Navigating the transfer of wealth in Germany requires a clear understanding of the Erbschaftsteuer- und Schenkungsteuergesetz (ErbStG). Whether you are planning an estate or receiving a gift, the German „acquisition tax“ model focuses on the enrichment of the individual recipient rather than the estate as a whole.
1. The Basics: Framework and Flexibility
Germany utilizes a progressive tax system where the tax burden depends on two main factors: the closeness of the relationship and the value of the assets.
Tax Classes and Personal Allowances
Taxpayers are divided into three classes. The higher the class (the closer the relation), the higher the allowance and the lower the tax rate.
| Relationship | Tax Class | Personal Allowance (every 10 years) |
| Spouse / Registered Partner | I | €500,000 |
| Children / Stepchildren | I | €400,000 |
| Grandchildren | I | €200,000 |
| Parents (Inheritance) | I | €100,000 |
| Siblings, Nephews, Nieces | II | €20,000 |
| All other individuals / Strangers | III | €20,000 |
Tax Rates
The rates range from 7% to 50%. For Class I, rates scale moderately (up to 26%), whereas Class III recipients face a steep 30% starting rate for even small amounts exceeding the allowance.
2. Special Cases: Privileged Assets
German law provides significant relief for specific types of assets to ensure the continuity of families and businesses.
- The Family Home (Familienheim): Spouses and children can often inherit the primary residence tax-free, provided the deceased lived there and the heir occupies it as their primary residence for at least 10 years post-acquisition. For children, this is capped at a living space of 200 m².
- Family Companies (Betriebsvermögen): Under §§ 13a, 13b ErbStG, business assets can receive an 85% or even 100% tax exemption. This is subject to „holding periods“ (5 to 7 years) and the „wage bill rule,“ ensuring the company continues to employ staff.
3. International Comparison: Different Philosophies
USA: The Estate Tax Model
Unlike Germany’s recipient-based tax, the US Federal Estate Tax is an „Estate Tax“—it is levied on the total value of the deceased’s property before distribution. While the US has significantly higher exemptions (exceeding $13 million for individuals in 2024/2025), the tax rate can quickly hit a flat 40%.
Spain: Regional Diversity
Spain, like Germany, uses an inheritance and gift tax (Impuesto sobre Sucesiones y Donaciones). However, Spain is highly decentralized. While national rates exist, autonomous communities (like Madrid or Andalusia) often provide 99% relief for close relatives, making the effective tax burden highly dependent on the location of the assets or the heir.
4. Practical Application: Case Studies
Case 1: The Inherited Apartment
Scenario: A daughter inherits an apartment in Munich worth €650,000 from her father. She decides to move in and use it as her primary residence.
- Analysis: The first €400,000 is covered by her personal allowance. Since she moves in (and assuming it is under 200 m²), the remaining €250,000 may be entirely tax-exempt under the „Family Home“ rule.
- Risk: If she sells or rents it out within 10 years, the tax exemption is revoked retroactively.
Case 2: The Gift to a Friend
Scenario: A successful entrepreneur gifts €100,000 to a lifelong friend.
- Analysis: The friend falls into Tax Class III.
- Calculation:
- Gift: €100,000
- Allowance: -€20,000
- Taxable Amount: €80,000
- Tax Rate: 30%
- Tax Due: €24,000
- Key Takeaway: Transfers to non-relatives are heavily taxed in Germany, making early planning via smaller, staggered gifts every 10 years essential.
Disclaimer: This post provides general information and does not constitute legal or tax advice. Always consult with a qualified tax professional regarding your specific situation.