Federal State | Current tax rate (January 2016) | Entry into force
(change valid from) | Reference | Current change plans
Baden-Württemberg | 5.0% | 5.11.2011 | GBl Baden-Württ. 2011, 493 | No
Bavaria | 3.5 % | No
Berlin | 6.0% | 1.1.2014 | GVBl Berlin 2013, 583 | No
Brandenburg | 6.5% | 1.7.2015 | GVBl Brandenburg I 2015 No. 16 | No
Bremen | 5.0% | 1.1.2014 | GVBl Bremen 2013, 559 | No
Hamburg | 4.5% | 1.1.2009 | GVBl Hamburg 2008, 433 | No
Hessen | 6.0% | 1.8.2014 | GVOBl Hessen 2014, 179 | No
Mecklenburg-Vorpommern | 5.0 % | 30.6.2012 | GVOBl M-V 2012, 208, 209 | No
Lower Saxony | 5.0 % | 1.1.2014 | GVBl Niedersachs. 2013, 310 | No
North Rhine-Westphalia | 6.5% | 1.1.2015 | GV. North Rhine-Westf. 2014, 954 | No
Rhineland-Palatinate | 5.0 % | 1.3.2012 | GVBl RP 2012, 41 | No
Saarland | 6,5 % | 1.1.2015 | OJ Saarland I 2014, 447 | No
Saxony | 3.5% | No
Saxony-Anhalt | 5.0% | 1.3.2012 | GVBl Saxony-Anhalt 2012, 52 | No
Schleswig-Holstein | 6.5% | 1.1.2014 | GVBl Schleswig-Holstein 2013, 494 | No
Thuringia | 6.5% | 7.4.2011 | GVBl Thuringia 2015, 238 | No
Acquisition | Tax Class
Spouse, life partner | I
Children, Stepchildren | I
Grandson | I
Parents, grandparents in acquisition by death | I
Parents, grandparents in gift | II
Siblings | II
Nieces, Nephews | II
Stepparents | II
Children-in-law | II
In-laws | II
divorced spouse, former life partner | II
all other acquirers | III
Acquiring person | allowance
spouse | 500.000 EUR
Registered life partners | 500,000 EUR
Children/stepchildren and children of deceased children | 400,000 EUR
other grandchildren | 200.000 EUR
other acquirers in tax class I; great-grandchildren, parents and grandparents on inheritance | 100.000 EUR
Acquisition in tax class II | 20.000 EUR
Acquisition in tax class III | 20.000 EUR
Limited taxpayers | 2,000 EUR
Value of the taxable acquisition (§ 10) up to and including ... Euro | percentage in the tax bracket
I | II | III
75 000 | 7 | 15 | 30
300 000 | 11 | 20 | 30
600 000 | 15 | 25 | 30
6 000 000 | 19 | 30 | 30
13 000 000 | 23 | 35 | 50
26,000,000 | 27 | 40 | 50
over 26,000,000 | 30 | 43 | 50
Value limit according to § 19 paragraph 1 ErbStG | Hardship compensation according to § 19 paragraph 3 ErbStG if the last previous value limit is exceeded up to ... EUR in tax class
EUR | I | II | III
75 000 | – | – | –
300 000 | 82 600 | 87 400 | –
–
–
10 799 900
–
–
600 000 | 334 200 | 359 900
6,000,000 | 677 400 | 749 900
13 000 000 | 6 888 800 | 6 749 900
26 000 000 | 15 260 800 | 14 857 100
over 26 000 000 | 29 899 900 | 28 437 400
M gives the J 264.800 EUR | M gives the J 190.899 EUR (that is, what J has net after tax payment) and takes over the tax.
M is control class III
§ 15 (1) ErbStG | 1. Calculation step
(tax on acquisition) | 2nd calculation step
(acquisition + tax results in “total donation”) | 3rd calculation step
(tax on total donation)
Enrichment
§ 10 (1) ErbStG | 264.099 EUR | 190.899 EUR | 190.899 EUR +
EUR 51.240
= 242.139 EUR | 242.139 EUR
./. allowance
§ 16 ErbStG | 20.000 EUR | 20.000 EUR | 20.000 EUR
Rounded off
§ 10 (1) S. 6
ErbStG | 244,000 EUR | 170,800 EUR | 222,100 EUR
Tax rate 30 %
§ 19 ErbStG | 73,200 EUR | 51.240 EUR | 66,630 EUR
Net at J | 190.899 EUR
‘Load’ M: | 264.099 EUR | 190.899 EUR + 66.630 EUR
= 257,529 EUR
If M takes over the tax, he has to spend EUR 257,529 in order for J to receive net EUR 190,899; If J pays the tax, M has to raise EUR 264.099 so that J also receives (only) EUR 190.899 net.
