Amendment Of The German Inheritance And Gift Tax Act

 
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On 17 December 2014, the Federal Constitutional Court held that the exemption of business assets from inheritance and gift tax is unconstitutional, as it is too broad-based. The Constitutional Court requested that the German legislator amend the rules by 30 June 2016. Finally, after lengthy discussions, the Parliament (Bundestag) and the Upper Chamber (Bundesrat - consisting of delegated members of the provinces) reached a compromise on the new rules applying to the transfer of business assets under the Inheritance and Gift Tax Act.

On 14 October 2016, the Upper Chamber approved the new legislation which will enter into force with retroactive effect from 1 July 2016. According to the new rules, the transfer of business assets from one person to another person within a ten year period may be fully exempt from inheritance and gift tax, up to an amount of €26 million. However, even if the donation exceeds €26 million, certain exemptions are potentially available. Under the new rules, there will be no exemption for assets which do not qualify as business assets but which will be transferred together with the business assets to the donee, such as real estate property which is rented out to third parties. Finally, there are a couple of other changes which increase the complexity of the existing rules and which need to be considered and analysed in connection with the succession planning.

Our recommendation

Existing structures and contracts which have been implemented on the basis of the former inheritance and gift tax rules should be checked in light of the new law. Since the new rules also provide for exemptions, there are still various options available to reduce the inheritance and gift tax due.

Directive on the VAT treatment of vouchers

The Council of the European Union adopted a Directive on the VAT treatment of vouchers on 27 June 2016. The new provisions need to be implemented by the Member States by 31 December 2018. The new rules will apply to vouchers issued on or after 1 January 2019.

For the purposes of the new Directive, a voucher...

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