Introduction
Germany levies an inheritance tax (Erbschaftsteuer). In contrast to an 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 visit the article German Inheritance Tax.
Obligation to submit an inheritance tax return
Under German law, there is only an obligation to file an inheritance tax return if the inheritance tax office (Erbschaftsteuerfinanzamt) has requested this.
Obligation to notify of the acquisition
Pursuant to § 30 para. 1 ErbStG, every acquisition subject to inheritance tax (§ 1 ErbStG) must be reported by the beneficiary (Erwerber). The mere possibility of a taxable acquisition is sufficient. The obligation to notify applies to anyone potentially subject to inheritance tax in accordance with § 20 ErbStG. Whether a German executor (Testamentsvollstrecker) or a foreign executor has a reporting obligation has not been conclusively clarified. The notification must be made within three months from the time the person obliged to notify becomes aware of the acquisition (e.g., through inheritance).
Please note: The taxable acquisition typically occurs at the time of death of the decedent and not the date of distribution to a German resident beneficiary.
Request to submit an inheritance tax return
Based on the notification of acquisition and other information that the tax office receives from third parties (e.g., courts, notaries, customs), the inheritance tax office checks whether inheritance tax is due. If the inheritance tax office concludes that inheritance tax is payable, it issues the inheritance tax assessment.
The inheritance tax office may require any party involved in an inheritance case to submit an inheritance tax return, regardless of whether they are liable to pay tax themselves (§ 31 para. 1 ErbStG). The filing deadline must be at least one month (§ 31 para. 1 ErbStG).
Information to be included in the inheritance tax return
The declaration must be made using the official forms. The following must always be submitted with
- the inheritance tax return form, also known as the "Mantelbogen" and
- the beneficiary form "Anlage Erwerber", which sets out the beneficiary’s details.
In addition, it may be necessary to submit other forms, e.g., the family home tax exemption annex.
The inheritance tax return must include details of:
- the decedent (e.g., last address, date of death, marital status, matrimonial property regime);
- the type of acquisition (e.g., by way of intestate succession, will, transparent trust, inheritance contract);
- if there is an executor: Name and address;
- the assets of the estate;
- the liabilities of the estate (Nachlassverbindlichkeiten);
- gifts (Schenkung) and other donations made by the deceased.
The beneficiary form (“Anlage Erwerber”) must include details of:
- the beneficiary (e.g., last address, relation to the decedent);
- the share of the beneficiary`s entitlement to the estate,
- other acquisitions upon the death of the decedent, e.g., by legacy (Vermächtnis), the death benefit of a life insurance (Lebensversicherung) or annuity (Rentenversicherung);
- payment of foreign death tax (which shall be offset against the German inheritance tax).
Supporting documents must be enclosed for the liabilities of the estate. It is also advisable to submit documents relating to the assets (e.g., bank statements).
If this has not already been done (e.g., as part of the notification of acquisition), a death certificate and documents relating to the reason for the acquisition (e.g., will) must also be enclosed.
Filing the inheritance tax return
The inheritance tax return must usually be submitted by the beneficiary (legatee, heir).
If there is a German executor (Testamentsvollstrecker), the inheritance tax return must be submitted by him, § 31 Para. 5 ErbStG.
The inheritance tax office can demand that the tax return is also co-signed by one or more heirs, § 31 Para. 5 ErbStG. Foreign executors are liable to file German inheritance tax returns if they qualify for a German certificate of executorship and have accepted the office by declaration towards a German probate court, e.g., by filing an application for a German certificate of executorship (Testamentsvollstreckerzeugnis).
If a curator of the estate (Nachlasspfleger) has been appointed by a German probate court (Nachlassgericht), he or she is obliged to submit the tax return, § 31 Para. 6 ErbStG.
In contrast to income tax, it is still possible and customary to submit the inheritance tax return in paper form. Electronic filing has also been possible since the beginning of 2022.
Calculation of the tax
In principle, the taxpayer does not have to calculate the tax themselves. Instead, the tax is calculated by the tax office on the basis of the information provided by the declarant.
Review of the inheritance tax return
The inheritance tax office should review the inheritance tax return in due course after the filing. If important information or supporting documents are missing, the tax office may request that they be submitted later.
The tax office's processing time depends on the complexity of the inheritance case and the resources of the responsible tax office. As many tax offices for inheritance tax are currently backlogged, it often takes months, and in some cases, years, before a decision is made.
Decision on the assessment of inheritance tax
If the requirements for the assessment of inheritance tax are met, the tax office assesses the inheritance tax and issues a tax assessment notice (Erbschaftsteuerbescheid) for each taxpayer under a special tax number.
In accordance with § 122 para. 1 AO, the tax assessment notice must be served on the person liable to pay the tax or who is affected by it. As the inheritance tax notice is usually intended for the person liable to pay the inheritance tax, it is usually issued to that person.
If there is a German executor (Testamentsvollstrecker), the executor is typically to file the inheritance tax return, and the inheritance tax assessment must be issued to the executor with effect for and against the beneficiary (§ 32 para. 1 ErbStG). No (further) notification to the beneficiary is required.
If the final tax assessment cannot be made immediately, it can be made subject to review or provisionally in accordance with §§ 164, 165 AO.
Due date of inheritance tax
Inheritance tax does not become due until the assessment has been issued (§ 220 para 2 AO). As a rule, a payment deadline of one month is set, at the end of which the tax becomes due. Deferral can be granted on application if the tax cannot be paid within the payment deadline. However, in this case, 6 % interest per year is payable on the amount of tax deferred.
Objection to the assessment of inheritance tax
The objection to the inheritance tax assessment must be lodged within one month of notification (§ 355 AO).
If the beneficiary was unable to meet the deadline through no fault of his own, he must be granted restitutio in integrum upon request. The fault of a representative is to be attributed to the represented party, § 110 AO. Restitutio in integrum is to be granted in particular if the transferee misses the deadline because the executor of the will has not brought the decision to his attention.
Preparation of the inheritance tax return by a tax advisor or lawyer
Preparation by a German tax advisor or a specialized German lawyer
In many cases, the taxpayer can and will submit the inheritance tax return themself. In more complex cases, however, it is advisable to instruct an expert to prepare the return. The client's tax advisor is often the right person to contact. In the case of an inheritance from abroad, however, they will often refer the client to a specialist lawyer, as the preparation of the inheritance tax return requires a command of the foreign language and a basic understanding of the foreign tax system. Furthermore, the lawyer can advise on arrangements to mitigate the German inheritance tax, e.g., by renunciation of the inheritance (Erbausschlagung), a disclaimer under foreign law, or a deed of variation.
Remuneration of German tax consultants or specialized German lawyers for the preparation of the inheritance tax return
Unless otherwise agreed, the preparation of an inheritance tax return is billed in accordance with the Tax Consultant Remuneration Ordinance (StBVV). This also applies in the case of preparation by a lawyer, as the Lawyers' Fees Act (RVG) generally refers to the StbVV in tax matters.
However, time-based fees or flat rates may also be permissible and appropriate (in the case of complex matters).
The costs for preparing the inheritance tax return are deductible for inheritance tax purposes.
Our service: We will be happy to prepare the notification of acquisition and the inheritance tax return for you and apply for the crediting of foreign inheritance tax, estate tax or other death tax. We will further apply
