What is Inheritance Tax?

Inheritance tax (or estate tax) is a tax on assets transferred from a deceased person to their heirs, calculated either on the deceased's estate as a whole or on each beneficiary's share, with rates depending on the relationship to the deceased.

Rates and exemptions vary enormously. In Switzerland, inheritance tax is cantonal: spouses and direct descendants are exempt in almost all cantons, but distant relatives and unrelated heirs can face 20–50% rates in cantons such as Vaud. Germany applies federal inheritance tax with allowances of EUR 500,000 for spouses, EUR 400,000 per child and rates of 7–50% depending on relationship and amount.

France's droits de succession can reach 45% for direct descendants beyond an EUR 100,000 allowance and 60% for unrelated heirs. Italy is the lightest in Western Europe: 4% on direct descendants above a EUR 1 million allowance, 8% on unrelated heirs.

Planning techniques include lifetime gifts (within annual allowances), life-insurance contracts, generation-skipping arrangements and (in some jurisdictions) family-business reliefs. Cross-border estates frequently trigger double taxation unless covered by an estate-tax treaty.

Example

A German parent leaves EUR 600,000 to one child. After the EUR 400,000 allowance, EUR 200,000 is taxable at 11% = EUR 22,000 inheritance tax. The same legacy in Italy would be tax-free thanks to the EUR 1 million per-heir allowance.

Related terms

Gift Tax

Gift tax is a tax on the transfer of value from one living person to another without consideration, typically structured as a sibling to inheritance tax to prevent people from giving everything away just before death.

Wealth Tax

Wealth tax is an annual tax on the net worth of an individual — total assets (real estate, investments, cash, vehicles) minus liabilities — levied in a handful of European countries including Switzerland, Spain, Norway and (limited) France.

Property Tax

Property tax is an annual tax levied by a local or regional government on the assessed value of real estate — land and buildings — paid by the owner and used to fund municipal services.

Tax Allowance

A tax allowance (or personal exemption) is a fixed amount of income that is tax-free for everyone — or for specific categories of taxpayer such as the elderly, parents or low earners — applied before the tax brackets kick in.

Frequently asked questions

Do spouses pay inheritance tax?+

Largely no in CH, IT and FR (with allowances); DE applies 7–30% above a EUR 500,000 spousal allowance.

Can lifetime gifts reduce inheritance tax?+

Yes — most countries let you give modest amounts tax-free each year, gradually shifting wealth.

Which country taxes a cross-border estate?+

Usually the deceased's last domicile, with adjustments under bilateral estate-tax treaties.