justification
Acquired assets | €1,000,000.00
./. | personal allowance | § 16 (1) No. 1 ErbStG | 500.000,00 €
./. | Pension allowance | § 17 (1) ErbStG | 256.000,00 €
= | Taxable acquisition | § 10 (1) ErbStG | 244,000,00 €
./. | Inheritance tax (11%) | § 19 (1) ErbStG | 26.840,00 €
= | Remaining assets | 973.160,00 €
+ | Assets B | 1,000,000,00 €
= | Total assets | 1,973.160,00 €
justification
Acquired assets | 1.973.160.00 € / 2 = | 986.580.00 €
./. | personal allowance | § 16 (1) No. 2 ErbStG | 400.000,00 €
= | Taxable acquisition | § 10 (1) ErbStG | 586.580,00 €
rounded to full hundred | 586,500,00 €
./. | Inheritance tax (15%) | 87.975.00 €
= | Remaining assets 1 child | 898.605.00 €
= | Resvermörör 2 Kinder | 898.605.00 € x 2 = | 1.797.210.00 €
justification
Acquired assets | 1.200.000.00 € / 2 = | 600.000.00 €
./. | Personal allowance | § 16 (1) No. 2 ErbStG | 400.000,00 €
= | Taxable acquisition | § 10 (1) ErbStG | 200.000,00 €
./. | Inheritance tax (11%) | § 19 (1) ErbStG | 22.000,00 €
= | Remaining assets 1 child | 578.000,00 €
= | Remaining assets 2 children | 578.000.00 € x 2 = | 1.156.000.00 €
+ | assets 1st succession | 800.000,00 €
= | Total assets | 1,956.000,00 €
justification
acquired assets | 800.000,00 €
./. | Free amount § 13 d ErbStG | 10% for V+V objects | 80.000,00 €
= | Purchase of land | 720.000,00 €
Annual value | €40,000.00
Restriction Annual Value | 800,000.00 € / 18.6 = | 43.010.75 €
NPV of usufruct | 40.000.00 € x 14.863 = | 594,520 €
./. | reduction of estate verb. | 594.520,00 € – 10% = | 59.452,00 €
./. | Liability of the estate | 535.068.00 €
= | Value of the grant | 184.932,00 €
./. | Child allowance | § 16 (1) No. 2 ErbStG | 400.000,00 € | 184.932,00 €
= | Taxable acquisition | 0.00 €
ErbSt | 0,00 €
justification
Annual value | €40,000.00
Limitation Annual Value | 800,000.00 € / 18.6 = | 43.010.75 €
NPV of usufruct | €40,000.00 x 13.191 = | €527.640.00
./. | Decrease in usufruct | 527.640.00 € – 10% = | 52.764.00 €
= | Value of usufruct | 474.876.00 €
+ | Pre-purchase | 184.932,00 €
= | Enrichment | 659.808.00 €
./. | Child allowance | § 16 (1) No. 2 ErbStG | 400.000,00 €
= | Taxable acquisition | 259.808,00 €
rounded to full hundred | 259,800,00 €
ErbSt (11%) | § 19 (1) ErbStG | 28.578,00 €
justification
acquired assets | 1.800.000,00 €
./. | Free amount § 13 d ErbStG | 10% for V+V objects | 180.000,00 €
= | Purchase of land | 1.620.000,00 €
Annual value | 50.000,00 €
Restriction Annual Value | 900,000.00 € / 18.6 = | 48.387.10 €
NPV of usufruct | 48387.10 € x 17.609 = | 852.048.39 €
./. | reduction of estate verb. | 852,048.39 € – 10% = | 852.204.84 €
./. | Estate liability | 766.843,55 €
./. | Child allowance | § 16 (1) No. 2 ErbStG | 400.000,00 €
= | Taxable acquisition | 453.156,45 €
rounded to full € 100 | § 10 (1) S. 6 ErbStG | 433.100,00 €
ErbSt (15%) | § 19 (1) ErbStG | 64.965.00 €
justification
Annual value of usufruit | 50.000,00 €
Restriction Annual Value | 900,000.00 € / 18.6 = | 48.387.10 €
NPV of usufruit | 48.387.10 € x 17.609 = | 852.048.39 €
./. | Child allowance | § 16 (1) No. 2 ErbStG | 400.000,00 €
= | Taxable acquisition | 452,048,39 €
rounded to full € 100 | § 10 (1) S. 6 ErbStG | 452.000,00 €
ErbSt (15%) | § 19 (1) ErbStG | 67,800,00 €
justification
annual value of usufruit | 50.000,00 €
Restriction Annual Value | 900,000.00 € / 18.6 = | 48.387.10 €
net present value usufruct | 48.387.10 € x 17.609 = | 852.048.39 €
./. | Child allowance | § 16 (1) No. 2 ErbStG | 400.000,00 €
= | Taxable acquisition | 452.048.39 €
rounded to full €100 | 452,000,00 €
= | Tax rate 15 % | § 19 (1) ErbStG
Annual tax | 15% x 50.000,00 € = | 7,500 €
justification
acquired assets | €1,500,000.00
./. | Free amount § 13 d ErbStG | 10% for V+V objects | 150.000,00 €
= | Purchase of land | 1.350.000,00 €
