Library of Congress

Law Library of Congress

The Library of Congress > Law Library > News & Events > Global Legal Monitor

Germany: Inheritance Tax Reform

(Mar. 25, 2009) As of January 1, 2009, a reform of inheritance tax legislation in Germany exempts family homes and business enterprises from taxation under certain circumstances (Gesetz zur Reform des Erbschaftsteuer- und Schenkungsteuergesetz, Dec. 31, 2008, BUNDESGESETZBLATT [BGBl.] I at 3018, ยง 13, available at, while increasing the inheritance tax on real property that does not qualify for these exemptions (Bewertungsgesetz, Dec. 31, 2008, BGBl. I at 3018, available at Until 2006, German real property was generally subject to the inheritance tax, yet very low assessments of the value of real estate lowered the tax burden significantly. In 2006, the Federal Constitutional Court vitiated that regime as being unconstitutional (Bundesverfassungsgericht, Nov. 7, 2006, Docket No. 1 BvL 10/06, available at

The new, 2009 legislation taxes real estate at market values, but exempts the heir of an owner-occupied family dwelling from inheritance tax if the decedent was his spouse, parent, or grandparent. The exemption applies only if the heir lives in the house for ten years, and, for children and grandchildren, only 200 square meters (2,150 square feet) of a single home or condominium are exempted.

The exemption for the heir of a business attempts to preserve domestic business or agricultural enterprises and domestic employment. If, over a seven-year period, the heir pays out wages amounting to 650 percent of the annual payroll at time of death, 85 percent of the inheritance tax is waived. If, over a ten-year period, the heir pays out 1,000 percent of the annual payroll at time of death, the entire inheritance tax is waived. These exemptions, however, apply only if the financial assets of a business do not exceed certain percentages. (A. Richter et al., Reform der Erbschaftsteuer zum 1. 1. 2009, DER BETRIEB Heft 6, Beilage 2 (2009).)