may be possible though for the surviving spouse to elect to be treated as UK domiciled for a period after the inheritance, but in this case the whole of the surviving spouse’s estate may become liable to IHT.
It is very important to understand the key concept of domicile. It is not codified in English law, but is derived from case law, much of it dating from the time of the Raj.
- In the case of a child born to married parents, the child gains a domicile of origin which is the same as the father’s domicile status.
- Where the parents are unmarried at the time of birth, the domicile status of its mother is assigned to the child.
- Where the relevant parent changes their domicile before the child becomes 16, the child’s domicile will change correspondingly. This is a domicile of dependence.
- Once 16, anyone can adopt a domicile of choice if they have closer connections with a state other than their existing domicile.
- If the connection to the state chosen falls away, then the domicile status may revert to the domicile of origin unless and until a new domicile of choice can be demonstrated.
Domicile of Origin
Where you have a domicile of origin in a part of the UK, it is not enough to be living away from the UK for a long period of time in order to become non-domiciled, you have to be able to point to closer economic and social connections to a particular new state – and in the case of federal countries like Austria, potentially a stronger connection to a particular province. It may be difficult to demonstrate a domicile of choice in Austria until having achieved at least permanent residence status (Daueraufenhalt).
The more connections retained to the UK, the harder it will be to prove that you have established an Austrian domicile of choice. Making a will subject to English (Scots, or Northern Ireland) law may weigh in favour of having retained a UK domicile. A specific statutory rule means that voter registration or voting in UK elections is not relevant for the purpose of the determination of domicile.
Domicile status is only normally determined when it is relevant. In most cases, it is those administering your estate who will have to prove that you had adopted a domicile of choice outside the UK, if your estate is to be fully or partly outside the scope of IHT. Where relevant, it is therefore important to leave good evidence to support that contention.
The only people who get rich from a cross-border intestacy (dying without a valid will) are the lawyers, so even if you are still quite young and have no plans to die just yet, it is best to make a will (or two).
Whether one will or two is advisable depends upon the particular circumstances. If you make two wills (Austrian and UK), they should be coordinated and dovetailed. They shouldn’t overlap and one should not accidentally revoke the other.
Austria has adopted the EU Succession Regulation 650/2012 (EUSR) or EU-Erbrechtsverordnung in German. This applies to deaths from 17 August 2015. If your will planning predated these new rules, you may want to revisit it.
The basic rule is that the law of the place where the deceased had their habitual residence (gewöhnlicher Aufenthalt) at the time of their death governs the succession. (Art 21). The concept of habitual residence is used in a number of contexts in European law and it has been the subject of various cases before the European Court of Justice.
Choice of Law Clauses
However under Art. 22, someone who has a foreign nationality (including that of a non-EU member state) may choose the law of their nationality (or one of them if they have multiple foreign nationalities) to govern their succession instead of the law of the place of habitual residence. This is normally done by means of a choice of law clause in a will. A British citizen may therefore choose English, Scots or Northern Irish law – as appropriate – to apply to their entire estate. An Austrian court may still be involved in administering the estate but it should apply the chosen foreign law.
The main reason for making a choice of law election might be to try to avoid the application of Austria’s forced heirship rules. Under these rules, apart from in a few exceptions, it is not possible to fully disinherit spouses and children. Recent developments in France and Germany indicate that it may not always be possible to achieve this objective, notwithstanding the EUSR.
Notably, Scots law also includes a form of forced heirship known as legal rights. If you have any Scottish heritage and might therefore have a Scottish domicile, you should consult a Scots lawyer.
Wills have differing formal requirement under Austrian and UK laws. Austria and the UK are parties to the Hague Convention on International Wills which facilitates mutual recognition.
It is important to recognise that the UK has 3 legal jurisdictions (England & Wales, Scotland, Northern Ireland) and laws may vary. Austria also has 9 provinces with their own legal jurisdictions. Property rules in particular may vary especially now British nationals are Third Country Nationals
This is a complex subject and not everyone’s circumstances are the same especially given the mixed legal jurisdictions. For example, people may different different nationalities and residency rights; so please seek Professional advice.
- EU Succession Regulation
- HMRC Manual on Inheritance Tax
- HMRC Manual on Domicile
- Dorda Guide
- Hague Convention on International Wills
- EY Worldwide Estate and Inheritance Tax Guide
- BiA Property Buying Overview
Disclaimer: The information provided on this website is provided on a best endeavours basis. Please inform the website owner of any errors or omissions. The Information should not be used as a substitute for legal advice from a licensed professional.