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Inheritance tax

If assets arise in the case of an inheritance, a donation or a special purpose grant, a tax is levied on them in Germany. The Inheritance tax The amount depends on the asset. It is levied on financial values ​​as well as remuneration in kind and valuables and is charged from the first euro after the personal allowance has been exhausted.

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  1. What is inheritance tax?
  2. How are inheritance and gifts regulated by law?
  3. Inheritance tax amount
  4. Calculation of inheritance tax
  5. What tax classes are there for inheritance tax?
  6. What are the inheritance tax rates?
  7. Which allowances apply to inheritance tax?
  8. How do I file an inheritance tax return?

What is inheritance tax?

The Inheritance tax is a tax that burdens the inheritance for the recipient of an inheritance. If a testator dies and his property is transferred to another living person with his death, inheritance tax is due. The inheritance tax is through the Gift tax added.

What is the difference between inheritance tax and gift tax?

The Inheritance tax, which arises when a deceased testator takes on an inheritance, is to be distinguished from the gift tax, which is taxed on gifts from living persons. In terms of taxation, however, inheritance and gift are comparable with one another and are therefore also regulated in a common code of law. The rules on gifts supplement the Inheritance Tax Act in order to prevent the testator and heirs from avoiding inheritance tax through early gifts.

How are inheritance and gifts regulated by law?

The legal basis for inheritance tax is the Inheritance Tax and Gift Tax Act ErbStG. In the ErbStG, the legislature specifies when the tax arises, how the assessment basis is to be determined, how the tax is to be calculated, which deductions can be claimed and which exemptions apply.

If a death occurs in Germany in which heirs were named in will, they must expect their inheritance to be taxed. However, inheritance tax also comes into force if gifts or contributions are made during one's lifetime. Above all, this prevents large amounts of money from illegally changing hands. However, the tax is also calculated on gifts or bequests above a certain value.

Amount of inheritance tax

The amount of inheritance tax is regulated in the Inheritance Tax Act from Section 10 of the Inheritance Tax Act. It is based on the tax class of the recipient and the value of the taxable inheritance. The tax class results from the relationship of the recipient to the testator or donor according to §15 ErbStG. Family members such as children and spouses are benefited. Small donations and low inheritance sums can often be subordinated to the tax exemption.

Calculation of inheritance tax - determination of the tax base

The Inheritance Tax Act deals with taxable acquisitions in Section 10 of the Inheritance Tax Act. The taxable acquisition refers to the Assessment basis for determining the tax amount.

To calculate the inheritance tax to be paid, the value of the inheritance or gift is first determined. Financial assets and securities count according to the current rate, real assets are valued. In case of doubt, an expert must be commissioned with the appraisal, for example if it is rare jewelry or an art collection. This also applies if the heir keeps the collection or the jewelry and never sells it.

Which deductions can be claimed?

Certain charges can be deducted from the assets that are passed on as inheritance in order to lower the assessment base for inheritance tax and finally for the Determination of the tax to determine. The deductible charges include:

  • Debt of the testator which was not taken into account in the valuation and which the heir assumes together with the property. Expressly, debts of the testator are not included if they are not related to the inheritance, such as debts from a business enterprise.
  • Liabilities from inheritance claims and asserted compulsory portions of other heirs
  • Funeral expenses incurred by the testator. The burial costs include not only an appropriate grave monument but also the expenses for normal grave maintenance. But the costs incurred by the heir in handling, regulating and distributing the inheritance can also be deducted from the inheritance amount.

What tax classes are there for inheritance tax?

The inheritance tax law regulates in §15 ErbStG Tax bracketswhich, in addition to the tax base, represent a further factor for determining the amount of inheritance tax. The law distinguishes between three tax classes:

  • Tax class I - who does it belong to?
    Spouses, children and stepchildren, as well as grandchildren of the biological or stepchildren are included in tax class I and are subject to a minimum of 7 and a maximum of 30 percent tax. They are subject to exemptions from household effects up to 41,000 euros, collections and real estate up to 85 percent and financial exemptions up to 500,000 or 400,000 euros according to §13 and §16 ErbStG.
  • Tax class II - who does it include?
    Tax class II includes parents, siblings, parents and children in law and divorced spouses.
  • Tax class III - who does it apply to?
    All other persons belong to tax class III, including registered partners who have not converted their union into a marriage. They are subject to tax from 15 to 50 percent, the tax exemptions are significantly lower.

