Inheritance tax and German citizenship

[Alberto]

What is the impact of having German citizenship on tax, or more specifically on inheritance tax?

I'm Italian and my wife is Japanese, and we reside in Germany.

I expect one day I will likely inherit some from my mum. It'll be less than the current 1M€ Italian threshold, so no payment there with current rules.
But it'll be perhaps a little more than the present 400k€ German threshold. So with current rules I expect paying some tax in Germany.
How would things be different if I had dual citizenship DE and IT.

Thank you

[PandaMunich]

What is the impact of having German citizenship on tax, or more specifically on inheritance tax?

I'm Italian and my wife is Japanese, and we reside in Germany.

I expect one day I will likely inherit some from my mum. It'll be less than the current 1M€ Italian threshold, so no payment there with current rules.
But it'll be perhaps a little more than the present 400k€ German threshold. So with current rules I expect paying some tax in Germany.
How would things be different if I had dual citizenship DE and IT.

If you live in Germany, you have to pay inheritance tax, no matter what your nationality is.

The only disadvantage to taking on German citizenship would be a lagging gift and inheritance tax liability:
If a German citizen moves away from Germany, he has to pay German inheritance/gift tax (or his heirs have to, if he dies) for up to 5 years after he moved away, see § 2 (1) Nr. 1 b) ErbStG: https://www-gesetze--im--internet-de.tr ... r_pto=wapp

[Alberto]

Alles klar, thanks.

[Emkay]

I enquired after my mother’s death. If you inherit a little over the 400k€, the tax rates increase relatively minimally over the tax free amount. Some costs can be deducted such as funeral costs, debts of the deceased, estate administration costs, property maintenance prior to transfer to heir etc.

Class I (over 400k€ as child)…..
• Up to €75,000 → 7%
• €75,001 – €300,000 → 11%
• €300,001 – €600,000 → 15%
• €600,001 – €6,000,000 → 19%
• €6,000,001 – €13,000,000 → 23%
• €13,000,001 – €26,000,000 → 27%
• Over €26,000,000 → 30%

It’s important to get a proper property valuation as soon after death as possible. I was advised that this valuation is solely relevant. Even if you eventually sell for more at a later date.

[kiplette]

That's extremely helpful, emkay. Getting an immediate evaluation makes sense when you point it out.

[PandaMunich]

It’s important to get a proper property valuation as soon after death as possible. I was advised that this valuation is solely relevant. Even if you eventually sell for more at a later date.

For a flat or for a house (a house for one family or one for two families, i.e. for a Einfamilien- oder Zweifamilienhaus) the Finanzamt will want to use the value based on the Vergleichswertverfahren: https://www.haufe.de/finance/haufe-fina ... 27883.html

Only a certified Sachverständiger/Gutachter (this is set down in § 198 (2) Bewertungsgesetz) can issue a Gutachten with a lower property value that will supersede the value the Finanzamt will want to use.

• (2) Als Nachweis des niedrigeren gemeinen Werts kann regelmäßig ein Gutachten des zuständigen Gutachterausschusses im Sinne der §§ 192 ff. des Baugesetzbuchs oder von Personen, die von einer staatlichen, staatlich anerkannten oder nach DIN EN ISO/IEC 17024 akkreditierten Stelle als Sachverständige oder Gutachter für die Wertermittlung von Grundstücken bestellt oder zertifiziert worden sind, dienen.

• (2) An appraisal by the competent expert committee within the meaning of Sections 192 et seq. of the German Building Code or by persons who have been appointed or certified as experts or appraisers for the valuation of real estate by a state, state-recognised or DIN EN ISO/IEC 17024 accredited body may regularly serve as evidence of the lower fair market value.

The other possibility to use a lower value in the inheritance tax return (or in a gift tax return) than the one the Finanzamt will want to use, is to sell the property at that lower price within 1 year of the date of death (of the date of donation in case of a gift), this is laid down in § 198 (3) BewG: https://www.gesetze-im-internet.de/bewg/__198.html

• (3) Als Nachweis des niedrigeren gemeinen Werts kann ein im gewöhnlichen Geschäftsverkehr innerhalb eines Jahres vor oder nach dem Bewertungsstichtag zustande gekommener Kaufpreis über das zu bewertende Grundstück dienen, wenn die maßgeblichen Verhältnisse hierfür gegenüber den Verhältnissen am Bewertungsstichtag unverändert sind.

