Inheritance tax / Gift tax (Erbschaft- und Schenkungsteuer)
Inheritance and gift tax are regulated uniformly in German tax law.
The gift tax supplements the inheritance tax. It is necessary so that inheritance tax for a future right to inherit cannot be avoided through gifts amongst the living. It therefore corresponds that gifts amongst the living are subjected to the same measures of taxation as transfers by reason of death.
The inheritance tax is levied as hereditary succession tax, which means that the devised estate is not taxed as a whole, but the enrichment of the inheriting person dependent on his/her personal situation.
Taxable transfer by reason of death is mainly deemed as acquisition through hereditary succession or bequest when the deceased person at the time of death or the heir at the time of taxation had his place of residence or habitual abode in Germany.
Inheritance procedures are also liable to taxation when none of the involved parties are residents, but domestic assets in the intentions of the valuation act (Bewertungsgesetz) are bequeathed.
Every generous gift amongst the living is subject to gift tax. The same principles apply for the personal tax liability as they do for the transfer by reason of death.
The taxable acquisition is the taxation base both for the inheritance tax and the gift tax. Taxable acquisition is the enrichment of the acquirer in as far as it is not tax free. In the case of acquisition through hereditary succession, the liabilities from bequests, charges, claimed statutory shares and inheritance substitute claims can also be deducted apart from the debts of the deceased person, to determine the taxable acquisition.
The inheritance tax and gift tax act differentiates various tax classes, depending on the kinship of the acquirer to the deceased person (for issues of gift tax: benefactor). Which tax allowance each acquirer is entitled to depends on his or her tax class.
Reform of the inheritance and gift tax
Relief for families and businesses have been adopted in 2008/2009.
back to the top