Who pays inheritance tax in Germany -- the estate or the beneficiary?

Under SS 1 and SS 10 ErbStG, German inheritance tax (Erbschaftsteuer) is levied on the individual beneficiary, not on the estate. Each recipient calculates tax separately on their own acquisition after deducting their personal Freibetrag. This means siblings inheriting the same estate each face their own tax bill based on their own relationship class and allowance -- and high-class recipients may owe far more than close relatives receiving the same share [DE1].

What is the personal allowance for a child inheriting from a parent?

A child -- including a stepchild or adopted child -- is entitled to a Freibetrag of EUR 400,000 under SS 16(1) ErbStG. This allowance applies separately to each child per parent, resets every 10 years for lifetime gifts, and is deducted before the tax rate table is applied. A grandchild whose parent is still alive receives EUR 200,000; if the intermediate parent is predeceased, the grandchild steps into the parent's position and receives EUR 400,000 [DE1][DE2].

How does the 10-year gift rule affect what a recipient owes on an inheritance?

Section 14 ErbStG aggregates all acquisitions from the same transferor to the same recipient within any rolling 10-year window. If a parent gifts EUR 400,000 to a child in year one (covered by the Freibetrag) and dies in year five leaving a further EUR 200,000, the two amounts combine to EUR 600,000, the Freibetrag applies once, and Class I tax is assessed on the EUR 200,000 excess. Credit is given for any tax paid on earlier gifts within the window [DE1][DE3].

Is the family home exempt from inheritance tax in Germany?

Yes, under SS 13(1) No. 4b and 4c ErbStG. A surviving spouse inheriting the family home receives a full exemption with no area cap, provided they occupy the property as their principal residence immediately and for at least 10 years. Children receive the same exemption but only for up to 200 square metres of floor area; any excess is taxable. If occupancy ceases within the 10-year window other than through compelling hardship, the exemption is clawed back in full [DE4].

Are worldwide assets taxed if the deceased or heir was a German resident?

Yes. Under SS 2(1)(1)(a) ErbStG, unlimited tax liability applies to the entire worldwide acquisition whenever either the deceased at death or the beneficiary at acquisition is a German tax resident -- meaning they hold a German domicile or habitual abode. German citizens who emigrate remain subject to worldwide liability for 5 years after departing if they take up residence in a low-tax jurisdiction. Where neither party is resident, only German-situs assets are within scope [DE1][DE5].

Inheritance and Estate Tax in Germany — Rates, Rules & Filing

Germany levies inheritance and gift tax (Erbschaftsteuer and Schenkungsteuer) under a single statute, the Erbschaftsteuer- und Schenkungsteuergesetz (ErbStG), administered by the Finanzamt (local tax office) under the supervision of the Bundeszentralamt fuer Steuern. Unlike estate-based systems in some other jurisdictions, the German tax falls on the individual beneficiary at the time of each acquisition, whether by death or by lifetime gift. Rates and allowances both depend on the relationship between the transferor and the recipient, which determines which of the three statutory tax classes applies.

Who is taxed and at what rate? The three Steuerklassen

The ErbStG divides all recipients into three classes under SS 15:

Class I (Steuerklasse I): Spouses and registered civil partners, children and stepchildren, grandchildren (including adopted and step-grandchildren), and -- in inheritance cases only -- parents and grandparents. Progressive rates run from 7% on amounts up to EUR 75,000 to 30% on amounts over EUR 26,000,000.
Class II (Steuerklasse II): Parents and grandparents when they receive a gift (lifetime transfers only), siblings, nieces and nephews, stepparents, parents-in-law, and divorced spouses. Rates run from 15% on amounts up to EUR 75,000 to 43% on amounts over EUR 26,000,000.
Class III (Steuerklasse III): All other persons, including unrelated individuals and more distant relatives. Rates run from 30% on amounts up to EUR 6,000,000 to 50% on amounts over EUR 13,000,000.

Rates apply to the entire taxable acquisition -- not incrementally -- so a single euro crossing a bracket threshold materially changes the total liability. A tapered marginal-relief mechanism under SS 19(3) ErbStG caps the additional tax to the amount by which the acquisition exceeds the bracket threshold, preventing cliff-edge results [DE1].

Relationship	Tax Class	Personal Allowance	Rate Range
Spouse / registered civil partner	I	EUR 500,000	7% - 30%
Child (including stepchild / adopted)	I	EUR 400,000	7% - 30%
Grandchild (parent alive)	I	EUR 200,000	7% - 30%
Grandchild (parent predeceased)	I	EUR 400,000	7% - 30%
Great-grandchild / other Class I descendant	I	EUR 100,000	7% - 30%
Parents / grandparents (inheritance only)	I	EUR 100,000	7% - 30%
Siblings, nieces/nephews, in-laws, stepparents	II	EUR 20,000	15% - 43%
All other persons	III	EUR 20,000	30% - 50%

What allowances (Freibetrag) reduce the taxable amount?

