According to the BFH, Foreign Inheritance Tax May Not Creditable – Germany
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If inheritance tax paid in a foreign country is not meant to be deductible in Germany, it is disregarded when the German inheritance tax is calculated.
In its decision of June 19, 2013 (File No. II R 10/12), the Federal Fiscal Court (BFH) ruled that higher-ranking law does not result in an obligatory tax credit. The BHF further ruled that for reasons of fairness, this double taxation must be alleviated under certain circumstances.
In this case, a law suit was filed by a co-heiress who had invested her capital assets in France and elsewhere. The capital assets included a bank balance and fixed income securities. In France, an inheritance tax rate of 55% was applied to the heiress’s capital assets, and in Germany, she was also forced to pay inheritance tax because at the time there was no provision for deducting the already paid inheritance tax – neither through a double taxation agreement nor by any German tax credit regulations.
The law suit was unsuccessful. The BFH also confirmed the decision of the Fiscal Court (FG). It explained that there is nothing in European law that would rule out several countries charging an inheritance tax, and that this also applies to the established case law of the Court of Justice of the European Union (CJEU).
In the meantime, Germany and France have entered into a double taxation agreement. This has come into effect on April 3, 2009.
The tax law is particularly layered and complex in terms of international tax law in relation to the German tax law. A lawyer can help to clarify inconsistencies of taxation.
ABOUT THE AUTHOR: GRP Rainer LLP
GRP Rainer LLP is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices in Cologne, Berlin, Bonn, Düsseldorf, Essen, Frankfurt, Hamburg, Hanover, Munich, Stuttgart, Bremen, Nuremberg and London UK.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
In this case, a law suit was filed by a co-heiress who had invested her capital assets in France and elsewhere. The capital assets included a bank balance and fixed income securities. In France, an inheritance tax rate of 55% was applied to the heiress’s capital assets, and in Germany, she was also forced to pay inheritance tax because at the time there was no provision for deducting the already paid inheritance tax – neither through a double taxation agreement nor by any German tax credit regulations.
The law suit was unsuccessful. The BFH also confirmed the decision of the Fiscal Court (FG). It explained that there is nothing in European law that would rule out several countries charging an inheritance tax, and that this also applies to the established case law of the Court of Justice of the European Union (CJEU).
In the meantime, Germany and France have entered into a double taxation agreement. This has come into effect on April 3, 2009.
The tax law is particularly layered and complex in terms of international tax law in relation to the German tax law. A lawyer can help to clarify inconsistencies of taxation.
ABOUT THE AUTHOR: GRP Rainer LLP
GRP Rainer LLP is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices in Cologne, Berlin, Bonn, Düsseldorf, Essen, Frankfurt, Hamburg, Hanover, Munich, Stuttgart, Bremen, Nuremberg and London UK.
Copyright GRP Rainer LLP
More information about GRP Rainer LLP
View all articles published by GRP Rainer LLP
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