./. | Child allowance | § 16 (1) No. 2 ErbStG | 400.000,00 €
= | Taxable acquisition | 950.000,00 €
rounded to full € 100 | § 10 (1) S. 6 ErbStG | 950.000,00 €
ErbSt (19%) | § 19 (1) ErbStG | 180.500,00 €
justification
acquired assets | € 1,500,000.00
./. | Free amount § 13 d ErbStG | 10% for V+V objects | 150.000,00 €
= | Purchase of land | 1.350.000,00 €
annual value | 60.000,00 €
Limitation annual value | 1,500,000.00 € / 18.6 = | 80.645.16 €
NPV of usufruct | 48387.10 € x 12.703 = | 762.180 €
./. | reduction of estate verb. | 852,048,39 € – 10% = | 76,218,00 €
./. | Liability of the estate | 685.962,00 €
./. | Child allowance | § 16 (1) No. 2 ErbStG | 400.000,00 €
= | Taxable acquisition | 264.038.00 €
rounded to full € 100 | § 10 (1) S. 6 ErbStG | 264,000,00 €
ErbSt (11%) | § 19 (1) ErbStG | 29.040,00 €
Inheritance is an issue for many people affected that they understandably only associate secondarily with inheritance tax. Also associated with this is the gift, which is subject to the gift tax. Both processes are taxed according to the Inheritance Tax Act (ErbStG) and burden those who should actually be favored in a gift or inheritance. A large number of factors influence the respective transfer of assets, such as the degree of kinship, the amount of assets and even more the extent of the tax liability of the persons involved. Of course, the transfer of real estate is also an often to be assessed by the tax authorities. It is also possible to link early estate regulation and retirement provision, whereby both parties can benefit from good planning – both personally and financially.
Wealth plays a crucial role in life. It serves to secure livelihoods and usually builds up during professional activity. As a result, the amount of wealth increases with age. But what happens to your own wealth in old age? Are your own care and that of your partner secured in old age? What are the options for pensions? In addition to pensions, inheritance regulation also plays an important role. Does the Berlin Testament offer a suitable possibility or should one consider another possibility? The property acquired during his lifetime leads to serious succession disputes due to a lack of succession regulation, e.g. by will or contract of succession. These can often lead to disputes among the heirs. Who receives what share of assets? What happens to land and buildings? Does one of the heirs take over the property or building and pay the other heirs? In addition, no optimal design is possible within the framework of the inheritance tax exemption. The different inheritance tax exemption amounts and estate liabilities are used suboptimally. But what solutions are given to the wealthy and later decedent to transfer the property without corresponding tax deductions? All these questions and difficulties can be avoided by the testator by early planning and regulated transfer to the next generation.
The aim of this article is to show various ways to transfer assets and answer the questions described above. In this context, private property means the transfer of money, capital or private property to the next generation. The focus of the article is on the transfer of property. A transfer may take the form of a transfer, either partly or free of charge. This contribution does not cover the transfer of assets.
In the first part of this work, the author explains the inheritance tax and income tax bases and consequences of a fully paid or free transfer. In doing so, the author examines both the transmission among the living and that of death. When transferring property upon death, the author examines the legal succession and disposition of property upon death. In connection with inheritance and especially the succession of the deceased, the author also deals with civil law issues.
