German Inheritance Tax Guide
German Inheritance Tax Guide — Overview
German inheritance tax (Erbschaftsteuer) — essentials & map to deep-dives
This page is the overview hub for German inheritance tax. It explains the core rules briefly and links to deep-dives (business assets, real estate), country cross-border guides, practical cases, and the calculator.
Core concepts (quick view)
- Who is taxed? Germany taxes the beneficiary’s acquisition, not the estate.
- Connectors: residence of decedent or heir, or German-situs assets (e.g., German real estate).
- Classes & allowances: spouse €500k; child €400k; grandchild €200k; others €20k.
- Rates: progressive by class (approx. 7–50% after allowances).
- Reliefs: family-home exemption; business-asset relief (85%/100%) with tests & clawbacks.
- Filing: notify and file with the competent tax office; mind cross-border credits/treaties.
Core modules
- German Inheritance Tax — full guide
- Business assets — relief, tests, clawbacks
- Real estate — valuation, family-home, debts
- Cases & court rulings (BFH selection)
- Foreign citizens — §21 ErbStG credit
- Germany × USA — treaty & practice
- Calculator — estimate tax for your case
Country cross-border guides
- Germany–USA: inheritance/estate & gift treaty
- Germany–Switzerland: inheritance treaty & cantonal rules
- Germany–Japan: coordination & credits
- Germany–UK: domicile & IHT interplay
- Germany–Ireland: CAT interaction & relief
Quick FAQ
How to avoid double tax? Treaties and §21 ErbStG credits; careful documentation and timing.
Business & real estate? Significant reliefs exist, but with strict entry conditions and clawback risks.
We prepare cross-border German inheritance/gift returns, treaty models, and credit-ready evidence.
Related reading
Frequently asked questions about German Inheritance Tax:
ℹ️ Click a question to reveal the answer:
What is German inheritance tax, and who is liable?
German inheritance tax (Erbschaftsteuer) is levied on the acquisition on death. In principle the beneficiary/heir is taxed (not the estate as a separate entity). Liability and scope depend on residence, nationality rules, and the asset’s German nexus.
When does unlimited vs. limited German inheritance tax liability apply?
Unlimited liability (taxation of worldwide assets) generally applies if either the decedent or the beneficiary was resident in Germany at the relevant time. Limited liability covers only German-situs assets (e.g., German real estate) where both are non-resident. German citizens who recently emigrated may still be treated as unlimitedly liable for up to five years (in some cases ten).
Which assets are taxed if there is a cross-border situation?
Under limited liability, German tax focuses on assets with a German situs (e.g., real estate in Germany, certain business assets). Under unlimited liability, the heir’s taxable base typically includes worldwide assets, subject to double tax relief and treaty rules where available.
What tax classes and rates apply in Germany?
Germany uses three tax classes (I–III) based on the heir’s relationship to the decedent. Progressive rates generally range from 7% to 50% depending on class and the size of the taxable acquisition.
What personal exemptions (allowances) are available (§16 ErbStG)?
Key allowances include: spouse/registered partner €500,000; children €400,000; grandchildren €200,000 (or €400,000 if their parent is predeceased); parents/grandparents (on death) €100,000; others €20,000. These are applied per recipient.
What is the additional “maintenance” allowance for the spouse/children (§17 ErbStG)?
In addition to §16, a maintenance allowance under §17 may apply: up to €256,000 for a surviving spouse (children receive age-based amounts). It is reduced by certain survivor’s pensions and similar benefits.
Is the family home exempt from inheritance tax in Germany?
A principal residence acquired by the spouse (and, under conditions, by children) can be tax-exempt if it is used as the beneficiary’s own home without interruption—typically for 10 years. Otherwise, the exemption can be clawed back.
How is business property treated (85% / 100% relief)?
Qualifying business assets may benefit from 85% (regular relief) or 100% (optional relief) exemption, provided continuation, wage-sum, and administrative assets tests are satisfied. The rules are technical and should be modeled carefully.
How are German real estate values determined for inheritance tax purposes?
Real estate is valued under statutory valuation methods (income, comparable, or cost approaches) intended to approximate market value. Method selection depends on property type and available data; since recent legal changes, values may trend higher in certain situations.
Which tax office is responsible, and what deadlines apply to the return?
The competent tax office depends on the decedent’s last residence or—under limited liability—the asset location. The inheritance tax return is typically due within three months of being requested by the authorities (extensions possible).
How does the U.S.–Germany Estate & Gift Tax Treaty affect my case?
The bilateral treaty coordinates taxing rights, definitions of situs property, and mechanisms for tax credit or exemption. It can significantly reduce double taxation for cross-border estates and lifetime gifts—but careful allocation and documentation are essential.
What planning tools exist (lifetime gifts, 10-year cycles, unmarried partners)?
Personal allowances refresh every 10 years for lifetime gifts, enabling staged transfers. Unmarried partners have only a €20,000 allowance and the less favorable class III rates—planning is key (e.g., marriage, life insurance, or structures that align with family and residence goals).
Are charitable bequests and foundations tax-efficient under German law?
Bequests to recognized charities are typically inheritance-tax exempt. Dedicated foundations (including family-linked or mixed models) can anchor legacy wishes and provide long-term tax and governance advantages. Proper setup and recognition are crucial.