Every recipient is entitled to a personal allowance (Freibetrag) under SS 16 ErbStG, which is subtracted from the gross acquisition value before tax is computed. These allowances have been unchanged since the 2009 reform:

Spouse or registered civil partner: EUR 500,000
Child or stepchild: EUR 400,000 per child
Grandchild (parent still living): EUR 200,000; rises to EUR 400,000 if the intermediate parent is predeceased
Parents and grandparents (on inheritance): EUR 100,000
Siblings, nieces, nephews, in-laws, and other Class II recipients: EUR 20,000
Unrelated persons (Class III): EUR 20,000

In addition to the personal Freibetrag, surviving spouses receive a supplemental maintenance allowance (Versorgungsfreibetrag) of EUR 256,000 under SS 17 ErbStG, reduced only by the capitalised value of any statutory widow's pension they are entitled to receive. Minor children receive age-graded Versorgungsfreibetrag amounts ranging from EUR 52,000 (age 0-5) down to EUR 10,300 (age 20-27), again reduced by any orphan's pension entitlement [DE1][DE2].

A separate small allowance of EUR 41,000 applies to movable household goods and personal effects for Class I recipients under SS 13(1) No. 1 ErbStG, and EUR 12,000 for all other classes.

How does the 10-year rolling gift window work?

Germany unifies inheritance tax and gift tax through an aggregation rule under SS 14 ErbStG: all gifts made by the same donor to the same recipient within any rolling 10-year period are added together, along with any subsequent inheritance from that donor, to determine the applicable tax bracket. Crucially, the personal Freibetrag also resets every 10 years. This means a parent can transfer EUR 400,000 to a child free of tax at year zero, and again at year ten -- making systematic gifting a recognised and lawful way to transfer wealth incrementally without breaching the threshold [DE1][DE3].

When a later transfer (including an inheritance) pushes the 10-year running total above the Freibetrag, tax is computed on the cumulative amount at the rate applicable to the total, and credit is given for any tax already paid on earlier gifts within the same window. Recipients generally have three months from receiving notification from the Finanzamt to submit a tax return (Erbschaftsteuererklarung or Schenkungsteuererklarung).

What reliefs apply to family homes and business assets?

Family home (Familienheim) -- SS 13(1) ErbStG: A surviving spouse who inherits the family home (located in Germany, the EU, or the EEA) is fully exempt from inheritance tax on that property, provided the home was the primary residence of the deceased and the surviving spouse moves in and continues to occupy it personally. The exemption is forfeited retroactively if the surviving spouse ceases personal occupation within 10 years of inheriting, except in cases of compelling hardship such as a requirement for residential care. Children and stepchildren who inherit the family home are likewise exempt, subject to the same 10-year occupancy requirement, but with a critical additional constraint: the floor area may not exceed 200 square metres. Any area above 200 square metres is taxable in the normal way. If a child sells the property or ceases personal occupation within the 10-year window, the exemption is clawed back in full [DE4].

Business assets (SS 13a, 13b ErbStG): Two relief options are available for qualifying business property (Betriebsvermogen), agricultural and forestry land, and interests in commercial partnerships or corporations where the holding exceeds 25%:

Standard relief (Regelverschonung): 85% of the qualifying business asset value is exempt from tax. The acquirer retains the business for at least 5 years and meets a payroll wage-sum test (minimum aggregate payroll over 5 years of 400% of the baseline wage level; reduced thresholds apply for businesses with fewer than 15 employees).
Full relief (Optionsverschonung): An irrevocable election under SS 13a(10) ErbStG provides 100% exemption, requiring a 7-year retention period and a stricter wage-sum test (700% aggregate). The proportion of administrative assets within the business may not exceed 20% of total business value to qualify.

Relief is recaptured retroactively if the business is sold, dissolved, or the payroll threshold is breached within the retention window. The acquirer must notify the competent Finanzamt within one month of any breach [DE4].

Who is subject to German inheritance tax on worldwide assets?

Germany operates a dual-scope system under SS 2 ErbStG:

Unlimited tax liability (unbeschrankte Steuerpflicht): If either the deceased (at the date of death) or the beneficiary (at the date of acquisition) is a tax resident of Germany -- that is, has a domicile (Wohnsitz) or habitual abode (gewohnlicher Aufenthalt) in Germany -- German inheritance or gift tax applies to the entire worldwide acquisition, regardless of where assets are located [DE1][DE5].
Extended unlimited liability (erweiterte unbeschrankte Steuerpflicht): German citizens who have emigrated remain subject to worldwide inheritance tax exposure for 5 years after ceasing German residence, under SS 2(1)(1)(b) ErbStG, where they reside in a low-tax jurisdiction.
Limited tax liability (beschrankte Steuerpflicht): Where neither party is a German resident and the above extended rule does not apply, only German-situs assets (Inlandsvermogens) are subject to German inheritance tax. In limited-liability cases, the Freibetrag is reduced to EUR 2,000 under SS 16(2) ErbStG unless an election is made to be treated as fully liable [DE5].

Germany does not operate a comprehensive bilateral estate-tax treaty network; the treaty in force covering inheritance and gift tax with the United States dates from 2000. In cross-border cases within the EU, Succession Regulation No. 650/2012 (Brussels IV) governs which country's succession law applies to the estate -- though it does not harmonise the underlying tax rules.

For a broader overview of the German tax landscape, see the Germany country overview. For individual guidance on Erbschaftsteuer, Schenkungsteuer, cross-border estates, or business asset relief elections, a qualified Steuerberater or Fachanwalt fuer Erbrecht can assess the specific facts and applicable reliefs -- this page summarises the statutory rules as sourced from gesetze-im-internet.de and does not constitute legal or professional guidance.

Inheritance and Estate Tax in Germany

Key points