GERMANY Law and Practice Contributed by: Christian von Oertzen and Philipp Windeknecht, Flick Gocke Schaumburg
ous pecuniary benefits accrued by the same person within ten years must also be included in the calcula - tion of the specific allowance. Germany has double tax treaties that cover inherit - ance taxes with five other countries. Furthermore, Section 21 of the German Inheritance Tax Act pro - vides for foreign estate taxes on foreign property to be credited against the German inheritance tax liability when the donor/decedent or the donee/heir has their residence or place of habitual abode in Germany or opts to be treated as being resident in Germany. 1.2 Exemptions Tax-Free Allowances Spouses, children and stepchildren, grandchildren, other descendants or (in the case of inheritance upon death) parents or grandparents, fall within Tax Class I, under which: • spouses have a gift and inheritance tax allowance of EUR500,000; • children or stepchildren have a gift and inheritance tax allowance of EUR400,000; • grandchildren have a gift and inheritance tax allow - ance of EUR200,000; and • other descendants, parents or grandparents have a gift and inheritance tax allowance of EUR100,000. Tax Class II includes parents or grandparents (in the case of a lifetime gift), siblings, nieces or nephews, step-parents, sons- or daughters-in-law, mothers- or fathers-in-law and former spouses, all of whom have an allowance of EUR20,000. Other donees, such as trusts, fall within Tax Class III and have an allowance of EUR20,000. This allowance is granted once within ten years for the same donor and testator. Tax Exemption Concerning Family Home The family home can be transferred tax-free between living spouses without any restrictions. There is no inheritance tax on a transfer of the family home between spouses, and there is an exemption for the first 200 square metres of a family home transferred on death to the decedent’s children. However, the tax
on a transfer on death can be clawed back if the prop - erty is sold or let within ten years. Transfer of Business Assets, Agricultural or Forestry Property and Capital Interests Special treatment applies to business assets, agri - cultural or forestry property, and capital interests in corporations. Two levels of relief are available for the transfer of business assets, agricultural or forestry property and capital interests, each with different conditions attached. Relief of 85% This is subject to the conditions that: • the donee retains the property for five years; and • the total sum of salaries paid during that period is at least 400% of the annual average for the five years before the gift or inheritance (ie, previous employment levels must be largely maintained). If there are more than five but fewer than ten employ - ees, the total sum of salaries must be 250% of the annual average for the five years before; if there are more than ten but fewer than 15 employees, it must be 300%. Relief of 100% This is subject to the more stringent conditions that: • the donee retains the property for seven years; • the total sum of salaries paid during that period is at least 700% of the annual average for the seven years before the gift or inheritance (500% if there are more than five but fewer than ten employees, and 565% if there are more than ten but fewer than 15 employees); and • no more than 20% of the value is attributable to assets under administration. Relief depending on value This relief cannot be claimed independently of the value of the acquired business assets. A particularly complex tax system applies if the value of the acquired business assets exceeds EUR26 million (all acquired business assets of the deceased/donor within a ten- year period have to be taken into account). According to the “ablation model”, the relief is reduced by 1%
175 CHAMBERS.COM
Powered by FlippingBook