German Inheritance Tax Return
Lawfirm in Germany with lawyers & tax consultants for inheritance tax declarations
Are you an heir, legatee, beneficiary of a compulsory portion or executor of a will? Are you wondering what steps need to be taken to ensure the proper taxation of estate assets? Here you will find information on the subject of inheritance tax returns.
For a non-binding inquiry, please contact one of our contacts directly by phone or e-mail or use the contact form at the bottom of this page.
Services around the inheritance tax return in Germany
Our tax advisors and specialist lawyers for german tax law advise and represent you in all questions concerning the notification of inheritances as well as the inheritance tax return:
- Subsequent tax structuring in the case of inheritances
- Preparation and optimization of inheritance tax returns
- Appeals and lawsuits against inheritance tax assessments
- Valuations of real estate and companies for inheritance tax purposes
- Calculation of the matrimonial property law claim to equalization of gains in the case of spouses
- Representation in criminal tax matters in the event of inheritance tax evasion
- Tax support for the division of communities of heirs
General information on german inheritance tax can be found here: Inheritance Tax
Information on the taxation of lifetime gifts in Germany can be found here: Gift tax
Duty to notify - this is how the tax office finds out about the inheritance
In the case of an inheritance or legacy, the heir or legatee is obliged to notify the inheritance tax tax office of the acquisition within three months in accordance with § 30 ErbStG. Exception: If the acquisition is based on a disposition of death opened by a German court or German notary (usually: will) and the relationship to the heir is undoubted. But beware: As soon as the acquisition includes real estate, business assets, shares in corporations or foreign assets, the heir is still obliged to notify.
The notification of the inheritance/legacy is to be made informally at the locally responsible inheritance tax tax office and should contain the following information:
- name and address of the testator and the and acquirer
- date and place of death of the testator
- Subject and value of the acquisition
- legal basis of the acquisition (will, intestate succession, bequest)
- Degree of relationship to the decedent
- Date and value of previous gifts by the testator
In the case of previous gifts, all gifts made within a period of up to ten years prior to the inheritance must be stated, because according to Section 14 of the Inheritance Tax Act (ErbStG), all pecuniary benefits accruing to the same person within a period of ten years are added together.
Incorrect information can already lead to tax evasion. In our experience, people often forget that property received abroad is also subject to gift tax or inheritance tax.
Request of the tax office to submit the inheritance tax return
The german inheritance tax office can then request an inheritance tax return from the heirs or legatees after becoming aware of the inheritance. As a rule, a generous deadline is set for submission. If the declaration cannot be submitted on time, an extension of the deadline should be requested, otherwise a late payment surcharge of up to 10% of the tax (§ 152 AO), as well as penalty payments (§ 329 AO) can be imposed.
The inheritance tax return must also be filed if the taxpayer comes to the conclusion that inheritance tax is not due. The decision as to whether inheritance tax is assessed is the responsibility of the tax office - at least in the first step.
Preparation of the inheritance tax return
In principle, the taxpayer can file the inheritance tax return himself, which may be feasible in simple constellations with some familiarization. However, hiring an inheritance tax expert makes sense at least if, for example, the following assets were given away:
- Real estate, agricultural land or forestry
- Company or partnership shares
- Participations in closed-end funds
Furthermore, a specialist attorney for german tax law should be commissioned if the decedent was married and the assets have been accumulated predominantly with him or her over the years. In this case, an equalization of gains under inheritance law can considerably reduce the inheritance tax burden. In our experience, this is a frequently ignored approach when preparing inheritance tax returns.
In the case of inheritance of the above-mentioned items, the submission of the inheritance tax return becomes complex, because then, in addition to the inheritance tax return, further declaration forms for the so-called needs assessment must also be submitted.
The following annexes to the inheritance tax return (mantelbogen Erb11) then belong to the so-called needs assessment:
- BBW 1/12 - Declaration for determination of the real estate value/personal data
- BBW 2/12 - Annex determination of real estate value
- BBW 2a/12 - Insert sheet for annex determination of the land value
- BBW 20/10 - Annex agriculture and forestry to the declaration of assessment
- BBW 50.1/13 - Annex business assets individual assets for taxation dates after 6.6.2013
- BBW 50.2/13 - Annex business assets partnership taxation dates after 6.6.2013
For these items, the valuation of the inherited item already raises difficult questions in german tax law. In addition, there are numerous statutory tax exemptions and benefits for real estate and business assets.
Only those who are aware of the tax-allowable options here can avoid an unnecessarily high inheritance tax. In these cases, it can often be useful to prove a lower value of the object to the tax office by means of an expert opinion. In this case, the possible tax savings must be weighed against the additional costs for the expert opinion.
In particular, when donating items that are partially or fully exempt from inheritance tax, care must be taken to ensure that the tax exemption is claimed. Examples:
If a business asset that is subject to preferential tax treatment within the meaning of §§ 13a. 13b ErbStG, the annex "Tax relief for business assets" must be completed.
If the acquisition includes real estate rented out for residential purposes within the meaning of Section 13c of the Inheritance Tax Act, the annex "Tax exemption for real estate rented out for residential purposes" must be completed.
Formalities, duration and costs of the declaration
The inheritance tax declaration must be signed by the acquirer. If a declaration is not signed, it is considered as not submitted.
How long does it take for an inheritance tax assessment to be issued? As a taxpayer in Germany, you must be prepared for the fact that the assessment may not be issued until a year after the inheritance tax return has been submitted. However, it always depends on the circumstances of the individual case (organization and processing staff at the tax office, scope of the documents, legal difficulty, etc.).
In any case, a long processing time is always to be expected if real estate or company shares are involved. In such cases, a provisional inheritance tax assessment is often issued initially, which is then amended when the relevant tax office (local tax office) issues a separate assessment notice for the valuation.
As a rule, the preparation of an inheritance tax return is charged according to the Tax Consultant Remuneration Ordinance (StBVV). The preparation of the inheritance tax return by a specialist for inheritance tax returns thus does not cost more than with a regular tax consultant.
The costs for the preparation of the inheritance tax return can be deducted from the value of the inheritance in the inheritance tax return. Further information on the tax treatment of the fee can be found here: Deductibility of the costs for the inheritance tax return