11. May 15

Bundesverfassungsgericht overturns tax privileges for company heirs

On December 17, the German Federal Constitutional Court (Bundesverfassungsgericht) overturned tax privileges for company heirs which were said to be unconstitutional. The legislature has until mid-2016 to establish a new arrangement.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: The Bundesverfassungsgericht’s ruling on the tax privileges of company heirs was eagerly anticipated. It is now clear: the generous tax rebates for company heirs infringe the principle of equal treatment in Germany’s Basic Law (Grundgesetz) because company heirs enjoy favourable treatment compared with private heirs. The Bundesverfassungsgericht set the legislature a deadline of June 30, 2016 to establish a new arrangement. Until then, the existing provisions continue to apply.

Company heirs can benefit from the current arrangement. Subject to certain conditions, such as the preservation of most jobs and the continuation of the business, between 85 and 100 per cent of inheritance tax can be avoided. Companies with up to 20 employees enjoy tax privileges without even having to prove that jobs will be retained. Furthermore, it is debatable whether the tax privileges may also be granted to larger companies. Thus, the Karlsruhe judges have now demanded that subsequent amendments be made, yet they also conceded that the legislature is allowed to privilege certain groups if this is in the public interest.

For many family businesses, the ruling means that they ought to concern themselves with the matter of company succession in good time in order to continue to be able to benefit from the current tax privileges and adequately protect business assets during succession. To this end, they can turn to lawyers and tax advisors who are experienced in the field of tax law. They can ensure that company succession is optimally arranged from a tax perspective and that the heir, and thus also the business, is not unduly burdened following company succession.

Company succession concerns not only tax matters but also issues pertaining to the law of inheritance and family law. It is therefore advisable to reach a trouble-free arrangement regarding company succession that satisfies all of those involved with the help of a team of lawyers who are competent in the various fields of law. They can supervise company succession from the outset, develop a suitable approach and exploit the creative room for manoeuvre for the benefit of those concerned.

For more informations: https://www.grprainer.com/en/legal-advice/private-clients/law-of-succession/business-succession.html 

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