Germany: Amendment to the Rules on the Taxation of Lifetime Benefits from Foreign tax-priviledged Retirement Assets
The Annual Tax Act 2024 amends the rules on the taxation of a lifetime benefit from a foreign tax-priviledged retirement account / pension plan. § Section 22 no. 5 is amended as follows: a) In sentence 2, the words "Section 3 no. 66 and" are replaced by the words "Section 3 no. 66," and…
Tax Court of Münster: Distributions upon the Termination of a Trust may be Subject to German Income Tax
In its ruling dated March 23, 2023 - 1 K 2478/21 E, the Münster Tax Court (Finanzgericht Münster) decided that the assets distributed upon the termination of a "non-transparent" US trust may be taxable under § 20 (1) No. 9 sentence 2 in conjunction with sentence 1…
BFH: A legacy of German Real Estate is not subject to limited inheritance tax liability
The German Federal Fiscal Court (BFJ) has held, that the legacy (Vermächtnis) of a domestic property (Inlandsvermögen) is not subject to limited inheritance tax liability (beschränkte Erbschaftsteuerpflicht). See Judgement of the Federal Fiscal Court dated 23.…
BFH: The Treaty does not prevent Germany from imposing Inheritance Tax on the Acquisition of a U.S. citizen beneficiary resident of Germany even if he has stayed no longer than 10 years in Germany
The German Federal Fiscal Court (BFH) ruled on September 20th 2022 (file number: II B 2/22, NV) that the Germany-U.S. Estate and Gift Tax Treaty does not prevent Germany from imposing German inheritance tax (Erbschaftsteuer) on a U.S. citizen beneficiary who is a German tax…
German Inheritance Tax: Tax-free Exemptions in 2023
The general tax-free exemption (Freibetrag) has not been changed as of Jan. 1, 2023, and thus remains unchanged since 2019. However, it is expected that the allowance will be increased by approx. 25% in 2023 to compensate for the depreciation of money since 2019. For additional information…
German Federal Civil Court: Application of English law can Violate German Public
IIn its judgment dated June 29, 2022 (Case No. IV ZR 110/21), the Federal Court of Justice upheld the decision of the Cologne Court of Appeal. The Cologne Court of Appeal had previously held in its judgment of April 22, 2021, file no. 24 U 77/20, that English law regarding the compulsory…
German Federal Fiscal Court Ruling on Gift Tax triggered by Distributions from a Foreign Trust
In its decision dated June 25, 2022, file no. II R 31/19 the German Federal Fiscal Court (Bundesfinanzhof) held that distributions from a Foreign pool of assets with the purpose to bind assets (Vermögensmasse ausländischen Rechts, deren Zweck auf die Bindung von Vermögen…
German Federal Fiscal Court: Assets titled in Trust to which the Grantor has reserved comprehensive Powers are to be considered owned by him for German Inheritance and Gift Tax Purposes
The German Federal Fiscal Court (Bundesfinanzhof) has held in its judgment of June 25, 2021, file number II R 13/19, that assets in a trust to which the grantor has reserved comprehensive powers are to be considered owned by him for inheritance and gift tax purposes. Substantive excerpts from the…
Cologne Court of Appeal: Application of English law can violate the German Public Policy
The Cologne Court of Appeal has held in its judgment of April 22, 2021, file no. 24 U 77/20, that English law regarding the forced share is not applicable due to a violation of German public policy if a UK national (with the closest connection to England) with habitual residence in Germany elects…
Decicison of the German Federal Fiscal Court on the Taxation of Distributions from a 401(k) to Beneficiary in Germany
1) Distributions from a 401(k) are other income pursuant to Section 22 No. 5 Sentence 1 of the German Income Tax Act (Einkommensteuergesetz, EStG). 2) Pursuant to Sec. 22 No. 5 Sentence 2 EStG, the income is taxable in the amount of the difference between the contributions and the distributions,…
Germany: Applicable laws as regards to ordering and supervision of a curator of the estate
(1) German courts have jurisdiction to order the curatorship of the estate of assets located in Germany of a testator who died with his last habitual residence abroad. 2 The ordering and supervision of the curator of the estate (Nachlasspfleger) shall be governed by German substantive…
German Inheritance Tax: Tax-free Exemptions in 2021
Personal Tax-free Exemption for 2021: The personal tax-free exemption (Freibetrag) depends on the familial relationship between deceased and beneficiary. In case of unlimited tax liability (unbeschränkte Steuerpflicht) - the following tax free exemptions apply…
German Gift Tax on Distributions from a U.S. Trust to a German resident Subsequent to an Election under Art. 12 para 3 of the Germany-U.S. Estate and Gift Tax Treaty
On March 6, 2019 the Ministry of Finance of Brandenburg published a binding decision on the taxation of distributions from a U.S. trust subsequent to electing the right under Art. 12 para 3 of the Germany-U.S. Estate and Gift Tax Treaty. The decision was rendered after the Ministry conferred…
German Federal Fiscal Court Ruling on Taxation of Distributions from a Foreign Family Foundation and a Foreign Trust
In its decision dated July 3, 2019, the German Federal Fiscal Court (Bundesfinanzhof) held that distributions from a foreign family foundation (ausländische Familienstiftung) to an individual which has a fiscal residence in Germany are subject to German gift tax (Schenkungsteuer) under §…
