Last updated: 6 Nov 2025
Germany–US: Real Estate & Business Assets in Inheritance Tax
How to handle property and company shares in Germany–US estates: valuation (BewG vs. FMV), §§13a/13b ErbStG business reliefs, family-home rules, US-situs classification, debt allocation, documentation, and worked examples—plus where this interacts with treaty and § 21 ErbStG credits.
Who does what? Cross-border valuation alignment and §21 credit math are coordinated in the hub.
National filings are delivered by our teams:
🇩🇪 German Inheritance Tax Service ·
🇺🇸 US Estate / Inheritance Tax Service.
Contents
1) Scope & situs (DE vs. US)
- Germany taxes worldwide acquisitions if decedent or heir is German-resident; otherwise only German-situs assets (e.g., German real estate, certain business/property interests).
- US (federal) estate tax focuses on the decedent; US-situs includes US real property, certain US securities and tangibles. State-level estate/inheritance taxes may also apply.
- Treaty & §21 ErbStG: Double-taxed foreign slices can be relieved—situs allocation and domicile determination drive which country credits the other.
Related: Treaty (Germany–US) · Coordination & §21
2) Valuation: BewG vs. FMV (and reconciliations)
- Real estate (DE): statutory methods per BewG/ImmoWert-inputs (comparative/capitalized earnings). Distinguish owner-occupied vs. rented.
- Business interests (DE): simplified earnings method or expert report (e.g., IDW S 1); align with relief eligibility (see §§13a/13b).
- US (Form 706): fair market value (FMV) at death; support with appraisals and, where appropriate, discounts (lack of control/marketability).
- Reconciliation: Prepare a bridge memo from US FMV to German taxable values (per asset). Use one document set across both filings to reduce queries.
3) Family-home rules (spouse/children)
- Spouse/partner: acquisition of the owner-occupied family home can be tax-free in Germany if self-use continues for ~10 years.
- Children: tax-free up to ~200 m² if self-use continues (excess area proportionally taxable).
- Clawback risks: early sale or stopped self-use can trigger retroactive taxation—plan occupancy and fallbacks.
4) Business reliefs (§§13a/13b ErbStG)
Regular relief – 85%
- 85% exemption for qualifying business assets / shareholdings.
- Retention ~5 years; wage-sum test for larger payrolls.
- Mind passive assets and excess liquidity (administrative assets).
Option relief – 100%
- 100% exemption with stricter entry tests.
- Retention ~7 years; tighter wage-sum/asset thresholds.
- Clawback if tests fail (sale/cessation, payroll shortfalls).
Coordinate with US FMV appraisals; relief only applies to qualifying assets in the German base—track asset mixes carefully.
5) Debt & encumbrances
- Mortgages/liens reduce German real-estate taxable value when properly attributable and documented.
- Business debts must relate to the asset acquisition to be deductible; maintain loan agreements and purpose evidence.
- Usufructs/life interests (Nießbrauch): value limited rights per statutory present-value tables and deduct accordingly.
6) Short examples (worked)
| Scenario | Key points | §21 / Treaty angle |
|---|---|---|
| DE home + US portfolio | Family-home exemption in DE; FMV portfolio in US; reconcile valuations. | Germany credits US estate tax on the US portfolio slice up to German tax on that slice. |
| DE GmbH shares (qualifying) | Check §§13a/13b eligibility; monitor wage-sum/asset tests; possible 85%/100% relief. | Relief reduces German tax base; §21 applies to foreign-situs assets only—track slices separately. |
| US real estate + DE brokerage | US property at FMV; German account per German rules; allocate debts to maximize deductibility. | Use treaty/§21 to credit US tax on US-situs property in the German computation. |
7) Evidence & documentation
- Appraisals: Real estate (both jurisdictions), business valuation report (IDW S 1 or equivalent), portfolio statements at death.
- Debt files: loan agreements, security docs, payoff letters, allocation rationale.
- Relief monitoring: payroll records, asset-mix tests, retention logs for §§13a/13b.
- Cross-border pack: reconciliation memo (FMV ↔ BewG), situs memo, allocation schedules for §21.
Next steps & links
Coordinate valuations & credits
We align evidence across DE and US and compute §21 credits on foreign slices.
Helpful resources
Also see: FAQ · Trusts & foundations · US state taxes