Domestic property (Inlandsvermögen)

If neither the deceased nor the beneficiary is a German tax resident (Inländer), the beneficiary will generally only be subject to German Inheritance Tax based on German domestic property (Inlandsvermögen). What forms part of the domestic property is defined in the German Valuation Act (Bewertungsgesetz), hereinafter "BewG". Pursuant to § 121 BewG, domestic assets are

  1. domestic agricultural and forestry assets;
  2. domestic real estate;
  3. domestic business assets, meaning assets used in connection with an industrial or commercial activity in Germany, where a permanent business establishment is maintained for that purpose in Germany, or where a permanent representative has been designated;
  4. shares in corporation, where the company’s registered office or central place of management is in Germany, and the shareholder, either alone or together with other parties connected to him within the meaning of Paragraph 1(2) of the Foreign Transaction Tax Act (Außensteuergesetz) holds, either directly or indirectly, at least 10 % of the company’s initial or share capital;
  5. inventions, utility models and layout designs not covered by point 3 which are registered in a national book or register;
  6. economic assets not covered by points 1, 2 or 5 and which are at the disposal of a domestic industrial or commercial undertaking, in particular under a tenancy or lease;
  7. mortgages, charges on land, rent charges and other debts or rights where these are secured, directly or indirectly, on domestic immovable property, on rights equivalent to domestic immovable property, or on vessels registered in a national shipping register. Loans and debts in respect of which part debentures have been issued are excluded;
  8. claims arising from participation in a commercial undertaking as a silent partner and from loans with profit participation, where the debtor’s domicile or habitual residence, registered office or central management is in Germany;
  9. Rights of enjoyment attached to one of the assets referred to at points 1 to 8.

The following are not domestic assets within the meaning of § 121 BewG

  1. private credit balances with domestic financial institutions (cf. BFH v. 19.06.2013 - II R 10/12 BStBl 2013 II p. 746);
  2. a private loan receivable, even if it is secured by domestic property (cf. BFH v. 19.06.2013 - II R 10/12 BStBl 2013 II p. 746);
  3. private movable property (e.g. cash, household effects, jewelry, works of art, cars or ships);
  4. fixed-interest securities held at a domestic bank (cf. BFH v. 19.06.2013 - II R 10/12 BStBl 2013 II p. 746); or other securities held by private individuals at a domestic bank;
  5. shares held by a private individual in a domestic corporation (i.e., e.g., shares) of less than 10% within the meaning of Sec. 121 No. 4 BewG;
  6. the claim of a non-resident to a compulsory portion against a non-resident (controversial);
  7. participation rights in an open-end real estate fund (cf. Sec. 12 (1) Inheritance Tax Act in conjunction with Sec. 11 (4) Valuation Act);
  8. a claim under the law of obligations to the transfer of ownership of a domestic property (BFH, judgment of 10.10.1958 - III 98/58 S, BStBl 1959 III p. 22);
  9. a bequest of a domestic property (BFH, judgment dated November 23, 2022 - II R 37/19).