German Inheritance Tax: Personal Tax-free Exemptions 2019
Personal Tax-free Exemption for 2019: The personal tax-free exemption (Freibetrag) depends on the familial relationship between deceased and beneficiary. In case of unlimited tax liability - the following tax free exemption applies (see § 15 ErbStG and § 16 ErbStG):…
German Inheritance Tax Rates 2019
The German inheritance tax rates depend on a) the tax class and b) the value of the taxable acquisition of the beneficiary. Determination of the German Inheritance Tax Class for 2019 The inheritance tax class depends on the familial relationship between the deceased and the…
Taxation of Distributions from an 401(k) to an individual Resident in Germany
In its decision dated August 9, 2018, the Fiscal Court of Cologne (Finanzgericht Köln) held that for German residents taxation should be limited to the difference between the contributions to a 401(k) and the distributed amount from the 401(k) assuming that the contributions were not…
FG Münster: Deed of Variation not recognized in Germany for Inheritance and Gift Tax Purposes
The Tax Court of North Rhine-Westphalia (Finanzgericht Münster) has held on 12 April 2018 , that German inheritance tax (Erbschaftsteuer) cannot be avoided or reduced by a deed of variation (under British law) as the German inheritance tax is triggered by the death (and not the…
Estate Tax: Effect of the Tax Cut and Jobs Act on German Domiciliaries
On December 22, 2017, Public Law 115‑97 ("Tax Cuts and Jobs Act") was enacted. Sec. 11061 of the Act more than doubles the estate and gift tax exemption amount for decedents dying or gifts made after December 31, 2017, and before January 1, 2026, by increasing the basic exclusion amount…
German Inheritance Tax - Update 2017
The General Tax-free Exemption and Tax Rates of the German Inheritance Tax 2017: The personal tax-free exemption (§ 16 ErbStG) and the Tax Rates (§ 19 ErbStG) remain unchanged. Tax-free Exemption in Case of Situs Taxation: : In case of situs taxation, the tax-free exemption…
German Federal Tax Court: Distributions of a US trust to beneficiaries domiciled in Germany are subject to German gift tax
The German Federal Tax Court (Bundesfinanzhof) has ruled on September 27th 2012, that distributions from a US trust to beneficiaries domiciled in Germany are subject to German gift tax ((reference: 2012 – II R 45/10) unless the beneficiary is the settlor himself. The decision is…
Germany rejects tax treaty with Switzerland concerning tax evasion
The German Upper House of Parliament has rejected a tax treaty designed to legalize undeclared assets held by German nationals in Swiss banks. The German Social Democrats and the Greens united to reject the accord on the grounds that the accord has significant loopholes and is contrary to notions…
Commission refers Germany to the Court of Justice for discriminatory inheritance tax provisions
The European Commission has decided to refer Germany to the EU's Court of Justice because of its legislation on inheritance and gift tax allowances. Under German law, there is a higher tax exemption for inherited German property if the testator or the heir are living in Germany, than if they are…
Succession regulation published and will apply from 17 August 2015
Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of…
FATCA Intergovernmental Arrangements
On July 26, 2012, the U.S. Department of the Treasury published a model intergovernmental agreement to implement the Foreign Account Tax Compliance Act (“FATCA”). FATCA targets non-compliance by U.S. citizens and residents using foreign accounts. The agreement was developed in…
European Court of Justice: 13 a Abs. 1 und 2 (commerical property) does not violate European law
Legislation of a Member State, such as that at issue in the main proceedings which, for the purposes of calculating inheritance tax, excludes the application of certain tax advantages to an estate in the form of a shareholding in a capital company established in a third country, while conferring…
US financial institutions will be required to report to the IRS interest payments made to certain nonresident alien individuals
Beginning on December 21, 2012, US financial institutions will be required to report to the IRS interest payments made to certain nonresident alien individuals. The new regulations were enacted in concert with the Foreign Account Tax Compliance Act, which provides for a greater exchange of tax…
German inheritance tax: Does German law violate Art. 56, 58 of the Treaty?
Reference for a preliminary ruling from the Finanzgericht Düsseldorf (Germany) lodged on 18 April 2012 — Yvon Welte v Finanzamt Velbert (Case C-181/12) Finanzgericht Düsseldorf Parties to the main proceedings Applicant: Yvon Welte Defendant: Finanzamt Velbert Question…
German Law on inheritance and gift tax: New regulations for situs taxation in force
German Law on inheritance and gift tax: New regulations for situs taxation in force
Pursuant to Section 16(1) of the German Law on inheritance and gift tax (Erbschaftsteuer- und Schenkungssteuergesetz) a taxpayer is entitled to acquire up to €500 000 tax-free depending on the degree of…
EU Commission requests Germany to amend discriminatory inheritance and gift tax provisions
The European Commission has formally requested Germany to amend its inheritance tax and gift tax legislation which discriminates against residents of other EU Member States in breach of EU law on the free movement of capital. The Commission's request takes the form of a "Reasoned Opinion" (second…