Do I Have to Pay Inheritance Tax in Germany?

Inheritance tax in Germany is an important consideration for beneficiaries, especially when the estate involves assets located in Germany. Here's a detailed look at whether you are required to pay inheritance tax and how it may apply to your situation.

 
1. Who Needs to Pay Inheritance Tax in Germany?
Inheritance tax is levied on beneficiaries if:

The deceased (testator) was a resident of Germany at the time of their death.
The estate includes assets located in Germany, such as real estate, bank accounts, or investments.
The beneficiary is a resident of Germany or a non-resident inheriting assets within Germany.
If the deceased and the beneficiary are both non-residents and the estate does not include German-based assets, inheritance tax may not apply.

 
2. Tax-Free Allowances
German inheritance tax laws provide tax-free allowances based on the relationship between the deceased and the beneficiary. These allowances reduce the taxable portion of the inheritance:

Spouse or Registered Partner: €500,000
Children: €400,000
Grandchildren: €200,000
Parents and Grandparents: €100,000
Other Beneficiaries: €20,000
Only the portion of the inheritance that exceeds these allowances is subject to taxation.

 
3. Tax Rates
The inheritance tax rate depends on:

The value of the taxable inheritance after allowances.
The relationship between the deceased and the beneficiary, which determines the tax class.
The rates range from 7% to 50%, with closer relatives typically paying lower rates and distant relatives or non-relatives paying higher rates.

 
4. Does Inheritance Tax Apply to Non-Residents?
Even if you are not a resident of Germany, you may still be required to pay inheritance tax if:

The deceased was a German resident.
The inheritance includes assets located in Germany.
Germany has double taxation treaties with some countries to prevent beneficiaries from being taxed twice on the same inheritance. If you're a Thai resident, you may need to consult a tax advisor to determine if double taxation applies.

 
5. Steps to Determine Your Inheritance Tax Obligations
Identify the Value of the Inheritance: Create a complete inventory of the deceased’s assets, including those located in Germany.
Determine Tax-Free Allowances: Assess your relationship to the deceased and calculate the applicable tax-free allowance.
Evaluate Taxable Assets: Subtract the allowance from the total value of the inheritance to find the taxable portion.
Check Double Taxation Agreements: Verify whether treaties between Germany and Thailand could reduce your tax burden.
Consult a Tax Expert: Work with a tax advisor familiar with German inheritance tax laws to ensure compliance.
 
6. What If I Can’t Pay the Tax Immediately?
If the inheritance tax owed exceeds your available resources, you may:

Request a deferment from the German tax office (Finanzamt), particularly if the inheritance includes non-liquid assets like property.
Consider selling part of the inherited assets to cover the tax liability.
 
7. Key Considerations
Real Estate: Inherited property in Germany is subject to inheritance tax, but its value can be reduced by tax allowances and deductions for maintenance costs.
Joint Accounts: Funds in joint accounts may be partially exempt, depending on contributions made by each account holder.
Sentimental Assets: Personal belongings like jewelry or artwork are also subject to valuation and taxation.
 
8. Conclusion
If you are inheriting from a German estate, it is essential to understand the inheritance tax implications. The amount you owe depends on your relationship to the deceased, the value of the inheritance, and whether any tax-free allowances apply. Consulting with a tax professional will help you navigate the process and ensure compliance, while minimizing your financial burden.