European Court of Justice permits inheritance tax based on nationality in van Hilten-van der Heijden

In its judgment in the van Hilten-van der Heijden case, handed down in February 2006, the European Court of Justice (ECJ) ruled that the Dutch inheritance tax, which is based on nationality, is not incompatible with EC law and that the Netherlands may tax the heirs of its nationals even if the legator resided abroad at the time of death. This article examines the Advocate-General's decision and the ECJ's judgment in van Hilten-van der Heijden. The article also makes observations on the ECJ's judgment and gives examples illustrating that there may be a restriction on the free movement of capital in some cases. The article concludes with the authors' comments.