Inheritance substitute tax (Germany)
Erbersatzsteuer
Other languages: Deutsch · Français · Español
German tax that charges the assets of domestic family foundations every 30 years as if they passed to two children.
The legal basis is section 1(1) no. 4 of the Inheritance and Gift Tax Act. The reference date follows from the first transfer of assets to the foundation.
In practice
The inheritance substitute tax can be planned but is often underestimated: every 30 years, the assets of a German family foundation are taxed as if they passed to two children – with the corresponding allowances and tax rates. Because the reference date is known well in advance, valuation, liquidity needs and possible relief rules should be examined early. On application, the tax can be paid in instalments over up to 30 years, which eases the foundation's liquidity planning.
Distinctions and common mistakes
The tax only concerns domestic family foundations and family associations; charitable and foreign family foundations are not subject to it. Typical mistakes are a reference date that is not in any deadline calendar, missing liquidity for the tax and the assumption that allowance and tax rate depend on the actual number of beneficiaries – the calculation always assumes two children.
Relevant in: Germany
Related terms
- Family foundation
- A foundation whose purpose lies predominantly in the interest of one or more families.