The 2009 Reform of the German Inheritance and Gift Tax Act

Abstract

Following a decision by the German Federal Constitutional Court, the German Parliament was left the choice of either following the Austrian example and have its Inheritance and Gift Tax Act (IGTA) expire, or to implement new valuation rules by 31 December 2008. Having chosen the latter path, an IGTA-Reform Act (IGTA-RA) was passed effective as of 1 January 2009. Pursuant to this IGTA-RA, every asset is now being valued at an approximation of its fair market value. At the same time, however, tax allowances were elevated and significant tax exemptions were introduced with respect to the acquisition of business assets and owner-occupied family homes in particular. The article provides an overview of the new German IGTA as amended by the IGTA-RA.