Politics · Germany · 2 days ago
German court to review tax breaks for inherited businesses
Germany’s Constitutional Court is due to hear a case about tax breaks for people who inherit businesses.
Under current rules, 85% of inherited business assets can be tax-free if the company is kept running for five years and its total wage bill does not fall too much.
Keeping the company for seven years can remove the inheritance tax entirely, while businesses with fewer than six employees do not have to meet the wage requirement.
The rules aim to protect jobs and investment, and apply to business assets worth up to €26 million.
A man who inherited securities and property, and was told to pay about €47,000 in tax, brought the case after losing an earlier challenge.
Critics say the rules give business heirs an unfair advantage over people who inherit other kinds of wealth, while industry groups argue they help preserve companies and jobs.
The court will decide whether the rules are constitutional; the case is part of a wider debate over reforming inheritance tax in Germany.
Germany’s Federal Constitutional Court is due to examine tax breaks for business heirs on Tuesday.
The rules can exempt 85 percent of inherited business assets from tax if a company is kept operating for five years and its total wage bill does not fall too much.
Keeping the company for seven years can remove the inheritance tax entirely.
The case was brought by a man who inherited securities and property from his aunt and was assessed about €47,000 in tax.
Economists have called for reducing the business-asset tax advantages, while the German industry association says they are constitutional and serve the public good.
- Who
- Germany’s Federal Constitutional Court is reviewing the rules in a case brought by a man who inherited securities and property from his aunt.
- What
- The court will consider whether tax breaks for business heirs are constitutional.
- When
- Tuesday next week, according to the article published on October 10, 2026.
- Where
- Germany.
- Why
- The court is to decide whether the rules unfairly disadvantage other heirs; the man who brought the case challenged his tax assessment.
Reform advocates
Federation of German Industries (BDI)
Tax fairness
Reform advocates
Reform advocates argue business-asset tax advantages should be significantly reduced to ensure more equal taxation across asset types.
Federation of German Industries (BDI)
The BDI says the preferential treatment of business assets is constitutional and serves the public good.
Purpose of the rules
Reform advocates
Reform advocates say the special rules are no longer appropriate.
Federation of German Industries (BDI)
The BDI says preserving companies, their investment capacity and associated jobs is a legitimate goal.
The German Council of Economic Experts called for reform of inheritance tax in its 2025/2026 annual report.
The German Council of Economic Experts said business-asset tax advantages should be significantly reduced.
The court is due to hear a separate case concerning several provisions of inheritance and gift tax law.
The court is due to examine tax advantages for business heirs.
- Five-year condition
- 85 percent of inherited business assets can be tax-free if the company continues operating and its total wage bill does not fall too much.
- Seven-year condition
- Inheritance tax can be waived entirely if the company is kept for seven years.
- Small businesses
- Businesses with fewer than six employees do not have to meet the wage-bill condition.
- Asset threshold
- The rules apply to business assets worth up to €26 million.
- Tax relief
- €3.7 billion in tax was waived under the needs-based exemption review last year.
What people are saying
to ensure more equal taxation across all types of assets
The preservation of companies, their investment capacity and the jobs associated with them is a legitimate goal
A tax with a low rate in the range of ten percent, combined with generous deferral rules, is affordable
Sources
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