Erbschaftsteuer
Inheritance Tax. The tax on inherited or gifted assets. German property is always taxable in Germany, even when the deceased and the heirs all live abroad: only the personal allowance changes, and for non-residents it is reduced pro rata.
Allowances depend on relationship, not residency: €500,000 for a spouse or registered partner, €400,000 per child, €200,000 per grandchild (€400,000 where the linking parent has died), €100,000 for parents and great-grandchildren, and €20,000 for siblings, nieces, nephews, in-laws and unrelated heirs. They have been unchanged since 2009 and renew every ten years. Rates run 7% to 30% in class I, 15% to 43% in class II and 30% to 50% in class III.
Two reliefs matter for property. Residential property that is let is assessed at 90% of its value under § 13d ErbStG, a flat 10% discount. A family home can pass entirely tax-free under § 13 ErbStG where the deceased lived in it until death and the heir occupies it as a main residence for ten years, capped at 200 m² of living space for children but uncapped for a surviving spouse.
Where neither the deceased nor the heir is resident in Germany, limited tax liability applies under § 2 Abs. 1 Nr. 3 ErbStG: only German-situs assets under § 121 BewG are taxed, and German real estate is explicitly one of them. Bank accounts, securities and shareholdings below 10% are not. The personal allowance is then reduced under § 16 Abs. 2 ErbStG in proportion to the share of the estate that is not German-situs, so a large estate abroad shrinks the allowance available against the German property.
Frequently asked questions
Do foreigners pay German inheritance tax on German property?
Yes. German real estate is always taxable in Germany, even where the deceased and every heir lived abroad. Under § 2 Abs. 1 Nr. 3 ErbStG only German-situs assets are taxed in that case, and property is explicitly one of them.
What are the German inheritance tax allowances?
€500,000 for a spouse or registered partner, €400,000 per child, €200,000 per grandchild, €100,000 for parents and great-grandchildren, and €20,000 for siblings, nieces, nephews, in-laws and unrelated heirs. They have not changed since 2009 and reset every ten years.
Is the allowance reduced for heirs living outside Germany?
Yes. Under § 16 Abs. 2 ErbStG the allowance is cut in proportion to the part of the estate that is not German-situs. The larger the estate abroad, the smaller the allowance left to set against the German property.
How much is German inheritance tax on a property?
It depends on the relationship. Class I, covering spouses and children, runs from 7% up to 30%, starting at 7% on amounts up to €75,000 above the allowance. Class II runs 15% to 43% and class III, which covers unrelated heirs, starts at 30% and reaches 50%.
Is a rented apartment taxed on its full value?
No. Residential property that is let is assessed at 90% of its value under § 13d ErbStG, a flat 10% discount. It applies to property in Germany and the EU, and to third countries only where that country exchanges tax information to the OECD standard.
Can a family home pass free of inheritance tax?
Under § 13 ErbStG yes, where the deceased lived in it until death and the heir uses it as a main residence for ten years. For children the exemption is capped at 200 square metres of living space; for a surviving spouse there is no size cap.
Which German assets are not subject to limited inheritance tax liability?
Bank accounts, securities and shareholdings below 10% are outside the § 121 BewG list, so they are not caught by limited liability. Real estate, business assets with a German permanent establishment and mortgages secured on German property are caught.