Privileged business assets

German inheritance tax law provides for tax concessions for the transfer of business assets as part of succession planning. These regulations are intended to ensure that business assets are tax-privileged when transferred to the next generation in order to promote the continuity of companies. In particular, the heirs of business assets should not be (excessively) burdened with inheritance tax, as the company often represents the largest asset in the estate. Inheritance tax could then only be paid from the company's financial resources and thus deduct necessary liquidity from the company or only be financed by loans. This is to be prevented by the preferential provisions in Sections 13a and 13b ErbStG.

Tax relief for business assets

§ Section 13a ErbStG grants a relief discount on the taxable value of the business assets. The relief discount is generally 85% (standard relief), but can be extended to 100% (option relief) on application.

Prerequisites for tax relief

• The acquirer must continue the business for five or seven years

• They must comply with certain payroll and retention periods

• They may not give up or sell the company
  

Company valuation and administrative assets test

In order to be able to apply the preferential rules, there must first be sufficient business assets in the company. There must not be excessive administrative assets (such as very high cash holdings or real estate transferred to third parties for use). To this end, the company must first be valued and a so-called administrative assets test must be carried out.

If this test shows that the proportion of assets is not harmful, the transfer can be tax-privileged.

Our law firm will be happy to assist you with company succession and, in coordination with our cooperation partners, we will be happy to check the requirements for a tax-privileged transfer of company shares or business assets for you.