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.