GERMANY Law and Practice Contributed by: Christian von Oertzen and Philipp Windeknecht, Flick Gocke Schaumburg
Gift tax is levied on gratuitous transfers. Like inherit - ance tax, it is based on the concept of the accretion of wealth or enrichment. Only transfers that are not contingent on future events and that result in a present benefit to the transferee are taxable. While income tax employs factual criteria such as so-called economic ownership (beneficial ownership) in addition to legal criteria to identify taxable transfers, inheritance and gift tax takes a more formal approach. As a rule, a taxable transfer requires the transferee to obtain legal title to the property or at least an enforceable claim under private law. Gift tax complements inheritance tax. Therefore, gra - tuitous transfers and transfers at death by an indi- vidual to the same recipient within ten years are aggre - gated into one transfer. Likewise, the same tax rates and tax-free allowances apply to gratuitous transfers and transfers at death. There is an unlimited, extended unlimited, limited or extended limited gift or inheritance tax liability in Ger - many. The (extended) unlimited inheritance and gift tax lia - bility applies especially if the deceased/donor or the heir/legatee/donee has a residence or habitual abode in Germany or is a German citizen who left Germany for not more than five years (ten years in the case of Germany–USA). In 2022, the Federal Fiscal Court ruled that the extend - ed unlimited inheritance and gift tax liability does not violate the principle of equality, the freedom to leave the country or the free movement of capital. The limited inheritance and gift tax liability is applica - ble if a person who lives abroad has, for example, an interest in a German partnership with business assets, or holds a share of at least 10% in a German corpora - tion (alone or with other closely related persons). The extended limited inheritance and gift tax liabil - ity can be relevant for Germans who had unlimited income tax liability for at least five of the last ten years before leaving Germany.
After deducting the tax-free allowance, the tax rate applicable to the gift or inheritance is as follows. • Gifts and inheritances of up to EUR75,000 are taxed at a rate of: (a) 7% in Tax Class I; (b) 15% in Tax Class II; and (c) 30% in Tax Class III. • Gifts and inheritances between EUR75,000 and EUR300,000 are taxed at a rate of: (a) 11% in Tax Class I; (b) 20% in Tax Class II; and (c) 30% in Tax Class III. • Gifts and inheritances between EUR300,001 and EUR600,000 are taxed at a rate of: (a) 15% in Tax Class I; (b) 25% in Tax Class II; and (c) 30% in Tax Class III. • Gifts and inheritances between EUR600,001 and EUR6 million are taxed at a rate of: (a) 19% in Tax Class I; (b) 30% in Tax Class II; and (c) 30% in Tax Class III. • Gifts and inheritances between EUR6,000,001 and EUR13 million are taxed at a rate of: (a) 23% in Tax Class I; (b) 35% in Tax Class II; and (c) 50% in Tax Class III. • Gifts and inheritances between EUR13,000,001 and EUR26 million are taxed at a rate of: (a) 27% in Tax Class I; (b) 40% in Tax Class II; and (c) 50% in Tax Class III. • Any gifts and inheritances of more than EUR26 mil - lion are taxed at a rate of: (a) 30% in Tax Class I; (b) 43% in Tax Class II; and (c) 50% in Tax Class III. As soon as the respective amount is exceeded, the entire amount is subject to the relevant tax rate. If neither the donor nor the donee has a place of residence or habitual abode in Germany, the tax- free allowances may be reduced by a partial amount. Pursuant to Section 16 (2) of the IGTA, the tax-free amount is to be granted pro rata when only part of the acquisition is subject to the limited tax liability. Previ -
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