German Inheritance Tax Guide
Last updated: 3 Oct 2025
German Inheritance Tax (Erbschaftsteuer)
A practical overview of German inheritance tax (Erbschaftsteuer): personal allowances, tax classes and rates, the 10-year aggregation, special relief for the family home and for business assets, valuation basics under the BewG, a cross-border credit note, a checklist, and FAQs.
Who is taxed? (scope & 10-year rule)
- Worldwide vs. German-situs: If either the decedent or the heir is an Inländer (German resident for ErbSt purposes), Germany taxes the worldwide acquisition. Otherwise, only German-situs assets are taxed.
- 10-year aggregation (§ 14 ErbStG): Lifetime gifts to the same recipient within the last 10 years are aggregated with the inheritance; personal allowances renew every 10 years (for gifts).
- Notification/filing: Beneficiaries generally must notify the tax office; the assessment follows once facts/valuations are filed.
Personal allowances (Freibeträge)
| Relationship (examples) | Personal allowance (each) | Notes |
|---|---|---|
| Spouse / registered partner | €500,000 | Plus potential pension allowance (§ 17 ErbStG) up to €256,000 (reduced by actual survivor benefits). |
| Children (including stepchildren) | €400,000 | Grandchildren: €200,000 (if their parent is alive); parents/grandparents on death: €100,000. |
| Other relatives (Class II) & unrelated persons (Class III) | €20,000 | Household effects allowance: up to €41,000 for Class I; other movables €12,000 (Class I); reduced amounts for Class II/III. |
Allowances apply per recipient; for lifetime gifts they can be reused every 10 years.
Tax classes & rates
| Tax class | Who is in it (typical) | Rate bands (taxable acquisition after allowances) |
|---|---|---|
| Class I | Spouse/partner, children/stepchildren, grandchildren, parents/grandparents (on death) | €0–75k: 7% • to €300k: 11% • to €600k: 15% • to €6m: 19% • to €13m: 23% • to €26m: 27% • over €26m: 30% |
| Class II | Siblings, nieces/nephews, in-laws, divorced spouse, parents/grandparents (on gifts) | 15% • 20% • 25% • 30% • 35% • 40% • 43% (same brackets as above) |
| Class III | All others (e.g., unmarried partner, friends) | Up to €6m: 30% • Over €6m: 50% |
Germany uses fixed brackets: €75k, €300k, €600k, €6m, €13m, €26m, >€26m after allowances.
Real estate: family home & other rules
- Family home for spouse/partner (§ 13 Abs. 1 Nr. 4b ErbStG): Tax-free if the surviving spouse/partner acquires the decedent’s owner-occupied family home and continues to use it for at least 10 years.
- Family home for children (§ 13 Abs. 1 Nr. 4c): Tax-free up to 200 m² of living space if the child continues to occupy it for 10 years (excess area taxable proportionally).
- Let property / second homes: No special exemption; taxed after valuation and allowances. Possible payment deferral in hardship cases (§ 28 ErbStG) may be available.
Business assets relief (§§ 13a, 13b ErbStG)
Germany offers two relief regimes for qualifying business assets and certain shareholdings (e.g., stakes in partnerships or corporations meeting activity thresholds and holding tests):
Regular relief — 85%
- 85% exemption on qualifying business value.
- Retention period: typically 5 years.
- Wage-sum test (for larger payrolls) must be met over the period.
Option relief — 100%
- 100% exemption on qualifying business value (stricter entry requirements).
- Retention period: typically 7 years.
- Stricter wage-sum test and asset tests apply.
Relief can be clawed back if tests are breached (e.g., sale/cessation, payroll shortfalls). Passive assets, excessive cash, or portfolio holdings can limit eligibility.
Valuation basics (BewG)
- Real estate: Comparative or capitalized-earnings methods per the valuation code (BewG/ImmoWertV-style inputs); special rules for owner-occupied homes and rentals.
- Quoted shares: Market value (average quoted price around the valuation date).
- Non-listed shares & businesses: Vereinfachtes Ertragswertverfahren (simplified earnings method) or other recognized methods; in practice, expert reports (e.g., IDW S 1) are common for substance/earnings-based values.
- Debts & liabilities: Deductible if related to the asset acquisition; mortgages reduce real-estate taxable value.
Cross-border credit (§ 21 ErbStG)
If both Germany and a foreign country tax the same foreign-situs asset, Germany may grant a credit for foreign death duties under § 21 ErbStG—generally limited to the German tax attributable to that foreign asset. Timing, documentation (foreign assessment, proof of payment), and correct situs classification are critical. Where a bilateral inheritance tax treaty exists (e.g., with Switzerland or the USA), treaty rules override.
See our pair pages: Germany × Switzerland • Germany × United States • Germany × Ireland
Document checklist
Identity & authority
- Death certificate; will/Erbvertrag; certificate of inheritance (Erbschein) if needed
- Beneficiary ID data; marital property agreement
- Notifications to Finanzamt; power of attorney for representatives
Assets, debts & valuations
- Real-estate extracts (Grundbuch), appraisals, loan statements
- Bank/brokerage statements; security listings; business financials
- Share registers, partnership agreements; inheritance contracts
- Foreign tax assessments & payment proofs (for § 21 credit)
FAQ
How often can I use the personal allowance?
For lifetime gifts, the allowance resets every 10 years (per donor–donee pair). For inheritances, it applies once at death.
Is the family home always tax-free?
No. The exemption requires acquisition by the spouse/partner (or a child, up to 200 m²) and 10 years of continued own use; breaking conditions can trigger clawback.
Do business reliefs remove tax entirely?
They can—under the 100% option—if all tests are met (asset tests, wage-sum test, 7-year retention). Failures can lead to partial or full clawback.
What if assets are in multiple countries?
Model situs asset by asset. Use § 21 credits or applicable inheritance tax treaties. Keep synchronized valuations and proof of foreign payments.
What are the German tax classes?
Class I (close family) with rates 7–30%; Class II (extended family/in-laws) 15–43%; Class III (others) 30–50%.
Talk to us
We compute German inheritance tax, apply family-home/business relief, and model cross-border credits alongside treaty allocation. Ask us for a filing-ready pack.