Inheritance tax is going before the Constitutional Court, which means the inheritance tax privileges for business assets may be restricted. The Bundesfinanzhof (BFH) has once again referred the German inheritance tax law to the Constitutional Court in Karlsruhe for review (Az. II R 9/11). A decision by the Bundesverfassungsgericht is expected in 2013. All indications suggest that the inheritance tax law will once again be found unconstitutional, which would also mean a tightening of the privileges granted to business assets. The current privileges under inheritance and gift tax can therefore still be claimed at this point. For planned gifts or anticipated succession arrangements, appropriate contractual clauses should be included in the agreements — for example, to ensure that the gift can be reversed if necessary. This applies, for instance, to cases in which inheritance and gift tax is later abolished. For further information on current developments and the outcome, please continue reading here… 16/08/2013: Info 12/04/2013: Info 10/11/2012: Info
Frequently asked questions
Frequently asked questions
Why are the inheritance tax benefits for business assets under review?
The Bundesfinanzhof has once again referred German inheritance tax law to the Federal Constitutional Court for review (Az. II R 9/11). The court is expected to find the current rules unconstitutional. As a result, the tax benefits for transferring business assets could be significantly curtailed.
What action should entrepreneurs planning a succession take?
As long as the current preferential treatment for business assets remains in force, planned gifts or anticipated succession arrangements should be implemented promptly. Following a potential ruling by the Bundesverfassungsgericht (Federal Constitutional Court), these tax benefits could be eliminated or reduced. Early succession planning therefore secures the tax advantages currently available.
Which contractual clauses should be included in gifts or anticipated succession?
Contracts should contain reclaim or revocation clauses that allow the gift to be reversed. This makes it possible to respond if the inheritance and gift tax benefits later cease to apply or if material conditions change significantly. The entrepreneur thus retains flexibility without losing the current tax advantages.
When is a decision by the Federal Constitutional Court on inheritance tax expected?
A decision by the Federal Constitutional Court was expected in 2013. Should the court overturn the preferential treatment for business assets, a tightening of inheritance and gift tax is to be expected. Until the ruling is announced, however, the existing rules continue to apply.