Taxation: Commission requests Germany to amend discriminatory inheritance tax provisions

The European Commission has formally requested Germany to amend its inheritance tax and gift tax legislation which discriminates against residents of other EU Member States in breach of EU law on the free movement of capital. The Commission’s request takes the form of a „Reasoned Opinion” (second step of EU infringement proceedings). In the absence of a satisfactory response within two months, the Commission may refer Germany to the EU’s Court of Justice.

Under German tax law, a tax exemption on inheritance of up to €500 000 is granted to German residents (depending on the degree of kinship), whereas this exemption is only €2 000 if both the testator and the heir are not resident in Germany. Equivalent provisions also apply in the case of gift tax.

The Commission considers that these provisions are discriminatory and constitute an unjustified restriction on the free movement of capital, as provided for in Article 63 of the Treaty on the Functioning of the European Union and Article 40 of the European Economic Area Agreement. Such provisions could dissuade citizens living abroad from investing in property located in Germany.

Press releases issued on infringement proceedings (IP/11/294);