Germany Imposes Higher Inheritance Tax

Germany taxes the inheritance of business assets relatively heavily compared to other countries. When it comes to unplanned inheritances, where existing tax planning options remain unused, Germany has the highest tax burden on inheritances passed on to spouses and the third highest on inheritances passed on to children. This is the result of an international comparison carried out by ZEW Mannheim on behalf of the Foundation for Family Businesses.

Of the 33 countries examined, 14 have no inheritance tax. A further 12 countries exempt inheritances passed on to spouses and, in some cases, also children. A total of 11 countries provide exemptions for inheriting businesses in general or specifically for family businesses. In 17 of the 19 countries that levy an inheritance tax, payment facilities such as deferrals or instalments are available.

At the same time, the researchers expect that inheritance tax can contribute to a reduction in absolute wealth inequality in the long run. It should be noted, however, that inheritance tax influences the behaviour of economic entities, such as the willingness of company shareholders to invest, the readiness of their spouses or children to take over the company, or the decision to sell the company. The burden of inheritance tax can therefore have an indirect effect on employment, wages or revenues from other types of taxes.