Inheritance Tax
In Germany, inheritance tax is levied on an acquisition upon death and gift tax is levied on the inheritor/gift recipient in the event of a gratuitous inter vivos gift. The legal basis is the Inheritance Tax and Gift Tax Act.
Wealth Tax
In Germany, the actual wealth tax is, according to the applicable Wealth Tax Act, a tax on assets as of the reporting date, calculated from the value of the taxpayer’s net assets (gross assets less debts). The tax base includes businesses, real estate, savings, securities and life insurance, as well as luxury items and works of art. Both natural persons and legal entities are subject to the tax.
In 1995, the Federal Constitutional Court ruled that a different tax burden on real estate and other assets with wealth tax was not compatible with the principle of equality. Since then, the wealth tax has no longer been levied with effect from 1997, although the Wealth Tax Act remains in force.
Property Tax
Real estate tax is levied on real property. This includes land, including buildings, as well as agricultural and forestry operations. As a rule, it is paid by the owners. If the property is rented out, the property tax can be passed on to the tenants via the operating costs.
In 2018, the Federal Constitutional Court declared the current system of property tax valuation unconstitutional, as it treats similar properties differently and thus violates the requirement of equal treatment enshrined in the Basic Law. With the reform of the property tax, the values of all properties must be recalculated. The property tax calculated on the basis of the new values is payable from January 1, 2025.
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