• (3) A purchase price realised in the ordinary course of business within one year before or after the valuation date for the property to be valued may serve as evidence of the lower fair market value if the relevant circumstances for this are unchanged from the circumstances on the valuation date.

[Emkay]

I‘m just revisiting the matter of my inheritance after my mother‘s death last October. I‘ve confused and forgotten some issues in the overall state of things over the last year.

In December 2024, I submitted a permitted free text letter to the Finanzamt re my inheritance. Reliable Makler detailed house valuation report, and small cash inheritance. Total well under the 400k limit. I submitted the house valuation plus copies of bank statement. And, stated that I’d paid for funeral costs and my mother’s outstanding debts….without stating specific amounts for these. Some months later, I asked the Finanzamt when I can expect any kind of response from them. They said years maybe!

They said that they value themselves based on certain criteria. I don’t recall now what this is exactly though at the time, I checked and it looked like my mothers house would be valued at ca. 550k by The Finanzamt based on being semi detached, ground space (Bodenrichtwert) and living space. A huge amount more than the 328k a Makler valued at as the property is in a very poor state of repair.

I mentioned this to a Makler and he said not to worry, if sold within 2 years at ca. initial valuation, you can challenge the Finanzamt and won’t have to pay inheritance tax most likely. Values haven’t risen over the last year.

Now it’s nearly a year since my inheritance and I will definitely have to sell. Does anyone have any advice as to whether I should now get an official Gutachten? If I put the house on the market now, most Makler have said that selling usually takes 8-14 months. Seems quite realistic based in my observations on houses for sale in the town since last year.

Any advice would be much appreciated.

[PandaMunich]

I mentioned this to a Makler and he said not to worry, if sold within 2 years at ca. initial valuation, you can challenge the Finanzamt and won’t have to pay inheritance tax most likely. Values haven’t risen over the last year.

Now it’s nearly a year since my inheritance and I will definitely have to sell. Does anyone have any advice as to whether I should now get an official Gutachten? If I put the house on the market now, most Makler have said that selling usually takes 8-14 months. Seems quite realistic based in my observations on houses for sale in the town since last year.

If you sell it within 1 year (not 2 years!) of the date of your mother's death, then that lower real market value will be used by the Finanzamt as the value with regards to inheritance tax, see § 198 (3) BewG: https://www.gesetze-im-internet.de/bewg/__198.html

• (3) Als Nachweis des niedrigeren gemeinen Werts kann ein im gewöhnlichen Geschäftsverkehr innerhalb eines Jahres vor oder nach dem Bewertungsstichtag zustande gekommener Kaufpreis über das zu bewertende Grundstück dienen, wenn die maßgeblichen Verhältnisse hierfür gegenüber den Verhältnissen am Bewertungsstichtag unverändert sind.

• (3) As evidence of the lower fair market value, a purchase price for the property to be valued that was agreed in the normal course of business within one year before or after the valuation date may be used if the relevant circumstances for this remain unchanged compared to the circumstances on the valuation date.

If you don't manage by then, get a Gutachten by a vereidigten Sachverständigen, that also overwrites the Finanzamts higher valuation, and it doesn't come with a 1 year deadline like the sale, see § 198 (2) BewG:

• (2) Als Nachweis des niedrigeren gemeinen Werts kann regelmäßig ein Gutachten des zuständigen Gutachterausschusses im Sinne der §§ 192 ff. des Baugesetzbuchs oder von Personen, die von einer staatlichen, staatlich anerkannten oder nach DIN EN ISO/IEC 17024 akkreditierten Stelle als Sachverständige oder Gutachter für die Wertermittlung von Grundstücken bestellt oder zertifiziert worden sind, dienen.

• (2) Proof of the lower fair market value may be provided by an appraisal report issued by the competent appraisal committee within the meaning of Sections 192 et seq. of the German Building Code (Baugesetzbuch) or by persons who have been appointed or certified by a state, state-recognised or DIN EN ISO/IEC 17024-accredited body as experts or appraisers for the valuation of real estate.