Inheritance tax – how much tax is really to be paid?

By: Redaktion 11. December 2018

Anyone who inherits more than the tax-free allowance must pay inheritance tax. It can be money, real estate, or business. The amount of inheritance tax depends on the degree of kinship and the amount of the inheritance.

In most cases, anyone who expects an inheritance plans it for old-age provision. However, the legacy can rarely represent the amount of a safe provision, say pollsters. Only about every twentieth heir can expect a gross discount of over € 300,000.

Who is subject to inheritance tax?

Natural persons who have acquired property through inheritance if their value exceeds the tax-free amount.

As a rule, tax liability arises when the decision of the court on the final acquisition of the inheritance becomes final or when the certificate of inheritance certificate is signed by a notary.

If the acquisition of an inheritance is not registered for taxation, the tax liability arises if the taxpayer relies on the fact of the acquisition before the tax office or the tax regulator.

How much is the inheritance tax?

The German legislature has defined the type of inheritance tax as progressive. A correspondingly high tax is levied on the inheritance – the higher the estate value, the higher the tax. In addition, the amount of inheritance tax is influenced by the degree of kinship – the closer it is, the lower the tax burden (3 kinship groups). The amount of the tax is determined on the basis of the inheritance tax law.

  • Group I: Infants, children and stepchildren, grandchildren, parents and grandparents in the event of purchase in the event of death
  • Group II: Parents and grandparents, if not inherited in Group I, siblings, sisters, foster parents, Cies, daughter-in-law, son-in-law and ex-toddlers Group III: other heirs.

Innovations in the inheritance tax law

A new right of inheritance has been in force in Germany since January 2009, since the previous law was declared incompatible with the German constitution.

The main changes include the following:

  • The allowance for spouses, children, grandchildren and registered partners has been increased.
  • The tax rate for siblings, nephews and other relatives is higher than in the previous law.
  • The inheritance of real estate from spouses or registered life partners remains untaxed if the property is inhabited by an heir for a period of 10 years.
  • The inheritance of the property by children or grandchildren is also tax-free if the property is occupied by an heir for a period of 10 years, provided the property is less than 200m².
  • The assets of the company and the shares in a corporation can be inherited without tax liability under certain conditions.

The tax-free amounts in Germany are currently as follows:

Taxable inheritance Inheritance tax class I Inheritance tax class II Inheritance tax class 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%
> € 26,000,000 30% 43% 50%

In order to calculate the amount of tax, it is necessary to deduct the free amount from the amount of the inheritance. The rest will be taxable.
For example, if a child is inherited with € 900,000, the tax-free allowance (here: € 400,000) is deducted from this value and the residual value (here: € 500,000) is taxed. In this case the person has to pay 15% inheritance tax, i.e. 75,000 €.

frequently asked Questions

Below we have compiled and answered the most frequently asked questions about the topic of “inheritance tax”.

What is an inheritance tax?

Inheritance tax is a tax (amount of money) payable by the heirs when a taxable inheritance is inherited from a natural person. The legal basis for this is the German inheritance tax law. It was first introduced in Germany (then the German Empire) in 1906.

What is inheritance tax??

Inheritance tax includes all money, all real estate and all companies that, in the event of inheritance, exceed the individual inheritance tax exemption. The inheritance tax exemption is primarily dependent on the degree of kinship.

Who gets inheritance tax?

Many taxpayers ask: Where does inheritance tax go? Well, that’s easy to answer. The state receives inheritance tax. The government decides what happens to the taxpayers’ money in the state coffers.

How to avoid inheritance tax?

There are several ways to avoid inheritance tax in Germany. You can save inheritance tax by using one of the following methods. With some methods, however, it is only possible to reduce inheritance tax. However, this depends on numerous individual parameters and must be considered in each individual case.

  • Acquisition of a cheaper tax bracket through marriage or adoption
  • Transfer of private assets to business assets
  • Relocation of assets to other asset classes that have to be taxed less (e.g. life insurance, real estate, etc.)
  • Transfer of real estate on condition that a usufructuary right is registered for the donor
  • Donation of inheritance to heirs taking into account the donation allowance
  • Mutual granting of legacies and inheritance (Berlin Testament) in favor of the children (in the event of the death of the first spouse)

How much is the inheritance tax exemption??