Overview table of tax classes

numberTax class ITax class IITax class III
1Spouses and life partnersParents and grandparents who do not belong to tax class I.All other heirs who do not fall under tax brackets I and II
2Children and stepchildrensiblings
3Descendants of the children and stepchildren named in number 2First-degree descendants of siblings
4Parents and grandparentsStepparents
5Children in law
6In-laws
7divorced spouses and civil partners of a dissolved civil partnership

What are the inheritance tax rates?

The one to be paid Inheritance tax is not just based on the Tax class and the taxable one Inheritance. The legislature has for that Determination of the amount of inheritance tax several tax rates are determined, the values ​​of which are between 7% and 50%. The tax rates depend on the tax class and the assets that are inherited. The higher the tax bracket and the higher the inherited wealth, the higher the rate Inheritance tax rate at. The tax rates for inheritance tax can be found in the table of the Inheritance Tax Act §19 ErbStG:

Inheritance tax rates - overview

Value of the taxable acquisition up to and including… eurosPercentage in the tax bracket
Tax class ITax class IITax class III
75.00071530
300.000112030
600.000152530
6.000.000193030
13.000.000233550
26.000.000274050
over 26,000,000304350

Which allowances apply to inheritance tax?

In Section 16 of the ErbStG, the legislature describes the allowances that can be claimed when an inheritance begins. Accordingly, in cases of unlimited tax liability, certain assets remain exempt from taxation:
The following exemptions apply to inheritance

  • of the spouse or partner: Allowance of 500,000 euros
  • of children and stepchildren who fall into tax class I as well as the children of deceased children: tax exemption of 400,000 euros
  • the grandson: allowance of 200,000 euros
  • for all other persons for whom tax class I applies: tax exemption of 100,000 euros
  • all persons in tax class II: tax exemption of 20,000 euros
  • of all persons in tax class III: tax exemption of 20,000 euros

How do I file an inheritance tax return?

Also for making the Inheritance tax return the legislator has specified precise regulations. According to this, the tax office can require any person who is involved in an inheritance or a gift to prepare an inheritance tax return. The tax office can also demand that the heir meet a certain deadline, which the office determines individually.

Which special features apply to the tax return in the event of inheritance?

If there is a continued community of property, the tax office can grant the surviving spouse Filing a tax return prompt. If several heirs are considered after the death of a testator, they can submit a joint tax return. The joint tax return must be signed by all parties involved. If, in addition to the direct heirs, other people receive part of the deceased's assets, they can also submit a joint tax return with the heirs. If the inheritance is issued in a will and thus an executor or administrator is entrusted with the processing of the inheritance, he must prepare the tax return to the tax office. The tax office can demand that one or more heirs must also sign the tax return and thus confirm it. Estate administrators are always obliged to prepare a tax return.

How should the tax return be carried out?

For the inheritance tax return, the taxpayer must create a list in which he lists the objects that belong to the estate. He must also state how the value of the items listed is to be determined.

In what form should the tax return be prepared?

Since the tax revenues from inheritance tax benefit the federal states, the tax authorities of the states are responsible for the Inheritance tax return responsible. Each federal state provides its own official forms for the tax return in the case of inheritance, which the heirs use for their inheritance tax return. The tax office sends the heirs a form to declare the inheritance or gift tax as soon as it learns of the transfer of assets for which the corresponding tax is due. Taxpayers can also obtain the form themselves from the tax office responsible for their case. The taxpayer must determine the tax himself on the form and pay the tax amount within one month of submitting the tax return to the tax office.

Which tax office is responsible for the inheritance tax return?

In principle, the tax office that is in the area of ​​responsibility of the testator is always responsible. If the deceased's domicile is abroad while the heir is German, the handling of the inheritance is the responsibility of the tax office at the heir's domicile.

What should be considered when preparing the inheritance tax return?

The Inheritance tax return specifies all the questions that the taxpayer must answer on their cover sheet. The form also contains a Plant acquirer. It must be filled in if the heir has received a share of the estate, if he claims a compulsory portion or if the testator's life insurance is paid out to an heir.

The specific calculation is only possible if all factors are taken into account and can be carried out by a lawyer or an estate administrator.

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