The second part of this work focuses on presenting ways to circumvent the civil and tax implications and problems of the first part. In this regard, reducing the inheritance tax burden is an essential cornerstone of the second part. Partially paid transfers in the form of consideration play an important role here.
A transfer of private property is the transfer of taxable private property in the form of movable and immovable property, e.g. land, jewelry and shares, to the next or next generation. [1] A distinction is made between a full-payment, part-payment and a free transfer. These forms of transfer have different tax implications for the transferor and the acquirer of the asset.
If the deceased does not make his own inheritance regulation, the statutory succession applies, according to §§ 1924 ff BGB. The inheritance is transferred to one or more heirs. If several persons are entitled to inherit, there are, on the basis of the statutory succession, in addition to the tax and civil law effects for the heirs. Equal heirs, as universal successors, form a community of heirs who share the inheritance. These communities of heirs remain until the dispute over the inheritance. [] 2]
2.1 Tax Effects of a Full-time Transfer
In the case of full-payment transfer, the later testator sells parts of his private property to the later heirs. Full-time transfers are legal transactions as between third parties. It follows that the value of the consideration corresponds to the common value of the object of sale. [3]
2.1.1. Income tax implications for the transferor
The transfer of private assets for remuneration is equivalent to a sale. Such a sale of private assets is subject to income tax pursuant to § 22 No. 2 of the V. m. § 23 (1) EStG. The law distinguishes private assets into real estate, according to § 23 (1) S. 1 No. 1 EStG, and other assets, according to § 23 (1) S. 1 No. 2 EStG. The real estate includes land, buildings and parts of buildings or apartments (§ 23 (1) S. 1 No. 1 EStG).[4] For taxation purposes, land, buildings and parts of buildings shall not be recognised if there is a period of more than 10 years between their acquisition and disposal. [5] Real estate that the taxpayer uses for his own residential purposes in the year of sale and in the two preceding years remains unaffected by the ten-year period and is also not subject to income tax. This property also includes land that the taxpayer has built up with a building and then uses himself. [6]
The other private assets are subject to, according to § 23 (1) S. 1 No. 2 EStG, the income tax, if between the acquisition and the sale is less than one year. [7] Excluded from this regulation are articles of daily use. These items include furniture, carpets and electrical appliances. [] 8]
If there is a tax liability, the capital gain, according to § 23 (3) EStG, is measured according to the capital price minus the acquisition costs and advertising costs. The AfA, according to § 23 (3) S. 4 EStG, reduces the AK.[9]
The entire operation remains tax-free if the capital gain per year does not exceed 600 € (§23(3) p. 5 EStG)[10]
For the acquirer, the AK, i.e. the sale price plus the non-acquisition costs from the acquisition of assets, constitutes the basis for assessment for the AfA. [11]
2.1.2. Real estate transfer tax implications for the acquirer
The transfer of land for payment is equivalent to a purchase of land. A property purchase is a two-sided legal transaction between seller and buyer. This legal transaction, based on a notarial purchase contract and registration in the land register, is an obligation transaction between the transferor and the transferee. [12] The seller undertakes to procure ownership of the property to the buyer and the buyer must pay the contractually agreed purchase price to the seller. According to § 1 (1) no. 1 GrEStG, such an obligation transaction is subject to the real estate transfer tax. [13] Furthermore, according to § 2 (1) GrEStG, the sales of buildings, parts of buildings and condominiums are also subject to real estate transfer tax if they are firmly linked to the land. [] 14]
Real estate acquisition tax exempt are real estate sales to spouses and registered life partners of the seller, according to § 3 no. 4 GrEStG, to former spouses and life partners, according to § 3 no. 5 and no. 5a GrEStG, and relatives in straight line, according to § 3 no. 6 GrEStG. [16] Beneficiaries include step, adoptive and in-law children, as well as step, adoptive and in-law parents. As a result, full-time transfers to the next generation are tax-free for the aforementioned persons, as acquirers. [17]
For all non-beneficiary persons, e.g. siblings, the real estate sale is subject to real estate transfer tax. [] 18)
Basis of assessment of the real estate transfer tax is the value of the consideration, according to § 8 (1) GrEStG, multiplied by the tax rate, according to § 11 (1) GrEStG. The value of the consideration is the land purchase price negotiated between the two parties (§ 9 (1) No. 1 GrEStG). If the buyer provides further services or the seller reserves uses related to the property, the value of the consideration is increased.[19] The tax rate is currently 3.5% in Germany. However, the federal states can set their own real estate transfer tax rate since 01.09.2006. For this reason, the federal tax rate only applies if a federal state does not have its own tax rate.[20] The current tax rates of the federal states are shown in the following table:
Fig. 1: Real estate transfer tax rates of the federal states, Source: Weilbach, D., § 11, Rz. 3.
