A typical example is the United States of America. In the Czech Republic, we have recently become accustomed to the fact that investing in US stocks can be advantageous (and profitable) in many respects, but not everyone thinks about what “will happen when it is no longer here”, i.e. how inheritance will be taxed.

Non-U.S. residents are subject to U.S. inheritance tax on certain assets located in the U.S. These assets generally include real estate and other tangible personal assets located in the US, business assets located in the US, as well as shares of US companies.

Inheritance tax rates currently range progressively from 18% to 40%. For tax non-residents, only a basic exemption of $60,000 is available (which applies to the value of assets included in the taxable wealth of an individual in the US who was not resident in the United States). The entire value of the property is taxed, not just the profit.

We would also like to point out that in this case, even the double taxation treaty between the Czech Republic and the USA will not help, as this inheritance tax is not covered by the treaty. As of 1 January 2024, the United States has inheritance tax treaties with only 16 jurisdictions, and the Czech Republic is not among them.

And that’s not all, unfortunately. Have you heard of the “One Big Beautiful Bill Act” that is currently going through the US legislative process? This law has potential tax implications not only for US tax residents, but also for Czech companies with US subsidiaries, Czech individuals investing in the US (e.g. in shares of US companies) and persons doing business in the US.

For foreign tax residents, Section 899 is an important part of this Act. It contains a provision that could increase taxes on persons from a so-called “discriminatory foreign country”. A discriminatory foreign country is one that has a tax in place that the US considers an “unfair foreign tax.”

An unfair foreign tax includes, for example, the digital services tax or the rules of undertaxed profits (“UTPR”). UTPR is part of the Pillar II rules, which is a global minimum tax of 15%, and in the Czech Republic these rules are in the process of being implemented.

If the Czech Republic were to be considered discriminatory against a foreign country, the bill (if implemented in its current state) could increase the current or future tax burden for Czech individuals and legal entities. In general, the tax rates imposed on these discriminatory countries should increase by 5 percentage points each year (up to a maximum of 20 percentage points above the legal rate). The bill is designed in such a way that this increase could be applied regardless of concluded double taxation treaties.

The application of this bill can be demonstrated on the example of US dividends received by a Czech resident, which are typically taxed in the USA at a rate limited by the double taxation treaty concluded between the Czech Republic and the USA (subject to the conditions for its use) to 5% or 15%. The bill would generally increase this rate by 5 percentage points for each year that the Czech Republic is considered discriminatory by a foreign country (maximum 20 percentage points above the legal rate).

It is worth noting that increased tax rates would likely not apply to income that is explicitly excluded from the application of the tax by US law (e.g. portfolio shares and probably qualified pension funds).

Finally, we consider it important to note that the inheritance tax is already valid and effective, while the “One Big Beatuful Bill Act” has not yet been passed. In this context, we have no choice but to wait. Nevertheless, it is advisable to keep in mind the principle that “he who is prepared is not surprised”.