Tax-Free Successions

Taxing Time for German Family Firms

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Handing over the keys from one generation to the next isn't quite that easy in Germany.
  • Why it matters

    Why it matters

    Family firms are soon going to have to comply with a more complicated and pricier inheritance tax code, but lawmakers still need to sort out the specifics.

  • Facts


    • Chancellor Angela Merkel’s coalition government is tasked with implementing changes to federal inheritance tax law following a Constitutional Court ruling last year.
    • The judges ruled that Germany’s complicated tax code under charges family-owned companies, compared with other forms of capital inheritance.
    • The Bundestag will debate this week dueling legislative proposals for how to address the upheaval, with some favoring tests for inheritance-tax exemption for any company worth more than €26 million and others wanting a uniform, lower flat tax on all inheritances.
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There is still a glimmer of hope for Raimund Wilhelmi. The 66-year old head of the healthcare firm Fastenklinik Buchinger, which runs therapeutic fasting clinics in Baden-Württemburg and Marbella, Spain, is still hesitating whether to go ahead and hand over his company to his two sons. He intends to carefully follow the debates on inheritance law which begin this Friday in the Bundestag, the lower house of the German parliament.

“I really hope that economic common-sense prevails. If not, I don’t have much time left,” he said. He’s in a tight spot – his sons both want to work for the company, but not for another few years.

Business owners like Mr. Wilhelmi want to decide for themselves when to hand over the reins to their children. But German lawmakers may soon put limits on their freedom of action.

Parliamentarians are responding to a decision last year by the Bundesverfassungsgericht, the German Constitutional Court, which will usher in changes as soon as December and as late as next summer on how inheritance tax is handled.

One thing is clear – for large family-owned German companies, inheritance is about to get a whole lot trickier. And in many cases, much more expensive, too.

The constitutional court ruling has set off a last-minute rush among family businesses. “It is important for us that the equity stays in the family. Before the end of the year, we’ll arrange things so it does,” said one businessman, who preferred to remain anonymous.

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