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