The taxpayers of the real estate transfer tax are, according to § 13 no. 1 GrEStG, the buyer and seller of the real estate, as jointly liable.[21] The real estate transfer tax is normally borne by the property purchaser, unless otherwise specified in the purchase contract (§ 448 (2) BGB).[22]
2.2. Inheritance tax effects of a free transfer
A free transfer of private assets within the framework of the anticipated succession is a donation, according to § 1 (1) No. 2 ErbStG. This is a free grant from the donor to the recipient according to § 7 (1) No. 1 ErbStG. This grant is subject to inheritance tax if it is subject to unlimited or limited inheritance tax at the time of donation. [] 24]
2.2.1. Personal tax liability
The free transfer of private property is, according to § 2 (1) no. 1 ErbStG, subject to unlimited inheritance tax if the donor or the gifted person, at the time of the donation, have their domicile, according to § 8 AO, or the habitual residence, according to § 9 AO, in Germany. [] 25]
Residence, within the meaning of § 8 AO, includes living quarters over which the taxpayer has the key power and can therefore use it at any time for his own purposes. [26] Furthermore, he must regularly use this living space himself.[27] The legislator does not provide for a minimum number of days of stay. [28] In order for the taxable person to use the dwelling at any time, he may not rent or abandon the dwelling. [] 29]
The habitual residence, according to § 9 AO, is justified if the stay of the taxpayer in the country lasts at least 6 months continuously. [30] A short-term interruption, such as annual leave, home leave or treatment, shall not terminate the habitual residence if the will to continue the stay in the country remains during this short-term interruption. [] 31]
Furthermore, a gift is subject to the extended unlimited inheritance tax if neither the donor nor the gifted person have their domicile or habitual residence in the country but have elapsed less than five years between the date of departure and the date of the gift. [32] If the donor or the gifted person has transferred his residence or habitual residence to a country which has no double taxation agreement with Germany i. S. who has inheritance tax, this regulation can lead to double taxation (§ 2 (1) no. 1 b) ErbStG).[33] Germany has currently concluded a double taxation agreement with Denmark, France, Greece, Sweden, Switzerland and the United States in the sense of inheritance tax.[34] The unrestricted obligation to pay inheritance tax means that the worldwide accruals are subject to German inheritance tax. [] 35
If neither the donor nor the gifted person is liable for unlimited inheritance tax on the transfer, the acquisition of domestic assets, the limited inheritance tax liability, is subject to § 2 (1) No. 3 ErbStG. The domestic assets include assets, according to § 121 BewG.[36]
Furthermore, the extended limited inheritance tax liability must be observed (§ 4 AStG). Extended limited tax liability occurs when an unlimited taxpayer moves to a low-tax country and does not transfer foreign assets within ten years of leaving, in accordance with § 34 d EStG, and has essential interests in Germany. However, the extended limited tax liability only applies from the sixth to the tenth year, because in the first five years the extended unlimited tax liability applies. [38] Low-tax countries include countries with a taxable income of €77,000 which have an income tax rate of less than 23.78 %.[39] Significant domestic interests exist if the taxpayer exceeds the income limits, according to § 2 (3) AStG. [40]
Restricted taxpayers in the context of inheritance tax, however, have the possibility to opt for unlimited tax liability according to § 2 (3) ErbStG and thus to make use of the more favorable tax classes, according to § 15 ErbStG, and higher personal allowances, according to § 16 ErbStG. [41] When opting for unlimited inheritance tax liability, it should be noted that all acquisitions in a period of ten years, before and after the optimization date, must be subject to unlimited tax liability. According to § 14 ErbStG, these acquisitions are aggregated. It follows that previous acquisitions that were not previously subject to German inheritance tax are now also subject to German inheritance tax. This could lead to the disadvantage of double taxation. For the taxpayer there is under certain conditions the possibility of offsetting the foreign tax, according to § 21 ErbStG.[42]
Conversely, it can be stated that the gift is neither subject to unlimited nor limited tax liability, it is not subject to inheritance tax. [43]
2.2.2.Date of donation in case of donation
The time of donation is the time of execution among living people (§ 9 (1) No. 2 ErbStG).[44] This point in time determines the tax liability of the acquirer, i.e. the unlimited, extended unlimited, limited or missing tax liability. [] 45
