What are the effects of Estate Tax Treaties?

The United States has concluded Estate & Gift Tax Treaties with various countries. For an overview and the current status of the treaties, click here. Treaties may be helpful in cases where two (or more) countries assert that a person is domiciled in that country for estate tax purposes. For example, the United States may assert that a non-American is domiciled in the United States whereas another country, such as Germany, may assert that the same person is domiciled in Germany. In such as situation, the Estate & Gift Tax Treaty between the United States and Germany allocates the right to tax either to the United States or Germany, thus solving the problem of potential double taxation. This is called the tie-breaking rule.

However, not all treaties concluded by the United States include a tie-breaking rule. For example, the Estate & Gift Tax Treaty between the United States and Switzerland does not include a tie-breaking rule. Therefore, in a situation involving the Switzerland, the treaty is not helpful in the allocation of taxing rights.