How high is inheritance tax in Germany? 100 million € inheritance example calculation + tax optimization

Why does SPIEGEL talk about only 1.5 percent inheritance tax for large company inheritances – and how is this figure arrived at? The overview explains the most important mechanisms, shows a simple example calculation and lists the conditions and typical pitfalls.

What does the 1.5 percent figure mean?

How to inherit, what to do? It’s not for nothing that inheritance tax is also known as the“stupid tax“. In other words, anyone who doesn’t deal with it is stupid. Why? You can see that very quickly here: €30 million becomes a tax burden of just €1.5 million.

The 1.5 percent is not a statutory tax rate, but an effective average that can result from very large company inheritances. It arises when exemption rules for business assets, deferrals and, in some cases, waivers come together. As a result, only a small part of the estate value is taxed at all.

Here is a concrete example calculation that shows how the effective tax rate falls from 30% to just 1.5% for a 100 million euro company inheritance. Extra short, so it’s easy to understand.

1st starting point – without benefits

Statutory rate: 30 %

Calculation:
€ 100 million × 30 % = € 30 million tax
→ Effective tax burden: 30 %

2. relief discount (85 % standard relief)

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

Calculation:
100 million × 15% = € 15 million taxable
15 million × 30 % = € 4.5 million tax
→ Effective tax burden: 4.5 %

3. option exemption (100% exemption possible)

Anyone who undertakes to continue the company for 7 years and not to reduce the payroll significantly can even apply for 100% tax exemption.

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

4. combination of structuring & deferral

In practice, there is often a mixture:

• Parts of the assets are outsourced to holding structures.
• Tax payments are deferred without interest for 7 years.
• The tax can be partially waived in the case of a “needs test“.

That means:

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

5. overview of the calculation

Here is an overview:

Step	Taxable amount	Tax burden	Effective rate
Without discount	100 million €	30 million €	30 %
With 85 % relief	15 million €	4.5 million €	4,5 %
With holding & deferral	5 million €	1.5 million €	1,5 %
With 100 % option protection	0 €	0 €	0 %

In short: you only pay €1.5 million in taxes this way

Legally, the state could demand €30 million. In reality, the company heir often only pays € 1.5 million due to tax exemption regulations, holdings and deferrals.

End.

In case you’re wondering… no family foundation involved?

The 1.5 % from the SPIEGEL article comes about without a family foundation – solely due to the statutory exemption of business assets. A family foundation can have a supplementary effect, but is not the reason for this figure.

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

• With a family foundation, assets can be transferred before inheritance.
• This allows inheritance tax obligations to be avoided or deferred.
• However, different rules apply here: Inheritance tax is payable, but with a time lag (e.g. every 30 years).

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

Learn more about the:

• Family foundation