German business and property tax regulations

Germany is seeing updates and expert guidance regarding tax and legal frameworks for asset and property transfers. The Federal Ministry of Finance is implementing a ‘modified separation theory’ for the taxation of partially compensated business asset transfers. This change follows a Federal Fiscal Court ruling intended to ensure taxation reflects actual economic gains rather than ‘phantom profits.’

In the context of business continuity, experts suggest finalizing succession plans before December 31, 2026, due to proposed income tax reforms that may eliminate certain exemptions for business sales and liquidations starting in 2027.

Regarding real estate, legal guidance highlights the complexities of transferring property to children. While children can receive up to 400,000 euros tax-free from each parent every ten years, transfers carry risks related to social welfare claims and inheritance disputes. Specifically, social welfare offices may reclaim gifts made within ten years if a donor requires assistance, and siblings may claim a ‘compulsory portion supplement’ that diminishes over a ten-year period.