GERMANY Trends and Developments Contributed by: Tanja Schienke-Ohletz, Flick Gocke Schaumburg
Co-ordination of company law, inheritance law and tax law The greatest challenge in international succession planning often lies in co-ordinating different areas of law. A company’s corporate law regulations must be aligned with inheritance law requirements and tax requirements. In many cases, the articles of association of German family businesses contain specific succession claus- es, such as entry rights for certain family members or restrictions on the transfer of shares. These provisions must be compatible with the inheritance law regula- tions of the countries involved. In addition, tax consequences both at home and abroad must be taken into account. In international constellations, it is generally not sufficient to consider individual legal systems in isolation. Conclusion The international dimension of German succession planning is becoming increasingly important. Cross- border asset structures, internationally active com- panies and mobile entrepreneurial families mean that succession arrangements often affect several legal systems at the same time. Particularly relevant here are questions of international inheritance law, compulsory portion regulations and international inheritance tax law. The risk of double taxation and differing legal frameworks can have a significant impact on the structure of a succession. It is therefore essential for foreign advisers to have a thorough understanding of German regulations and their international integration. Only through a co-ordi- nated consideration of company law, inheritance law and tax law can a long-term, stable and tax-efficient succession structure be developed.
Tax Act. The tax office allowed the Spanish tax to be deducted as an estate liability, but not to be credited against the German tax. There is no double taxation agreement. The ECJ ruled that EU law does not pro- vide for any obligation to credit foreign inheritance tax and that double taxation results from the paral- lel exercise of national taxation powers. Such cases should therefore be identified at an early stage in order to avoid double taxation through asset restructuring. Cross-border business succession The international dimension of succession planning affects not only the private assets of entrepreneurs, but also the structure of companies themselves. Many German family businesses operate internationally and have subsidiaries in several countries. Additional tax and legal issues may arise when trans- ferring such corporate structures. These include, for example: • valuation of international shareholdings; • tax treatment of holding structures; • exit taxation when changing residence; and • different succession regulations under company law; This provision can have a significant impact on inter- national succession planning, especially if entrepre- neurs wish to relocate their residence as part of asset structuring. Of particular relevance in this context is what is known as exit taxation. If a shareholder with significant hold- ings in a German corporation moves his or her resi- dence abroad, a notional capital gains tax may be triggered. The aim of this regulation is to prevent the tax-free transfer of hidden reserves abroad.
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