Introduction
Germany levies inheritance tax (Erbschaftsteuer). In contrast to estate tax, an inheritance tax does not attach to the estate itself but instead is imposed on the acquisition (Erwerb) of the beneficiary. See § 1 ErbStG. Accordingly, the tax is payable by the beneficiary and not the estate. For information on the calculation of the German inheritance tax, please read the article German Inheritance Tax.
Under German law, there is only an obligation to file an inheritance tax return if the inheritance tax office (Erbschaftsteuerfinanzamt) has requested this.
In a purely German domestic estate matter, the inheritance tax office will receive sufficient information from German banks, insurance companies, and other financial institutions, which will allow it to decide whether it will ask a beneficiary to file an inheritance tax return.
Obligation to notify of Inheritance from Abroad
According to § 30 (1) ErbStG, every acquisition (Erwerb) subject to inheritance (§§ 1, 3 ErbStG) must be reported by the beneficiary (Erwerber).
The mere possibility of an acquisition is sufficient.
Persons obliged to notify the acquisition
Typically, it is the beneficiary`s obligation to notify the inheritance tax office.
However, a legal representative or authorized person (§§ 34, 35 AO) as well as asset managers, insofar as their management extends, may be liable too.
Whether this also includes the executor (Testamentsvollstrecker) or a foreign personal representative has not been conclusively clarified.
The guardian (Betreuer) is obliged to notify the persons under their care.
Deadline for notification
The notification must be made within three months. The period begins at the time at which the beneficiary has sufficient knowledge of the acquisition.
Such knowledge is typically assumed if the beneficiary knows
- about the death of a person,
- that he is a beneficiary (e.g., under a Will or intestacy rules), and
- he can expect to receive something.
The details required to calculate the inheritance tax need not yet be known.
In the case of an acquisition by will or contract of inheritance, reliable knowledge of the accrual cannot generally be assumed as long as the opening of the Will (Testamentseröffnung) has not yet been opened and the period for the renunciation of the inheritance (Erbausschlagung) has not yet begun.
In the case of acquisition by intestate succession (gesetzliche Erbfolge), the beneficiary must know for certain that other individuals who would exclude him from intestate succession do not exist. In the case of completely unclear circumstances, knowledge may only exist in individual cases when the certificate of inheritance is issued.
The actual distribution is generally not relevant in the case of an acquisition by reason of death. In particular, the fact that the estate is being settled by an estate administrator in the USA and the latter has not yet paid out to the beneficiary does not prevent the deadline from running (see BFH, judgment of 8.6.1988, II R 243/82. BStBl. 1988 II p. 808, 810).
Content of the notification pursuant to Section § 30 ErbStG
The notification should contain the following information in accordance with Section 30 (4) ErbStG:
- first name and surname, occupation, residence of the decedent and of the beneficiary;
- date and place of death of the decedent;
- a short description of the assets;
- the value of the acquisition of the beneficiary.
- legal basis of the acquisition (e.g., intestate succession, legacy, or beneficiary designation);
- personal relationship of the beneficiary to the decedent (e.g., child, spouse); and
- previous gifts made by the testator.
These are the minimum details. However, it will often be advisable to provide further information, such as:
- regarding the payment of a foreign death tax that may be offset against the German inheritance tax;
- other (taxable) acquisitions (e.g., from another person or from a trust created by the decedent);
- on the status of the estate administration abroad.
Furthermore, it is often advisable to explain foreign law, particularly if there is a trust involved.
Form, forms, and samples
The notification of acquisition must be submitted in writing. An official form does not have to be used. However, most tax authorities of the federal states provide samples on their websites, e.g., Bavaria, Berlin, or North Rhine-Westphalia. However, in case of more complex estate or trust matters, it is often not advisable to use the templates.
Further procedure
Based on the notification of acquisition and other information received by the tax office, the inheritance tax office checks whether inheritance tax may be due. If it concludes that inheritance tax may be payable, it asks the beneficiary or, if there is an executor, the executor to file an inheritance tax return (Erbschaftsteuererklärung) and set a deadline for this. This is further explained in our article, German Inheritance Tax Return.
Our service: We will be happy to prepare the notification and the inheritance tax return for you. Further information on our services can be found in our detailed service description.
