Germany imposes inheritance tax (Erbschaftsteuer) and gift tax (Schenkungsteuer) on the transfer of assets, both through death and inter vivos gifts. Beneficiaries and donors with connections to Germany are often required to file a tax return and, in many cases, pay inheritance or gift tax.
In 2025, several thresholds and regulations continue to apply, but some valuation rules and administrative procedures have changed. This article outlines the key aspects that private individuals and advisors should be aware of when preparing an inheritance or gift tax return in Germany.
1. When Does German Inheritance or Gift Tax Apply?
German inheritance and gift tax may apply if:
- The deceased person, donor, or beneficiary is a resident of Germany.
- Assets located in Germany are inherited or gifted, even if none of the involved persons is a German resident.
- The recipient is treated as a German tax resident, even after moving abroad within the last five years (extended unlimited tax liability).
2. Tax-Free Allowances (Freibeträge) 2025
Germany grants allowances depending on the relationship between the deceased/donor and the beneficiary:
| Relationship | Allowance in 2025 |
| Spouse | €500,000 |
| Child | €400,000 |
| Grandchild | €200,000 |
| Other persons | €20,000 |
These allowances apply per transfer and per beneficiary. If multiple transfers occur, allowances may apply more than once under certain conditions.
3. Valuation of Assets — New Rules in 2025
In 2025, valuation rules for certain assets have been slightly adjusted:
- Real estate is typically valued at its fair market value, determined according to official valuation methods.
- Business assets may benefit from special reliefs under specific conditions.
- Securities, bank accounts, and other financial assets are valued at market value as of the date of death or gift.
It is important to note that the German Constitutional Court is currently reviewing parts of the valuation law (Bewertungsgesetz). Changes may occur in the near future.
4. Filing Requirements
Beneficiaries and recipients of gifts are generally required to file an inheritance or gift tax return (Erbschaftsteuer- oder Schenkungsteuererklärung) if:
- The total value of the received assets exceeds the applicable allowance.
- They receive a formal request from the German tax office (Finanzamt).
- The transfer involves complex structures, business assets, or foreign elements.
The tax return must be submitted to the competent tax office within a set period, usually 3 months after being requested to do so.
5. Tax Rates in 2025
Tax rates depend on both the relationship to the deceased/donor and the taxable value of the assets:
| Relationship | Tax Class | Tax Rate Range |
| Spouse, children | Class I | 7% – 30% |
| Parents, siblings | Class II | 15% – 43% |
| Others | Class III | 30% – 50% |
6. International Aspects
Foreign heirs and donors should be aware:
- Double taxation may arise if both Germany and another country claim inheritance or gift tax.
- Germany has few inheritance tax treaties.
- Foreign assets may still be subject to German tax if the deceased/donor or beneficiary was connected to Germany.
Professional advice is essential when dealing with cross-border situations.
7. Our Services for Inheritance and Gift Tax Returns
At WW+KN, we regularly assist clients with:
- Preparing inheritance and gift tax returns for German and foreign clients.
- Valuation of assets, including real estate and business assets.
- Structuring and optimizing inheritance and gift transfers.
- Communication with German tax authorities.
In addition, we work closely with the experienced inheritance and gift tax specialists from Baker Tilly when handling complex cases.
Important Note
This article provides general information only and does not constitute legal advice. Please consult an advisor for an individual assessment of your specific case.
If you have any questions regarding inheritance or gift tax in Germany, please feel free to contact us.
We are WW+KN, a Baker Tilly Company.
You can reach us at info@wwkn.de.
