After months of tough wrangling, the coalition agreed on a reform of inheritance tax. The core of the reform is the tax exemption of business assets, which is subject to stricter conditions compared to the previous legal situation (for the framework conditions, see TAXGATE News from 20/06/2016). Next Friday, 24 June 2016, the Bundestag is set to pass the amendments to the Inheritance and Gift Tax Act. Now that the three coalition parties represented by Horst Seehofer (CSU), Federal Economics Minister Sigmar Gabriel (SPD) and Federal Finance Minister Wolfgäng Schäuble (CDU) have negotiated the compromise, approval in the Bundestag is considered certain.
However, the reform bill still has to clear another hurdle, as the Bundesrat must also give its approval. And as things stand, this is anything but certain: not only the Greens but also voices from the SPD have criticised the compromise (F.A.Z. from 22.06.2016 p. 4). The Greens are involved in no less than ten state governments and have already prevented the proposed legislation to declare the Maghreb states of Tunisia, Algeria and Morocco as safe countries of origin. The Greens criticise the inheritance tax compromise because the privileges for large companies are too far-reaching. The SPD-led state governments of North Rhine-Westphalia and Schleswig-Holstein are also very critical of the inheritance tax reform and first want to check whether they agree to the compromise negotiated by SPD leader Gabriel.
Now, on 8 July 2016, the chamber of the federal states is to vote on both the inheritance tax reform and the draft law on safe countries of origin. This is the last Bundesrat meeting before the summer break. If the Bundesrat refuses to give its approval, the inheritance tax reform will have to be unravelled once again. There will then be 3 + 1 talks (CDU, CSU, SPD + Greens). The SPD faces the additional challenge of overcoming the concerns of the state governments it leads.
