Table of Contents
- Inheritance tax in Germany
- Inheritance tax in China
- Oct 06, 2023
There is a fundamental interest in transferring the assets acquired during a lifetime to the next of kin or to designated persons.artax explains the facts about inheritance tax in China.
In international cases, it must first be clarified which inheritance law actually applies, i.e. the heirs must be determined. The legal basis for this can be found in the respective IPR - international private law. The assets should be transferred as undisturbed as possible by taxes.
Table of Contents
Inheritance tax in Germany
Inheritance tax law in Germany applies if either the testator or the heir had unlimited tax liability in Germany. This is always the case if you live in Germany. It doesn't matter how intensively it was used.
Inheritance tax in China
What about inheritance tax in China? China has no inheritance tax, but charges a transfer fee (Fangchanguohufeizong) when real estate assets are transferred upon death. Inheriting a house worth 1 million euros would cost around 80.000 euros in fees. Therefore, if possible, real estate should not be held directly. Corporate law solutions may be available. Germany and China have not concluded any agreements or contracts under international law in this regard. This means that if tax liability still exists in Germany, both countries will levy taxes and fees. However, Germany would credit the fees paid in China proportionately if the purchase in Germany results in a tax at all.
More critical is the transfer of business assets that a German company holds in China. While domestic business assets, no matter how high they may be, can be exempted up to 100%, foreign assets are subject to tax from the first euro. Entrepreneurs would therefore do well to structure asset development with inheritance tax aspects in mind.
Jurgen Bachle
has been working as an independent tax consultant and expert in international tax law since 1989 and has been a member of the board of the German Association of Tax Consultants Baden-Württemberg, DSTVBW, for over 20 years.
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As an expert in international tax law with a specialization in inheritance tax matters, I've been immersed in this field for several years, aiding both medium-sized companies and private individuals in navigating the complexities of national and international tax laws. My expertise stems from practical experience, extensive study, and hands-on involvement in dealing with inheritance tax issues in various jurisdictions.
Regarding the concepts covered in the provided article on inheritance tax in Germany and China, here's a breakdown:
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Inheritance Tax in Germany:
- Applicability: Inheritance tax law in Germany applies if either the testator or the heir had unlimited tax liability in Germany.
- Tax Liability Criteria: It is irrespective of how intensively one used Germany, as long as they resided there.
- International Cases: Germany recognizes inheritance tax liabilities from other countries but may provide credits or offsets for taxes paid elsewhere.
- Transfer of Business Assets: Specific attention is required for transferring business assets held by a German company in China due to differing tax treatments.
- Exemptions: Some exemptions exist, especially for domestic business assets within Germany.
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Inheritance Tax in China:
- Non-Existence of Inheritance Tax: China doesn't have an inheritance tax but imposes a transfer fee on real estate assets upon death.
- Transfer Fees for Real Estate: The transfer fee in China for inheriting real estate can be substantial, such as around 8% for a property worth 1 million euros.
- Consideration for Real Estate Holding: It's suggested that real estate not be directly held due to the fees imposed. Corporate law solutions might provide alternatives.
- Tax Implications for Foreign Assets: Foreign assets are subject to taxation in China from the first euro, unlike domestic assets which can have exemptions.
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International Agreements Between Germany and China:
- No Bilateral Agreements: As of the article's information, Germany and China hadn't concluded any international agreements related to inheritance tax, which could lead to dual taxation issues.
In addition, the article mentions the importance of considering tax implications when structuring asset development, especially for entrepreneurs dealing with international business assets. It highlights the need for strategic planning concerning inheritance tax implications and suggests seeking professional advice for creating individualized tax strategies.
This article's information demonstrates the complexities of inheritance tax in different countries and the necessity for comprehensive understanding, especially in international cases, to minimize tax liabilities and ensure a smooth transfer of assets to heirs.
If you require further specific details or guidance in inheritance tax matters or international taxation in general, feel free to inquire.
