Last week, the mediation committee of the Bundestag and Bundesrat reached a compromise on the inheritance tax reform.
With the new inheritance tax rules, the legislator aims to comply with the requirements set by the Federal Constitutional Court, which had called for legislative changes in December 2014.
Under the new rules, heirs of businesses will, as before, largely be exempt from inheritance tax provided the business is continued for a sufficient period and the jobs are preserved.
According to the agreement, a company's operating result may be multiplied by a maximum factor of 13.75 (the capitalisation factor) to determine the tax base.
Measures to prevent abuse are also planned. For example, so-called "cash companies" are to be prevented, removing the option of using a GmbH to shield liquid assets from taxation.
Luxury goods such as classic cars, yachts or works of art are, in principle, to be excluded from the preferential treatment.
In addition, there are technical and clarifying amendments regarding pension cover assets, as well as exceptions for leased or rented real estate, for instance held by breweries.
The Bundesrat must now still approve the law.
Source: www.bundesregierung.de
Read more here: https://steffen-partner.de/einigung-kurz-vor-fristablauf-endlich-neue-regeln-fuer-erben/
Inheritance tax reform: never ending story – deliberations postponed!!!
Frequently asked questions
Frequently asked questions
Which capitalization factor applies to business valuations following the inheritance tax reform?
For inheritance tax purposes, a company's operating profit is multiplied by a maximum factor of 13.75. This capitalization factor replaces the previously much higher values and generally results in a lower tax base for inheritance tax.
Under what conditions do business heirs remain largely exempt from inheritance tax?
Even after the reform, business heirs can remain largely tax-exempt if they continue operating the business over an extended period and preserve the jobs. With this, the legislator implements the requirements of the Federal Constitutional Court from December 2014, which permits such relief only if specific conditions are met.
What measures does the reform provide against abuse of the inheritance tax exemption?
The reform aims in particular to prevent so-called cash companies, which were previously used to transfer liquid assets tax-free via a GmbH. In addition, luxury items such as classic cars, yachts or artworks are generally excluded from the relief in order to prevent abusive use of the tax benefit.
How are leased or rented properties, e.g. owned by breweries, treated?
Special exceptions apply to leased or rented properties, such as those typical for breweries. Despite being made available to third parties, they may still qualify for the preferential treatment and are not automatically classified as harmful administrative assets (Verwaltungsvermögen).
Why was the inheritance tax reform necessary in the first place?
In December 2014, the Federal Constitutional Court ruled that the previous inheritance tax regulations were partly unconstitutional and required the legislator to enact a new framework. The reform is intended to implement these constitutional requirements, particularly with regard to the preferential treatment of business assets.