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Germany’s current inheritance tax laws are likely facing a challenge, according to economic advisor Martin Werding. Werding anticipates the Federal Constitutional Court will rule against the current regulations, stating that the generous exemptions for business assets during gifts and inheritances violate the principles of equal taxation. “If we tax higher inheritances more heavily, that must apply to all types of assets,” he told the Augsburger Allgemeine.
Werding is a member of the German Council of Economic Experts, advising the federal government on economic development. The 61-year-old economist has also worked at the ifo Institute in Munich.
Several cases concerning the inheritance tax are currently pending before the Federal Constitutional Court. The court previously declared similar regulations unconstitutional in 1995, 2006, and 2014, leading to subsequent reforms. The most pressing case centers on whether the preferential treatment of business assets over private assets violates the principle of equality. A ruling is expected later this year.
SPD Proposal Aligns with Expert Recommendations
Last week, the SPD parliamentary group presented a concept for inheritance tax reform. The proposal includes a lifetime allowance of one million euros per person, comprised of 900,000 euros for inheritances from relatives and 100,000 euros from non-relatives. Self-occupied homes would remain tax-free. Businesses would benefit from a five million euro allowance, with the option to pay taxes over a 20-year period.
The SPD’s proposal largely follows recommendations from the Council of Economic Experts. In its 2025/2026 annual report (PDF), the council advocated for inheritance tax reform, particularly regarding the scope of exemptions for business assets and personal allowances. The council also suggested a potential lifetime allowance of one million euros and the possibility of spreading tax payments over 20 years for businesses.
The Union and business associations oppose the plans. Alexander Hoffmann, leader of the CSU parliamentary group, described the proposals as “anti-performance.” Currently, business assets are largely tax-exempt when inherited.
Frequently Asked Questions
What is the SPD’s proposed lifetime allowance?
The SPD proposal includes a lifetime allowance of one million euros per person, composed of 900,000 euros for inheritances from relatives and 100,000 euros from non-relatives.
What is the key issue in the current case before the Federal Constitutional Court?
The court is examining whether the preferential treatment of business assets compared to private assets violates the principle of equal treatment under the law.
What did the Council of Economic Experts recommend regarding business assets?
The Council of Economic Experts recommended reforming the scope of exemptions for business assets, suggesting a need for change in this area.
As the Federal Constitutional Court deliberates, will Germany move towards a more equitable inheritance tax system, or will the current exemptions remain in place?
