How high is the inheritance tax in Germany? 100 Mio. € Heritage Example Calculation + Tax Optimization

Why does SPIEGEL speak of only 1.5 percent inheritance tax on large business inheritances – and how does this figure come about? The overview explains the most important mechanisms, shows a simple example calculation, and lists the conditions as well as typical pitfalls.

What does the 1.5 percent figure mean?

How to inherit, what to do? Not without reason is the inheritance tax also called the “fool’s tax“. This means that whoever does not deal with it is foolish. Why? You will see here very quickly, so 30 million euros become only 1.5 million euros in tax liability.

The 1.5 percent is not a legal tax rate, but an effective average that can result from very large business inheritances. It arises when exemptions for business assets, deferrals, and sometimes waivers coincide. As a result, only a small part of the estate’s value is actually taxed.

Here is a concrete calculation example that shows how the effective tax rate of 30% on a 100-million-euro business inheritance can drop to just 1.5%. Extra short, to make it understandable.

1. Starting point – without benefits

Legal rate: 30 %

Calculation:
100 Mio. € × 30 % = 30 Mio. € Control
→ Effective tax burden: 30 %

2. Relief discount (85 % relief rule)

The Law on Inheritance and Gift Tax (ErbStG) allows for 85 % tax exemption for business assets, if the business is continued for at least 5 years.

Calculation:
100 Mio. € × 15 % = 15 Mio. € taxable
15 Mio. € × 30 % = 4.5 Mio. € Control
→ Effective tax burden: 4.5 %

3. Option relief (100 % exemption possible)

Anyone who commits to continuing the company for 7 years and does not significantly reduce the total wages can even apply for 100 % tax exemption.

Calculation:
100 Mio. € × 0 % = 0 € tax
→ Effective tax burden: 0 %

4. Combination of Design & Deferral

In practice, there is often a mix:

• Parts of the assets are transferred into holding structures.
• Tax payments are deferred interest-free over 7 years.
• During the ” Need Assessment “, the tax can be partially waived.

That means:

Real effect:
Instead of 4.5 million €, often only 1.5 million € flows to the tax office.
→ Effective tax burden: 1.5%

5. Overview of the calculation

Here is an overview:

In short: This is how you pay only 1.5 million € in taxes

Legally, the state could demand 30 million €. Effectively, the company heir often pays only 1.5 million € through exemption rules, holdings, and deferrals.

End.

If you’re wondering… no family foundation involved?

The 1.5% from the SPIEGEL article comes about without a family foundation – solely through the legal exemption of business assets. A family foundation can be supplementary, but it is not the reason for this figure.

A family foundation, on the other hand, is an independent planning tool. It can also be used for tax optimization, but in a different way:

• With a family foundation, assets can be transferred before the event of inheritance.
• This can help avoid or delay inheritance tax obligations.
• However, different rules apply here: substitute inheritance taxes apply, but they are staggered (e.g. every 30 years).

In combination with business assets, a family foundation can be used to save additional taxes, but this is a separate strategy.

Learn more about:

• Family foundation