Bundesfinanzhof issues rulings on business sales and inheritance tax

The German Federal Fiscal Court (Bundesfinanzhof) has issued significant rulings regarding tax classifications for business sales and inheritance.

In one case, the court addressed whether a portion of a purchase price paid to a managing shareholder for continued service should be classified as employment income or as part of the sale price under § 17 EStG. The court ruled that the lower court had not sufficiently investigated whether the payment was an element of the purchase price formation, noting that the entire value increase of a participation should be captured under § 17 EStG.

In a separate ruling regarding inheritance tax, the court clarified the scope of the tax exemption for the so-called ‘family home.’ The decision establishes that garden and pathway areas used in conjunction with the property can be included in the tax-exempt residential area. This comes amid rising real estate values and stagnant tax allowances, which have increased the financial burden on heirs, particularly when siblings must buy out co-heirs.