Update on inheritance tax: The SPD submits concept paper for a new regulation

Does inheritance tax need to be reformed? This fundamental political question is being hotly debated in light of the long-awaited ruling by the Federal Constitutional Court. 

While family businesses and their interest groups reject the SPD's proposals, voices in politics and even in the ruling coalition are leaning toward adjusting the existing legal situation. 

The SPD wants to reform inheritance tax – what are the party's plans? 

The key points of this concept paper are:

• There should be a “lifetime allowance” of one million euros for each acquirer, i.e., heir or donee. 

This consists of two elements: an amount of €900,000 can be used for inheritances and gifts from family members. A further €100,000 is available for acquisitions from persons who are not related or are distantly related. 

• The current regulations on business asset relief are to be abolished. 

The SPD wants to grant only a tax allowance of five million euros for inheritances and gifts of shares in companies. 

The tax liability arising from acquisitions of business assets in excess of this amount is to be deferred for up to a maximum of 20 years. 

Assessment 

In contrast to the current inheritance tax law, tax exemption regulations would only benefit small family businesses. Large family businesses, on the other hand, would be disproportionately burdened. It also remains questionable whether the deferral rules planned by the SPD would provide sufficient economic relief for heirs or donees. 

Pending ruling by the Federal Constitutional Court (Ref.: 1 BvR 804/22) 

It is also significant that the SPD did not wait for the Federal Constitutional Court's final decision on the constitutionality of the current inheritance tax law, and in particular the exemption rules for business assets provided for therein, before presenting its concept paper, but instead wants to create a fait accompli. 

This approach has prompted the other coalition parties, the CDU and CSU, as well as numerous business and interest groups, to react critically and clearly reject the SPD's proposal.  

Immediate action required for family businesses and their shareholders!  

“It won't get any better” – this motto sums up the current situation. 

Even if the Federal Constitutional Court were to rule that individual provisions of the current inheritance tax law are constitutional, a fundamental reform initiated by the legislature is to be expected. 

It is highly likely that special tax breaks for housing companies and the application of the exemption requirement test pursuant to Section 28a ErbStG (tax exemption for large acquisitions), in particular to foundations in Germany and abroad, will be abolished. 

Anyone who wants to secure the current favorable inheritance tax law and avoid high tax burdens in the future when transferring companies should immediately take a close look at the issue and implement suitable tax-saving concepts in good time before a comprehensive reform comes into force. 

Time is running out! The ruling of the Federal Constitutional Court is expected in the second half of 2026 at the latest – so as an entrepreneur, you should act quickly. 

We would be happy to advise you on the development and implementation of a suitable succession plan and all the necessary process steps, from the valuation of the company's assets with the help of our “BEST” tool to tax declaration and enforcement with the tax authorities.