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Calls for Stronger Inheritance Tax Reform by German Entrepreneurs
While political parties and business associations in Germany often warn against changes to inheritance tax laws, a growing number of entrepreneurs have begun advocating for stronger taxation on large inheritances. This shift counters traditional concerns that reform could damage family businesses. Some business heirs argue that higher taxes would encourage better financial planning and help reduce wealth disparities. The Social Democratic Party (SPD) has proposed reforms aimed at increasing tax burdens on substantial estates, particularly company assets, which could result in additional revenue in the low single-digit billion euro range annually [Source 1].
Implications of Reform Proposals for Expats and Foreign Workers in Germany
The SPD’s planned reforms include adjustments to the rules around business assets inherited by successors, such as tightening exemptions that currently allow many firm heirs to pay very low effective tax rates. For expats, international students, and foreign workers involved in or inheriting German businesses, these changes may influence estate planning strategies and tax liabilities. A new lifetime exemption of approximately one million euros is set to replace the current system of periodic tax-free allowances available every ten years. This reformed framework could require heirs to form more substantial financial reserves before inheritance to cover higher taxes [Source 6].
Practical consequences for expats include the need to reassess estate plans under German law, possibly increasing legal and financial advisory costs. Timely action might be necessary to adapt wills and business succession agreements to comply with upcoming tax changes. Additionally, foreign citizens owning assets or company stakes in Germany should monitor ongoing legislative developments closely, as the Federal Constitutional Court is expected to rule on the constitutionality of current inheritance tax provisions this year [Source 6].
Background on Germany’s Inheritance Tax Context
Germany’s inheritance tax has long sparked debate due to its low yield relative to other taxes, partly because of generous allowances for large corporate inheritances. Large estates, especially company assets, benefit from extensive discounts, resulting in some heirs paying effective rates as low as 1.5 percent. This situation has contributed to significant wealth concentration—where the top 10 percent of the population holds over half the country’s wealth—and criticisms regarding tax fairness [Source 4][Source 8].
The Federal Constitutional Court’s earlier 2014 ruling found the existing regime partially unconstitutional for being too lenient on business assets, prompting the current reform efforts. The SPD and some entrepreneurs argue that increasing inheritance tax rates on very large estates would help address social inequality without threatening business continuity. Notably, some company heirs have publicly supported higher inheritance taxes, reflecting a broader reconsideration of tax policy among Germany’s economic elite [Source 2][Source 1].
Expats engaged in Germany’s economy should note that any reforms to inheritance tax might also affect their rights and obligations related to inherited assets. Close attention to legislative changes and consultation with tax professionals is advisable to navigate the evolving landscape effectively.
For further information, refer to the original article in German at Tagesschau [Source 1].
