After lengthy discussions, the CDU/CSU and SPD have agreed on a reform of inheritance tax. In principle, the exemption of business assets is to remain in place, but under stricter conditions.

The basis for discussion was a draft bill from the German government dated 8 July 2015, which the parties were unable to agree on. Compared to this draft, the CDU, SPD and CSU have agreed on the following changes:

  • In order to reduce the burden on small companies, the payroll check will not apply to companies with up to five employees. In the original draft, the threshold had been lowered further.
  • With the aim of restricting tax structuring, exemption from inheritance and gift tax is excluded if the harmful administrative assets exceed 90% of the business assets.
  • A new feature is the favouring of funds from the inheritance that are to be invested in the company within two years of death in accordance with the testator's will.
  • The concept of administrative assets is retained. In contrast, the draft provided for a definition of business assets. 10% of administrative assets should remain harmless. 15% of cash and financial resources may be held by the company.
  • In the case of restrictions on the disposal of shares, a tax exemption of up to 30% of the company value is to apply, provided that the restrictions exist two years before and 20 years after the death/gift.
  • From favoured assets of EUR 26 million per acquirer, a tax exemption requirement test or a tax exemption discount model is envisaged. From an acquisition of EUR 90 million (with a holding period of 7 years, payroll 700%) or EUR 89.75 million (with a holding period of 5 years, payroll 400%), there will no longer be any tax relief.
  • A reduction in the capitalisation factor from 17.86 to a corridor of 10 to 12.5 was renegotiated, resulting in lower company values.
  • Finally, a new entitlement to deferment for up to 10 years has been introduced if business assets are transferred by reason of death and the holding period and payroll regulation are complied with.

In its ruling of 17 December 2014, the Federal Constitutional Court set a deadline of 30 June 2016 for a new regulation. The legislative process cannot be finalised by then. The law is therefore to come into force retroactively from 1 July 2016.