The Federal Constitutional Court has opened a hearing on inheritance tax exemptions for business assets, a case that could affect how family firms are taxed when ownership passes to heirs.
Germany’s Federal Constitutional Court opened a hearing on a challenge to inheritance tax exemptions for business assets.
Private assets can be taxed at up to 50%, depending on the heir’s relationship to the deceased and the value of the inheritance. Business assets can in some cases qualify for a 100% exemption if heirs continue operating the business for at least seven years and maintain the original payroll level.
The case centres on a man who says he was taxed at a higher rate on private assets inherited from his aunt than would have applied to qualifying business assets.
A finance ministry representative defended the 2016 inheritance tax law as consistent with earlier court guidance. Associations representing the Mittelstand argued that changes to the law could weaken investment and lead to job losses.
The state forwent EUR 3.7 billion in revenue last year after 34 heirs had a large portion of their inheritance tax waived, according to the federal statistics office.
The court is expected to rule in the coming months.
