Tax Treaty Case Law around the Globe 2024

4.1. Facts of the case

The taxpayer was an individual resident of both Germany and Sweden. His centre of vital interest was located in Sweden. He donated shares of a Swedish company to his daughter who was a resident of Sweden.

According to section 2(1) N°1 of the German Inheritance and Gift Tax Act, donations made by a person who is a resident of Germany are subject to unlimited gift tax liability. The donation was not subject to gift tax in Sweden because Sweden had abolished the inheritance and gift tax in 2005. The father died and the daughter inherited the German gift tax liability from her father.

The daughter argued that the tax treaty between Germany and Sweden prevented Germany from taxing the donation. The German tax administration refused to grant treaty protection. The tax administration was of the opinion that the father was not a resident of Sweden for treaty purposes because - due to the abolition of the inheritance and gift tax in Sweden - he was not subject to a gift tax in Sweden. The tax court of first instance decided in favour of the taxpayer. It held that the taxpayer was a resident for treaty purposes in Sweden and that Sweden won the tie-breaker as the father’s...