Taxes in Europe Database v2
Legal basis for the imposition of inheritance and gift tax is the Inheritance and Gift Tax Act as published on 27 February 1997 (Federal Law Gazette 1997 I p. 378) last amended by Article 30 of the Act of 16 June 2013 (Federal Law Gazette 2013 I p. 1809).
As of 1 January 2009 important new regulations have come into effect. All kinds of assets will be equally valuated on the basis of the fair market price. The law also enhances tax privileges for close family members; company successors enjoy considerable tax reliefs (which are linked to the maintenance of jobs in the company over a fixed period).
Federal Republic of Germany
Federal Republic of Germany
Tax liability does not attach to the estate of a person, as it would in the case of estate duties, but to what an individual, a legal entity or a community of joint owners receives from the estate of the deceased. Gift tax is a supplement to inheritance tax, and is needed to prevent inheritance tax on the future passing of an estate being avoided by means of gifts inter vivos. Life-time gifts are therefore subject to taxation on the same conditions as transfers on death.
Inheritance tax is imposed on transfers by reason of death, provided that either the deceased at the time of death or the beneficiary at the time his liability for tax originated was a resident of Germany. Where neither the deceased nor the beneficiary is a German resident, transfers by reason of death are subject to tax insofar as the property transferred is domestic property as defined under the Valuation Act.
Inheritance tax: Gratuitous transfer of property by reason of death.
The term "transfer by reason of death" refers to:
Certain other transfers of property specified in Sec. 3 paragraph 2 and Secs. 4 and 6 of the Inheritance Tax Act (ErbStG) are also subject to the tax.
Gift tax: Any gratuitous transfer "inter vivos", provided that either the donor or the donee is a resident. Transfers made by a non-resident donor to a non-resident donee are also subject to tax insofar as the property transferred is domestic property as defined under the Valuation Law.
A number of notification requirements are laid down in the Inheritance and Gift Tax Act to ensure that no transfer escapes taxation.
Both inheritance and gift tax are assessed on the basis of the taxable transfer. This is the amount by which the beneficiary is enriched, insofar as the amount is not tax-exempt. The value of each asset is determined in accordance with the Valuation Act as published on 1 February 1991 (Federal Law Gazette 1991 I p. 230), last amended by Article 3 of the Act of 8 December 2013 (Federal Law Gazette 2013 I p. 4318). In compliance with the requirements of the German Constitutional Court, since 1 January 2009, all kinds of assets have been valued uniformly on the basis of the fair market price.
In computing the taxable transfer in the case of transfer by inheritance, not only the deceased's liabilities are deductible, but also those incurred in connection with inheritances, obligations, the assertion of the claim to a compulsory portion and claims in lieu of inheritance. The deductible debts of the estate also include the burial costs (including expenditure on the gravestone and the care of the grave) and the cost of winding up, settling, distributing and attaining the inheritance, for all of which a lump sum of € 10,300 may be deducted undocumented. The net value of the transfer is then decreased by any tax exemptions to which the beneficiary is entitled.
The exemption to which a beneficiary is entitled depends on the tax class to which he or she belongs. The Inheritance and Gift Tax Act categorises beneficiaries into the following three classes according to their family relationship to the deceased or donor (tax classes I and II [up to and including nephews and nieces] also apply where a family relationship as a result of adoption has been disestablished under civil law [Sec. 15 paragraph 1a ErbStG]):
Class I applies to the deceased’s spouse, to the officially registered partner, to children and step-children, to grandchildren and to parents and forebears in the case of transfer by reason of death.
Class II applies to parents and forebears in the case of transfer by gift (for transfer by reason of death see Class I), to brothers and sisters (also half-brothers and half-sisters), nephews, nieces, step-parents, sons-in-law, daughters-in-law, parents-in-law, to the divorced spouse and to the partner from an officially registered partnership that has been revoked.
Class III applies to all other beneficiaries and to the transfer of property for particular purposes.
To begin with, a tax-exemption is granted for family homes: A spouse or a registered partner may inherit free of tax a piece of real estate which has been inhabited by the bequeather before. This applies to children also, but with the tax exemption limited to a living area up to 200 square meters. The heir is required to inhabit the apartment or house for not less than ten years after the transfer.
As for donations, a spouse or a registered partner may acquire free of tax real estate which is used as a family home (no further requirements).
Apart from that, every beneficiary is entitled to a personal exemption which applies to the transfer of property by reason of death as well as to lifetime gifts. This amounts to
In order to make sure that the personal exemptions are claimed once only in a ten-year period, all transfers received by one person from one and the same donor/deceased are cumulated for tax purposes, thus ultimately being treated as one single transfer.
In addition, the surviving spouse (the surviving registered partner respectively) and children up to the end of their twenty-seventh year are granted a special maintenance allowance, which applies only to transfers by reason of death, less the capital value of tax-exempt pension payments accruing to the surviving spouse or children.
The maintenance allowance
Every beneficiary is entitled to a special allowance for the transfer of household effects and the like.
Class I beneficiaries may acquire free of tax household effects including linen and items of clothing up to a value of € 41,000. A tax-free allowance of € 12,000 is granted for the transfer of other movable objects, including art objects and collections, with the exception of currency, securities, coins, precious metals, gems and pearls.
Beneficiaries of Class II and III are granted a combined tax-free allowance of € 12,000 for household effects and other movable objects subject to the exceptions named above.
Beneficiaries of the transfer of business property on death or as a gift may choose between two options:
The tax rates, which apply equally to transfers by reason of death and to lifetime gifts, are graduated according to the value of the property transferred and the beneficiary's tax class.
All beneficiaries in Class II or III may claim a special tax relief amount for business assets, substantial holdings in incorporated companies and agricultural and forestry assets.
Inheritance tax is levied at the following percentage rates:
Value of the taxable transfer (Sec. 10)
in € up to (inclusive)
Percentage rate in tax class
The taxpayer must pay the (self-assessed) tax within one month after the submission of the tax return.
The tax is assessed and collected by the tax offices.
The revenue from inheritance and gift tax accrues to the federal states (Länder).