Germany’s upper house of Parliament, the Bundesrat, has approved a bill to tighten the eligibility criteria for inheritance tax exemptions for family-owned companies.
The changes mean that inheritance tax exemptions and reductions will be abolished on inheritances exceeding EUR90m (USD98.7m). In addition, inheritances worth between EUR26m and EUR90m will be subject to more stringent criteria in order to claim tax reductions. A total exemption from inheritance tax will apply in most other cases, but only if the company operates for a minimum of seven years and maintains previous employment levels.
Companies employing five staff or fewer will automatically be exempt from inheritance tax without restriction, down from 20 workers under existing rules.
The new law will apply retrospectively from July 1, 2016.
Changes to Germany’s inheritance tax rules have been brought about as a result of a Constitutional Court ruling in 2014, which said that existing rules breach the principle of fiscal equality.
IHT exemptions and reductions have benefited thousands of family-owned firms, which employ more than 50 percent of the German labor force and form the backbone of the economy. However, they are also said to perpetuate inequality and the accumulation of wealth among a relatively small number of families.
Some argue that the reforms fall short of the Constitutional Court’s ruling and could be subject to another court challenge.
Source: www.tax-news.com
