Germany–US Estate & Inheritance Tax Treaty Overview

How the 1980 Germany–United States Estate and Inheritance Tax Treaty allocates taxing rights, coordinates domicile and situs rules, and interacts with §21 ErbStG to avoid double taxation on cross-border estates and inheritances.

Ask about treaty application ← Back to Germany–US Hub

Objet : The treaty prevents double taxation of estates, inheritances, and gifts between Germany and the US. It defines domicile, situs, and credit mechanisms that work in tandem with §21 ErbStG.

Contenu

1) Scope & structure
2) Domicile & tie-breaker rules
3) Situs allocation of assets
4) Relief mechanisms
5) Interaction with §21 ErbStG
6) Practical examples
7) Planning insights
Next steps & resources

1) Scope & structure

S'applique à estate, inheritance, and gift taxes in both countries.
Coordinates taxation when both Germany and the US claim rights based on domicile, citizenship, or asset situs.
Primary goal: avoid double taxation and define mutual credits.
In Germany, works alongside the ErbStG; in the US, complements federal estate/gift tax (IRC §§2001–2501).

2) Domicile & tie-breaker rules

“Domicile” ≈ permanent home, not just residence or citizenship.
If both countries claim domicile, tie-breaker hierarchy applies:
1. Permanent home available;
2. Center of vital interests;
3. Habitual abode;
4. Nationality;
5. Mutual agreement of competent authorities.
Correct domicile classification determines which country taxes worldwide assets.

3) Situs allocation of assets

Each country may tax certain assets by location (“situs”).
Germany-situs assets: German real estate, German business property, shares in German companies (>50%), certain debt claims.
US-situs assets: US real property, US securities, business assets, tangible property located in the US.
Movables and bank accounts follow domicile unless clearly linked to one jurisdiction.

4) Relief mechanisms

Credit method: The country of domicile gives credit for tax paid in the situs country.
Exemption method: In limited cases (e.g. government securities, certain pensions), assets may be exempted by one country.
Administrative cooperation: exchange of information and mutual agreement procedures (MAP) to resolve conflicts.

5) Interaction with §21 ErbStG

§21 ErbStG applies when no treaty or as a supplementary rule.
Under the treaty, the credit method still relies on the German tax attributable to the foreign-asset slice.
Tax credits under §21 are capped to that German tax portion, even if foreign tax exceeds it.
Ensure that the foreign assessment & payment are fully documented for German credit claim.

6) Practical examples

Example 1 – German-domiciled decedent, US assets

Germany taxes worldwide inheritance. The US taxes US-situs property. The treaty allows Germany to credit US estate tax on US assets.

Example 2 – US-domiciled decedent, German property

Germany taxes the German property. The US taxes the worldwide estate. The US gives credit for German inheritance tax on the property.

Example 3 – Dual-domicile uncertainty

Apply tie-breaker sequence; if unresolved, mutual agreement procedure decides. Tax filings paused or adjusted accordingly.

7) Planning insights

Review domicile and situs early to prevent overlap.
Track dual-national situations and long-term US residents with German assets.
Coordinate valuations and timing to maximize credit recognition.
Consider foundation or trust setups for asset segregation and governance.

En rapport : Fiducies et fondations - Foundation structuring - Foundation management

Next steps & resources

Integrate treaty into planning

Combine treaty allocation with domestic exemptions and §21 credits for optimal relief.

Go to Planning

Start coordinated filing

We handle cross-border filings under the treaty and §21 ErbStG from one desk.

Book assessment DE Service US Service

Also see: Coordination & §21 credits - Real estate & business - Exécuteur - FAQ

Traité