The exemption for inheritance tax depends on the degree of kinship. The free allowance for spouses and life partners is € 500,000. For children (including stepchildren and adoptive children) the allowance is € 400,000. Grandchildren, on the other hand, have an inheritance tax allowance of € 200,000. For parents and Grandparents have an allowance of € 100,000.

relationship Inheritance tax exemption
Life and spouse € 500,000
Children (including stepchildren and adoptive children) € 400,000
grandchildren € 200,000
parents & grandparents € 100,000
rest € 20,000

How is the value of a property determined??

If the inheritance is a property, the question quickly arises: How are properties valued? Inheritance tax on real estate is calculated on the basis of the market value. The local tax authority takes care of determining the current market value of the property and accordingly determines its inheritance tax. The tax authorities are therefore responsible for calculating inheritance tax.

How quickly do you have to pay inheritance tax??

How long does it take to pay inheritance tax? First of all, you have 3 months to register the legacy. If this was done on time, the further procedure clarifies your responsible tax office. You will be informed in writing of the payment amount and payment deadlines.

How long do you have to be married with an inheritance tax??

There is no statutory minimum marriage time here. From the time of the wedding, the inheritance tax law applies to married people.

How much is the inheritance tax for siblings?

Inheritance tax is not only dependent on the degree of kinship. However, the degree of kinship defines the inheritance tax allowance, which is € 20,000 for siblings.

What is the inheritance tax for children??

Inheritance tax is not only dependent on the degree of kinship. However, the degree of kinship defines the inheritance tax allowance, which is € 400,000 for children.

How much is the inheritance tax for nephews and nieces?

Inheritance tax is not only dependent on the degree of kinship. However, the degree of kinship defines the inheritance tax allowance, which is € 20,000 for nephews and nieces.

How much is the inheritance tax for non-relatives??

Inheritance tax is not only dependent on the degree of kinship. However, the degree of kinship defines the inheritance tax allowance, which is € 20,000 for non-relatives.

Limits inheritance tax?

In fact, inheritance tax lapses after four years. If no tax payment request has been made by the tax office after this time, the tax will lapse.

How much is the inheritance tax for property separation?

In the case of a matrimonial separation of property, there are no inheritance tax consequences.

Why do you have to pay inheritance tax??

Because the law requires it.

When does inheritance tax apply??

Heirs often ask themselves when to pay inheritance tax. The person who takes up the inheritance is legally obliged to report his or her inheritance to the finance office within three months. The tax office determines when the inheritance tax is due and depends, among other things, on the processing time.

When does the inheritance tax notice come??

You will receive the letter of inheritance tax from the tax office. The period is difficult to make out. You can be sure that it will reach you within 4 years. Enjoy if nothing happens within 4 years, because then the tax claim becomes time-barred.

Who pays inheritance tax??

The inheritance tax is paid by the person who takes up the inheritance. If, for example, a child inherits a sum of money from its deceased father, the son bears the inheritance tax. He has to pay them to the extent specified by the tax office.

Who calculates the amount of inheritance tax?

The amount of inheritance tax is usually calculated by the tax office. The prerequisite for this is that the heir reports his heir to the tax office within 3 months.

Who pays inheritance tax in a community of heirs??

If there is a community of heirs, the inheritance tax to be paid is determined by the inheritance rate. Once the inheritance rate has been determined, each heir of the community of heirs must be assigned an inheritance tax class. Only then can the respective tax portion be determined according to the degree of kinship and the corresponding allowance.

Where do you have to state the inheritance tax??

As the heir, you must report the assets that are inherited to the responsible tax office within 3 months. If the inheritance is registered, the inheritance tax must be paid to the tax office within a defined period.

Where is inheritance tax paid??

The inheritance tax is paid to the tax office. The money then flows into the state treasury.

Which form is required for inheritance tax?

For inheritance tax, it is necessary to submit the correct form with the corresponding attachments to the responsible tax office. The problem is that each authority cooks its own soup and therefore the forms are not the same everywhere, or are frequently adapted. It is therefore necessary and highly recommended to request the appropriate form from the tax office that is responsible for you.


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Christina Cherry
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