Inheritance tax is the most expensive tax one can pay "just like that." On a €5 million business, up to 30% tax applies in tax class I — €1.5 million in substance withdrawal per generation. §§ 13a/13b ErbStG offer massive exemptions — but they require preparation.
The two exemption options
Standard exemption (85% tax exemption)
85% of inheritance/gift tax is exempted on qualified business assets. The remaining 15% is taxable. Requirements:
- Administrative asset ratio ≤ 90% (otherwise no benefits)
- Payroll regulation: 5-year payroll sum ≥ 400% of the initial payroll sum
- Minimum holding period 5 years
Option exemption (100% tax exemption)
Complete tax exemption against the following stricter requirements:
- Administrative asset ratio ≤ 20%
- Payroll regulation: 7-year payroll sum ≥ 700% of the initial payroll sum
- Minimum holding period 7 years
Anyone who violates the minimum holding period — through sale, abandonment, or excessive withdrawal — loses the exemption retroactively (proportionally in case of sale). The inheritance tax will then be assessed retroactively and is due immediately; late payment interest according to § 233a AO does not apply to inheritance tax. However, if the tax was deferred under § 28 ErbStG, deferral interest of 0.5% per month (6% per year, § 238 AO) will accrue after the interest-free first year. Example: An exemption of over €1 million can lead to a six-figure, immediately due payment if sold after 4 years.
What is eligible property?
According to § 13b of the Inheritance Tax Act, the following are eligible:
- Shares in domestic corporations (at least 25%)
- Shares in corporations based in the EU/EEA (at least 25%)
- Agricultural and forestry assets
- Business assets of a partnership (KG, OHG, GmbH & Co. KG)
What is not eligible (administrative assets)?
Caution: If the share of administrative assets is too high, the exemption fails. Typical administrative assets include:
- Properties rented to third parties (except in conjunction with operational business)
- Securities and comparable claims
- Art objects, precious metals, coins
- Liquid assets and claims exceeding 15% of the company's value
The most important lever: Structuring 5 years in advance
Anyone who structures 5 or 7 years before the planned transfer has all the levers:
- Reduce administrative assets: Redirect liquidity surplus into operational assets (machines, investments, working capital).
- Secure payroll sums: Maintain personnel levels at a solid level before the transfer to meet the payroll regulation.
- Optimize holdings: Shares < 25% cannot be transferred with benefits — possibly bundle or restructure.
- Utilize multiple exemptions: Personal exemptions apply every 10 years again. Those who give early can utilize two cycles.
Exemptions in detail
| Recipient | Exemption amount (every 10 years) |
|---|---|
| Spouse/Partner | 500.000 € |
| Child (per parent) | 400.000 € |
| Grandchild | 200.000 € |
| Parents (in inheritance) | 100.000 € |
| Siblings, Nieces/Nephews | 20.000 € |
Typical mistakes in practice
- Starting too late: 1–2 years before the generational change is not sufficient for serious structuring.
- Overlooking liquidity as administrative assets: €2 million in bank accounts can jeopardize the exemption.
- Ignoring payroll amounts: Reducing staff before transfer jeopardizes the exemption.
- Not clarifying valuation issues: The tax value can significantly differ from the market value — choose a valuation method.
Over 20 years of consulting practice for entrepreneurs, investors, and family businesses. Tax-related reserved tasks are provided by the partner firm TABAK Steuerberatung.
Firm Profile →Prepare succession in a structured manner.
We work with clients for an average of 5–7 years on tax-optimized succession — with exemption path, administrative asset check, cash pool strategy, and notary support.