How U.S. Estate Tax Treaties Affect Non-Residents

U.S. estate tax treaties are bilateral agreements with foreign countries that prevent the double taxation of an individual’s assets after death. When a person has financial ties to both the United States and another nation, their estate can face taxation in both jurisdictions. These treaties establish rules to determine which country has the primary right to tax the estate and offer mechanisms like tax credits to avoid duplicative taxes.

Determining Treaty Applicability

The application of a U.S. estate tax treaty depends on the decedent’s domicile, not their residency status for income tax purposes. Domicile is a person’s permanent home, the place they intend to return to even if living elsewhere. An individual can be a resident of one country for income tax but domiciled in another for estate tax.

For an estate to receive treaty benefits, the decedent must have been domiciled in a country with an active estate tax treaty with the United States. The U.S. has estate and, in some cases, gift tax treaties with the following countries:

• Australia
• Austria
• Denmark
• Finland
• France
• Germany
• Greece
• Ireland
• Italy
• Japan
• Netherlands
• South Africa
• Switzerland
• United Kingdom

An agreement with Canada also contains provisions that address estate taxation within its income tax treaty. The executor of an estate must verify the decedent’s domicile and confirm a treaty exists with that country to receive any benefits.

Key Provisions and Benefits of Estate Tax Treaties

If an individual is claimed as a domiciliary by both the U.S. and a treaty partner, the agreements provide “tie-breaker” rules to assign domicile to a single country. The first test is the location of the permanent home. If a permanent home exists in both countries, the next test is the “center of vital interests,” considering where personal and economic ties are closer, followed by the person’s “habitual abode.”

Treaties establish “situs” rules that determine where an asset is located for tax purposes, which dictates which country has the primary right to tax it. For example, while U.S. law considers stock in a U.S. corporation a U.S. situs asset, a treaty may reclassify it as located in the decedent’s country of domicile, exempting it from U.S. estate tax. Real estate is taxed by the country where it is physically located.

The foreign death tax credit is a primary mechanism for preventing double taxation. The country where assets are located (the situs country) has the first right to tax. The country of domicile then allows a credit for the tax paid to the situs country.

Some treaties also offer more generous deductions and exemptions. A treaty might allow the estate to take a pro-rata portion of the unified credit available to U.S. citizens, based on the ratio of U.S. assets to worldwide assets. Certain treaties also provide a marital deduction for property passing to a non-citizen surviving spouse, a benefit that is highly restricted under domestic law.

The No-Treaty Scenario for Non-Residents

For a non-resident from a country without an estate tax treaty, the default U.S. tax rules apply. The federal estate tax exemption for a non-resident alien is only $60,000, compared to the $13.99 million exemption for U.S. citizens in 2025. U.S.-based assets with a fair market value above this threshold will be subject to estate tax.

The tax applies to all assets with a “U.S. situs.” This includes real estate located in the United States, tangible personal property physically present in the country, and stock in U.S. corporations. A non-resident could have an estate tax liability simply by owning shares of a publicly traded American company.

Without a treaty, there are no provisions to modify these situs rules or provide enhanced exemptions. The estate is taxed on the value of U.S. assets exceeding the $60,000 threshold at progressive rates up to 40%.

Claiming Treaty Benefits

To claim treaty benefits, the estate’s executor must file Form 706-NA, “United States Estate (and Generation-Skipping Transfer) Tax Return, Estate of nonresident not a citizen of the United States.” This form reports the decedent’s U.S. situs assets and calculates the estate tax. The filing deadline is nine months after the date of death, though a six-month extension is available.

The executor must also attach a supplementary statement to Form 706-NA that cites the specific treaty articles being used and provides supporting calculations. Additionally, Form 8833, “Treaty-Based Return Position Disclosure,” must be filed whenever a treaty is used to modify a provision of U.S. tax law. The executor should maintain thorough records of the decedent’s worldwide assets and domicile to substantiate the claim.