Germany's Constitutional Court to Review Inheritance Tax Rules for Family Homes and Business Assets

The Bavarian state government filed a constitutional complaint challenging several inheritance- and gift-tax regulations, including how land is valued, because it believes the existing allowances do not keep pace with regional property price spikes. The Federal Constitutional Court will consider whether the preferential tax treatment for business heirs—allowing reduced or eliminated tax if the firm is kept running for a number of years—complies with constitutional standards.

Current tax-free thresholds for spouses and children stand at €500,000 and €400,000 respectively. Last year, about €3.7 billion in taxes were waived under a relief assessment, according to the Statistisches Bundesamt. Economists from the Wirtschaftsweisen call for a overhaul that would curb business-asset benefits, while the BDI defends one outlet system as essential for preserving companies and jobs.

Ifo-Institute head Clemens Fuest and DIW president Marcel Fratzscher argue the rules favor large family firms and should be reformed, whereas Federal Economy Minister Katherina Reiche rejects the proposals, emphasizing the importance of family-run enterprises. The court’s ruling date has not yet been set.