In the case of the granting of land, this grant date is reached when the disposition and the registration permit between the donor and the recipient is available. On the basis of discontinuation and registration approval, the will of the donor is satisfied, because the recipient is independently able to make the registration in the land register through these declarations. [] 46]
2.2.3. Taxable acquisition in the case of a gift
The taxable acquisition in accordance with the inheritance tax law is the entire amount of property transferred, less the tax-exempt property, according to §§ 5, 13, 13a, 13d, 16, 17 and 18 ErbStG. Furthermore, estate liabilities and consideration imposed on the acquirer reduce the taxable acquisition.[47] In the case of a donation, these are, for example, acquisition costs, such as land register registrations, notary costs, tax consultant costs and legal fees.[48] Consideration imposed on the acquirer, such as permanent burdens, usage and toleration obligations, also reduces the taxable acquisition. These permanent burdens and obligations include, for example: housing rights and usufruct rights, equality payments, pension benefits or assumption of old liabilities.[49] According to § 10 (6) S. 3 ErbStG, only those reductions in employment which are in connection with assets subject to gift tax are deductible. Liabilities relating to tax-exempt assets are not deductible.[50] In the case of limited tax liability, only debts and charges relating to goods subject to German tax are deductible. ‘ [] 51]
2.2.4. Valuation date for a donation
The valuation date is the date of the donation (§ 11 in the V. m. § 9 ErbStG). On the basis of this date principle, the total value of the transferred assets is determined on this valuation date.[52] It follows that subsequent changes in value have no effect on the valuation of the taxable acquisition. [53] The valuation date also serves as a basis for determining the personal relationships of the donor and the gifted person to each other and therefore also serves as a basis for classifying tax-free amounts and classes. [] 54]
2.2.5. Valuation of assets in a gift
The valuation of the transferred assets is determined in accordance with § 12 ErbStG i. In the transfer of private assets § 12 (3) ErbStG for real estate and § 12 (6) ErbStG for other assets is decisive. [] 56
In the case of real estate, according to § 19 (1) BewG, i.e. enterprises of agriculture and forestry, private land and industrial land, the value is determined according to § 12 (3) ErbStG i. V. m. § 151 (1) No. 1 and § 157 (3) BewG. The corresponding real estate value is determined by the management tax office, in whose district the property is located (152 BewG). The established property value of the management tax office serves as a basis for the inheritance tax.[58] The valuation of real estate differs between undeveloped and built-up land. In the case of undeveloped land, the value is determined, according to § 179 BewG, from the current land reference value, according to § 179 S. 3 BewG i. V. m. § 196 Building Code, and the transferred area. [] 59]
The valuation of built-up land is based on the type of land (§ 181 BewG). The legislator divides from this into three different procedures. These procedures are: the comparative value procedure, § 182 (2) in the V. m § 183 BewG, the income value procedure, § 182 (3) in the V. m §§ 184-188 BewG, and the material value procedure, § 182 (4) in the V. m §§ 189-191 BewG.[60] The comparative valuation method serves as a basis for valuation of residential, partial and one- and two-family houses. In the case of rented residential properties, commercial properties and mixed-use properties, the income-value method shall apply. The other values of the land are determined by the property value method. [] 61]
If the taxpayer can prove a corresponding lower partial value, according to § 199 Building Code, at the valuation date, this value is to be used instead of the determined value, according to § 182 BewG. [] 62]
2.2.6. Tax classes for gift and inheritance
The legislature divides, according to § 15 ErbStG, heirs or gifted persons into three tax classes. The three tax classes differ according to the personal conditions between Schenker and Gifted. [63] They are divided as follows:
Fig. 2: Inheritance tax classes § 15 ErbStG, Source: Own presentation
Of the family relations, the following are to be assigned to tax class III: grandnephew, grand niece, great uncle, great aunt, married uncles and aunts, cousins and foster children, as well as unregistered partners and engaged persons. [64] In addition, tax class III must be assigned to former adoptive children in whom the adoption relationship has expired before the donation. [] 65]
This tax classification plays an essential role within the scope of the tax rates to be determined, according to § 19 ErbStG, and the personal allowances, according to § 16 ErbStG. [] 66
