Expat Tax Residency and Digital Assets: The Inheritance Tax Trap Most Europeans Never See Coming

A Tax Bill from a Country Your Family Never Lived In

Picture this. A British expat moves to the Netherlands for work. They spend 12 years there, build a life, accumulate savings, investments, a crypto portfolio, and several digital businesses. Then they die.

Their Dutch-resident status means the Netherlands taxes their worldwide estate — including the crypto, the UK brokerage account, and the digital businesses incorporated in Ireland. The UK, where most of the non-crypto assets are held, also asserts taxation rights. There's no comprehensive double-taxation treaty on inheritance between the UK and the Netherlands.

Their family pays tax on the same assets twice.

This is not a hypothetical. This is what happens to thousands of expats across Europe every year — and digital assets make it dramatically worse.

Why Your Tax Residency Determines Everything

The EU Succession Regulation (Brussels IV), in force since 2015, governs which country's inheritance law applies when an EU citizen dies. Generally, it defaults to the country where you were habitually resident at death.

But inheritance tax is a different matter. Tax is not harmonized in the EU. Each member state applies its own rules, its own rates, and its own definition of who qualifies for exemptions. Some countries — like Sweden, Portugal, and Cyprus — have abolished inheritance tax entirely. Others, like France, Belgium, and Germany, have rates that reach 45–60% for distant relatives or unrelated heirs.

When you're an expat, you often sit at the intersection of two countries' tax systems — and digital assets fall into the cracks.

Digital Assets Are the Problem Child of International Inheritance Tax

Traditional assets have a clear physical location. A house is where it stands. A bank account is where the bank is domiciled. But digital assets? They exist everywhere and nowhere.

Consider what this means:

• Cryptocurrency has no legal domicile. Tax authorities in at least 3 countries — the one where you lived, the one where you were born, and the one where the exchange is registered — may all assert they have the right to tax it.
• Stock portfolios held on platforms like eToro, Trading 212, or Degiro are registered in one country but held on behalf of residents in dozens more. When a Dutch-resident expat dies, does the platform's UK registration mean the UK taxes the gain?
• Digital businesses, SaaS products, and domain portfolios are often incorporated in tax-friendly jurisdictions (Ireland, Malta, Luxembourg) but owned by someone resident elsewhere. At death, the country of residency may claim the full value.
• NFTs and tokenized assets have no treaty framework at all. Revenue authorities are still arguing about what they are, let alone where they "sit."

The Double Taxation Trap

Most countries have bilateral double-taxation treaties (DTTs) to prevent the same income being taxed twice. But here's the problem: most DTTs cover income tax, not inheritance tax.

As of today, only a handful of inheritance-specific DTTs exist in Europe — and most are outdated or incomplete.

The UK, for example, has inheritance tax treaties with only eight countries — and Germany, the Netherlands, Spain, Italy, and France are not among them. A British expat who dies in Germany faces potential taxation in both jurisdictions, with no treaty to arbitrate.

France has signed more inheritance DTTs but still leaves many expats exposed, particularly those from outside the EU.

Germany has signed treaties with the US, France, Sweden, Denmark, Switzerland, and Greece — but not the UK, Netherlands, or most Eastern European countries.

For expats in countries with no DTT covering inheritance: welcome to double taxation.

Real Scenarios That Will Terrify You

The British tech founder in Berlin: Holds €400,000 in startup equity and €80,000 in Bitcoin. Dies a German tax resident. Germany taxes the worldwide estate at German inheritance tax rates. The UK also asserts taxation rights over UK-source assets. No treaty protection. Potential combined liability: over 50% of total estate value.

The French retiree in Spain: Moved to Málaga five years ago, never updated their will or tax status. Holds French brokerage accounts, a French property, and €30,000 in ETFs. Spain taxes as a Spanish resident. France taxes the French property and assets with French source. Daughters pay inheritance tax in two countries with overlapping claims. Exemptions that would apply in France alone (€100,000 per child) are partially lost.

The Dutch engineer in Amsterdam: Originally from South Africa, has been a Dutch resident for 14 years. Dies with cryptocurrency worth €150,000 and a digital consulting business. The Netherlands taxes the worldwide estate, but the South African Revenue Service also wants its cut. No treaty. Crypto's "location" is disputed. Family inherits legal uncertainty alongside grief.

What Expats Absolutely Must Do Before It's Too Late

1. Establish your tax domicile deliberately — and document it. In many countries, "domicile" is separate from "residence." Your domicile of origin may follow you for life even if you've lived abroad for decades. UK citizens are particularly vulnerable: even after 10 years in Berlin, you may still be UK-domiciled for inheritance tax purposes. Work with a cross-border tax lawyer to formally establish domicile where you intend.

2. Map every digital asset — with its jurisdiction. Create a comprehensive list: exchanges, wallets, platforms, digital businesses, domain portfolios, NFTs, stock platforms. For each, record where it's registered, where it's taxed, and what happens at death according to the platform's terms.

3. Identify which DTTs (if any) apply to your situation. Your tax adviser needs to check whether the country you live in has an inheritance-specific treaty with your country of citizenship or previous domicile. If not, the absence of treaty protection needs to be factored into your estate planning.

4. Consider a holding structure for digital assets. Some expats use a Dutch Stichting, an Irish holding company, or a family foundation to hold digital assets in a way that reduces cross-border tax ambiguity. These structures have their own costs and complexity — but for a €200,000+ digital portfolio, they can save your family hundreds of thousands.

5. Write a will that acknowledges both jurisdictions. A will drafted in one country may not address the tax obligations in another. In some cases, you need two wills — one for each jurisdiction. Make sure your executor knows about both.

6. Leave a complete digital asset inventory. If your family doesn't know what you own, they can't claim it, report it, or plan around it. A sealed letter with your complete digital holdings — exchanges, wallet addresses, platforms, login credentials — should be part of your estate planning, not an afterthought.

The Clock Is Already Running

Tax authorities in Germany, the Netherlands, France, Spain, and Italy are all actively expanding their approach to digital assets in inheritance. They are not waiting for international coordination. They will apply their domestic rules — and they will seek payment.

The expat who plans is the expat whose family keeps what they earned. The expat who doesn't leaves their heirs in a legal maze at the worst possible time.

You built this life intentionally. Protect it the same way.

Start building your digital legacy plan today — because two countries will claim your estate if you don't plan which one actually gets it.