A 49-year-old woman is carer to a childless 83-year-old man. They entered into a registered partnership. He dies more than two months later. After his death, she receives an additional inheritance tax assessment of almost €260,000. This is because the Tax Administration finds that the partner exemption and the partner rate do not apply. What does the court say?
Partner concept inheritance tax
The inheritance law contains a partner concept based on objective criteria. When those objective criteria are met, the partner exemption and the lower partner rate should be granted. The informal carer meets those criteria.
Badly meant to evade tax?
But if there would be a sham or abuse of right, an exception applies. However, the legislator has explicitly not included a rule in the law under which the partner is entitled to the exemption and the lower rate only under the condition that the partnership has lasted for a certain period of time.
The tax inspector, in case he considers that the de facto partnership is lacking because of a relatively short duration of the partnership, must prove that the partnership could have no real practical meaning and was entered into with the overriding motive of avoiding inheritance tax.
In this case, entering into the registered partnership saved inheritance tax. But besides the overriding purpose of saving inheritance tax, the Inland Revenue must prove that entering into the registered partnership is contrary to the purpose and intent of the Inheritance Tax Act.
According to the court, this is not the case. In this case, there was clearly no registered partnership entered into in accordance with the parties' intentions for such a short period of time that the duties attached to it by law, such as the duty of care reciprocally, could not have any real practical meaning.
Informal carer actually still partner of ex-husband
The Inland Revenue has further argued that during that period when she was the registered partner of the testator, the carer remained de facto partner of her ex-husband. In fact, after the death of her new partner, she immediately resumed living with her ex-husband.
On this, the court says that even if a registered partner is in addition actually in an affective relationship with someone else, there is a legal duty of care on the part of that registered partner towards his or her partner. What matters is only whether that duty of care cannot have real significance, and there is none of that here.
Conclusion
The partner exemption and the partner rate apply to the acquisition by the carer. The additional tax assessment was wrongly imposed.
Note: The Tax Administration is clearly struggling with statutory schemes that grant hefty exemptions and lower rates to taxpayers who simply meet the criteria for such a scheme.
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