2.2.7. Personal allowances
The amount of personal allowances, according to § 16 ErbStG, is determined, similar to the tax classes, according to the personal relationship between the acquirer and the transferor. Depending on the personal relationship, the amount of the allowance to be granted results.[67] These allowances are subdivided as follows:
Fig. 3: personal allowances § 16 ErbStG, Source: Based on Längle, H., § 16, 2014, Rz 7
The allowances should be noted that they count for a period of ten years from the date of the first donation. After this ten-year period, the taxpayer can claim a new allowance in accordance with § 16 ErbStG. [] 68]
2.2.8. Accounting for previous acquisitions
If a person receives several asset benefits within ten years, these acquisitions are aggregated (§ 14 (1) S. 1 ErbStG). Due to the aggregation of acquisitions, the taxpayer cannot claim the personal allowances several times. Therefore, the provision of § 14 ErbStG excludes an advantage of the transmission distribution and thus use of several tax exemptions. All relevant acquisitions and the previously used allowances are aggregated at the last acquisition of the ten-year period. [] 69
2.2.9. Tax rates of inheritance tax
The tax rates of the inheritance tax are based on the amount of the taxable acquisition, according to § 10 ErbStG and the tax class of the property acquirer, according to § 15 ErbStG. According to § 19 ErbStG, there is a division into asset levels, which is as follows:
Fig. 4: Tax rates inheritance tax, source: § 19 ErbStG
Due to the asset classification, a direct tax rate determination is possible. However, a minimal overrun would result in a severe disadvantage for the taxpayer.[70] In order to partially spare the taxpayer such hardship in the event of minimum border crossing, the legislature has introduced the hardship compensation (§ 19 (3) ErbStG). The hardship compensation serves to limit the additional tax burden due to the higher asset level. [] 71]
The Financial Administration has announced the following threshold table:
FIG. 5: Limits of hardness compensation, source: HE 19 ErbStH 2011
It shows up to which asset level exceedance a hardship compensation is possible.
2.2.10. Taxpayer in the case of a gift
In the case of gifts, according to § 20 (1) ErbStG, the donor and the gifted person are liable for the inheritance tax. This has the consequence that both the donor and the acquirer, in accordance with § 44 (1) S. 1 AO, are debtors of the tax.[72] "In practice, however, the donor is treated only as a potential tax debtor and the gift tax is asserted primarily against the acquirer as an enrichment tax"[73] As a rule, the Schenker is to be regarded as the liable party of the tax to be paid.[74] If the Schenker assumes the tax liability to be paid, the acquirer receives a financial advantage in accordance with § 10 (2) ErbStG. This asset advantage receives the actual value of the grant and is therefore also subject to inheritance tax. [75] The taxable acquisition upon acceptance of the inheritance tax by the Schenker is determined by the acquisition, according to § 10 (1) ErbStG, plus the tax incurred on this acquisition. [] 76
The following calculation example serves to clarify:
Fig. 6: Tax calculation Takeover inheritance tax by Schenker, Source: Based on Jüptner, R., § 10, paragraph 66.
This example illustrates that the assumption of the tax by the donor is in some cases the tax cheaper alternative. [77]
2.3. Inheritance tax impact on the acquisition of property upon death
Pursuant to § 1 (1) No. 1 in the V. m. § 3 (1) No. 1 ErbStG, an acquisition of property upon death is a transaction subject to inheritance tax if heir or decedent are subject to limited or unlimited taxation at the time of inheritance. [78] According to § 9 (1) ErbStG, the time at which death is acquired is the death of the deceased.[79] The inheritance tax on the acquisition of death is calculated according to the taxable acquisition, according to § 10 ErbStG, minus the allowances, multiplied by the tax rate (§ 19 (1) ErbStG).[80]
Furthermore, spouses and registered partners, as well as children until the completion of the 27. In addition to the personal allowances, according to § 16 ErbStG, the benefit allowance according to § 17 ErbStG. The pension allowance is intended to provide for the nuclear family, in the event of death of the deceased, beyond the personal allowance. Therefore, it is not to be granted in a gift. [] 81]
For spouses and registered partners, the pension allowance, according to § 17 (1) S. 1 ErbStG, is € 256.000.00. In the case of the children of the deceased, the pension allowance, according to § 17 (2) ErbStG, staggers according to the age of the children until completion of the 27. year of life, and shall be:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.