Inheritance Tax and Estate Inventory – Taxation Basics

Inheritance tax basics

Inheritance tax is based on the Inheritance and Gift Tax Act (378/1940). The tax is calculated on each heir's portion of the estate's net assets. Net assets are obtained by deducting debts, funeral expenses, and estate administration costs from the estate's gross assets. Inheritance tax is progressive, meaning the tax rate increases as the inheritance portion grows. The tax applies to both statutory heirs and beneficiaries under a will.

Tax classes

Heirs are divided into two tax classes based on the closeness of their relationship. Tax class I includes the spouse, children, grandchildren, parents, grandparents, and the spouse's descendants. A cohabiting partner also belongs to tax class I under certain conditions. Tax class II includes all other recipients: siblings, cousins, friends, and other beneficiaries under a will. Tax class II rates are significantly higher.

In the tax class I scale, tax starts at 7 percent (EUR 20,000–40,000) and rises to 19 percent (over EUR 1,000,000). In the tax class II scale, tax starts at 19 percent and rises to 33 percent.

Exempt portions and deductions

The most significant deductions in inheritance taxation are:

• Exempt portion: Inheritance portions below EUR 20,000 are tax-exempt.
• Spouse deduction: The surviving spouse has a EUR 90,000 deduction from their inheritance portion.
• Minority deduction: A minor direct heir has a EUR 60,000 deduction.
• Debts and expenses: Estate debts, funeral expenses, and estate administration costs are deducted from assets.

These deductions significantly reduce the heirs' tax burden, particularly in smaller estates.

Taxation procedure

Inheritance taxation begins when the deed is submitted to the Tax Administration. The Tax Administration examines the deed and assesses inheritance tax for each heir separately. The tax decision typically comes within 6–12 months. The tax is generally paid in two instalments. The heir can request a preliminary decision from the Tax Administration before the inheritance distribution to know the exact tax amount in advance.

Tax correction

If the inheritance taxation is incorrect, a correction can be requested from the Tax Adjustment Board within three years of the taxation ending. A correction may be needed if the deed contained incorrect valuations or new assets or debts are discovered later. A supplementary deed is prepared if new property or debts are found after the estate inventory. The supplementary deed must be submitted within one month of discovering the new property.