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Where Taxpayers and Advisers Meet

UK/India Estate Tax Treaty

Joined:Wed Aug 06, 2008 3:34 pm
UK/India Estate Tax Treaty

Postby sirp2000 » Mon May 10, 2010 10:29 am

Mr R has Indian domicile but has been resident in the UK for many years and will therefore be UK deemed domicile for IHT purposes.

However, I understand that the 1956 Estate Tax Treaty between UK and India means that on death any non-UK assets will only be taxable in India, not the UK, and as Indian Estate Duty is now abolished will escape tax completely.

In order to ensure that full advantage is taken of this rather surprising relief, how do his UK and Indian wills need to be drawn up? Does his UK will need to specifically exclude his non-UK assets and does his Indian will need to specifically include only his non-UK assets? What further steps need to be taken apart from obviously maintaining his Indian domicile status?

Some of his assets are in India but he also has considerable wealth in the Isle of Man.

Joined:Wed Aug 06, 2008 3:25 pm

Re: UK/India Estate Tax Treaty

Postby maths » Thu May 13, 2010 12:44 am

I believe your understanding of the UK/India DTA is correct.

UK situs assets will I believe fall subject to UK IHT (see Article III(3)(b)).

Typically, the UK will should relate to UK real estate only; whether the will should be drawn up under Indian law to cover all other situs assets is a question for Indian law.

Care needs to be exercised to ensure that an acquisition of UK domicile under common law doesn't occur.

Joined:Wed Aug 06, 2008 2:19 pm

Re: UK/India Estate Tax Treaty

Postby Taxbar » Tue May 18, 2010 3:57 pm

Dear Sirp2000,

You ask what steps need to be taken to ensure an Indian Domicile is maintained?

Apart from careful drafting of wills, there are a number of steps which really need specific advice (and outside the scope of a forum reply); as well as an initial written opinion on your Client's Domicile.

HMRC are well aware of this treaty position and will challenge those who do not have a good case; e.g. never claimed non-Domicile before and have lived in the UK for many years and have weak links to India.

So, only with good advice and planning is this a viable option, otherwise it will just lead to a protracted and expensive investigation and tie an estate up for many years!

Daniel Feingold
Senior Partner
Strategic Tax Planning

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