The article provides a short introduction to the Taxation of estates under the German Inheritance and Gift Tax Act without taking into consideration special rules under Double Taxation Agreements. Germany does not levy an estate tax Nachlasssteuer but an inheritance tax Erbschaftsteuer. In contrast to an estate tax, an inheritance tax does not attach to the estate itself but instead is imposed on the acquisition Erwerb of the beneficiary.
Accordingly, the beneficiary must pay the German inheritance taxes on all transfers received. Germany has a unified inheritance and gift tax systems: Gratuitous transfers upon death or inter vivos , in particular a gift Schenkung between the same persons within 10 years are aggregated and the tax is re- calculated based on the aggregated taxable acquisition. Example: A makes a lifetime gift to his sole child in and dies in leaving his estate to his child, the value of both transfers is aggregated in order to calculate the tax.
Example: If A had made the gift in , he could have used the tax-free exemption twice and the progressive tax rate may be lower. German inheritance tax is imposed on any transfer of property at death. For example, tax is imposed on the following transfers:. Payments from German or foreign government pension schemes are excluded from taxation in Germany. Company based pension plans or tax-qualified annuities are generally subject to taxation under the German Inheritance Tax Act.
However, the German Federal Fiscal Court Bundesfinanzhof held that certain payments from tax-qualified company pension plans or annuities are exempt from German inheritance tax. Payments from foreign pension plans are tax-exempt, if the foreign pension plan resembles a German tax-qualified pension plan or annuity. Nevertheless, it should be noted that German pension plans are somewhat unique, and foreign plans often do not resemble German plans.
In many jurisdictions the spouses acquire joint property during the marriage. Under the German laws governing matrimonial property if applicable , there is no spousal community property unless the spouses agree to such an arrangement in a contractual agreement antenuptial agreement, postnuptial agreement.
