German inheritance and gift tax for internationals: who pays, how much, and what has to be filed

Who is taxable in Germany

Germany taxes the recipient, not the estate. Full (unlimited) liability applies if either the deceased or donor or the heir or recipient was resident in Germany at the relevant time (§ 2 Abs. 1 Nr. 1 ErbStG). German citizens remain within the net for five years after leaving Germany; for some destinations longer. If neither side is resident, Germany taxes only German-situs assets – real estate in Germany, German business assets, substantial shareholdings in German companies (limited liability, § 2 Abs. 1 Nr. 3 ErbStG, § 121 BewG). German bank accounts and portfolios held by non-residents are not German-situs assets and remain outside.

A practical consequence: an expat living in Frankfurt who inherits from parents in the United States is fully taxable in Germany on the entire inheritance – including assets that never leave the US. Whether tax is actually due depends on the allowances and on treaty relief.

Tax classes and personal allowances

The allowance applies per recipient and per deceased or donor, and it renews every ten years for gifts. On death, a surviving spouse additionally receives a pension allowance of up to 256,000 € and children age-dependent amounts, each reduced by the value of tax-free survivor pensions. A flat 15,000 € for funeral and administration costs is deducted from every estate. Household effects up to 41,000 € are exempt in class I.

For recipients who are only subject to limited liability, the allowance is granted in full but reduced in proportion to the assets Germany does not tax (§ 16 Abs. 2 ErbStG).

Rates

The rate applies to the taxable acquisition after allowances and rises with its size: class I from 7 % (up to 75,000 €) to 30 % (above 26 million €); class II from 15 % to 43 %; class III 30 % up to 6 million € and 50 % above. An unmarried partner inheriting a 400,000 € flat pays 30 % on 365,000 € after allowance and lump sum – around 110,000 €. A spouse inheriting the same flat pays nothing. Marriage is, among other things, a tax decision in Germany.

Exemptions that matter for internationals

• The family home. The home the deceased lived in passes tax-free to the spouse, and to children for up to 200 m² of living space, if the recipient moves in without delay and stays for ten years (§ 13 Abs. 1 Nr. 4b, 4c ErbStG). A gift of the family home between spouses is tax-free without conditions. The exemption applies to homes in Germany, the EU and the EEA – not to a house in the US or the UK.

• Rented residential property in Germany or the EU/EEA is valued at 90 % (§ 13d ErbStG).

• Business assets can be exempt at 85 % or 100 % under strict conditions (§§ 13a, 13b ErbStG) – including shares in foreign companies within the EU/EEA.

• Occasional gifts – birthdays, weddings – and support for maintenance and education are exempt if customary and appropriate.

The three-month notification

Every acquisition – inheritance or gift – must be notified to the German tax office within three months of learning about it (§ 30 ErbStG). For gifts, donor and recipient are both obliged. The notification is informal: a letter with names, addresses, date, relationship, assets and approximate values. It is not the tax return; that is only due if the tax office asks for it afterwards, with a deadline of at least one month.

The exception – no notification needed where a German court or notary opened the will – does not apply to foreign wills, foreign probate or estates with real estate abroad. For internationals, the notification is almost always required. Failing to notify keeps the assessment period open: a gift never notified can be taxed decades later, when it surfaces in an estate.

Foreign assets and double taxation

Germany has inheritance tax treaties with only a handful of countries: the United States, Switzerland, Denmark, France, Greece and Sweden. Where a treaty exists, it allocates taxing rights – real estate and business assets to the country where they are located, the rest generally to the country of the deceased’s domicile – and prevents double taxation by exemption or credit. The German–US treaty additionally grants a pro-rata share of the US exemption in certain constellations.

Without a treaty – the United Kingdom, Australia, Canada, India and most other countries – Germany relies on a unilateral credit (§ 21 ErbStG): foreign inheritance tax paid on foreign assets is credited against German tax on the same assets, capped at the German tax, and only if the foreign tax was paid within five years. Two catches: the credit covers only taxes comparable to inheritance tax (US estate tax yes; Canadian deemed-disposition capital gains tax no), and it does not cover assets Germany treats as domestic. UK inheritance tax on a UK house owned by a German-resident heir’s parent is creditable; the mismatch in valuation dates and definitions frequently leaves a residual German tax.

Foreign assets must be valued at fair market value at the date of death or gift, converted into euro at that day’s rate. Foreign probate valuations are a starting point, not binding on the German tax office.

Gifts: planning across borders

Because allowances renew every ten years and apply per donor, lifetime gifts are the main planning tool – and they work for internationals too. Parents abroad gifting to a child in Germany trigger German gift tax if the child is resident here, with the child’s allowance of 400,000 € per parent. Timing gifts before a move to Germany, or after a move away, can change the picture entirely – as can the choice of asset, since German valuation rules for real estate and company shares differ from the market price. Gifts of foreign real estate to a German-resident child are taxable in Germany at full value, with no 10 % reduction and no family-home exemption.

How tes tax handles cross-border estates and gifts

Steuerberater Florian Enders and the tes tax team prepare the notification and the German return, value foreign assets according to German rules, apply treaty relief or the unilateral credit and coordinate with your advisors in the other country so that the two filings match. Where German succession law is involved – a German will, a community of heirs, a compulsory portion – the lawyers of tes legal in the same firm handle it. You explain your case once, in English.

Note: This page provides general information on German tax law. A binding assessment of your situation is only possible after engagement and review of your documents. We quote our fees in the initial consultation, before you commit.