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Germany Referred To ECJ Over Inheritance Tax

by Ulrika Lomas, Tax-News.com, Brussels

08 October 2012


The European Commission has decided to refer Germany to the European Union (EU) Court of Justice because of its legislation on inheritance and gift tax allowances.

Under German law, a tax exemption on inheritances and gifts of up to EUR500,000 (USD650,000) is granted to German residents (depending on the degree of kinship) under article 16 of the Law on Inheritance and Gift Tax, whereas the exemption is only EUR2,000 if both the testator and the heir are not resident in Germany.

As a result, non-residents are taxed much more highly on inherited assets located in Germany than are German residents.

The Commission argues that such a provision could dissuade citizens living abroad from investing in property located in Germany. The Commission is of the opinion that this provision is discriminatory and constitutes an unjustified restriction on the free movement of capital, as provided for in the EU Treaties.

The Court of Justice had already ruled back in 2010 that the provision is contrary to the free movement of capital.

After the Commission issued a reasoned opinion, Germany amended the Law on Inheritance and Gift Tax and, since December 2011, has granted non-residents the possibility to be treated, upon request, in Germany as tax residents for the purposes of gift and inheritance tax. However, this option does not, in the view of the Commission, eliminate the infringement.

TAGS: inheritance tax | tax | investment | European Commission | law | legislation | gift tax | Germany | European Union (EU) | Europe

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