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Federal Fiscal Court: Foreign Inheritance Tax May Not Be Deductible - Tax-Law

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.


Cologne, NRW -- (SBWIRE) -- 09/12/2013 -- GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Bremen, Dusseldorf, Essen, Frankfurt, Hamburg, Hanover, Munich, Nuremberg, Stuttgart and London – conclude: 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.

Thereupon, the local revenue office assessed an inheritance tax and neither deducted the inheritance tax already paid in France from the German tax nor did it subtract it from the assessment base. Yet for reasons of fairness, the revenue office waived some of the inheritance tax.

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). The court also found that the basic rights of the European Convention on Human Rights (ECHR) do not call for a deduction and could not be used as grounds for such a deduction and not for a deduction from the assessment base either.

In the meantime, Germany and France have entered into a double taxation agreement that has come into effect on April 3, 2009. It rules out all double taxation in cases of estate tax, inheritance tax and gift tax.

Tax law is a many-faceted and complex subject that is often unmanageable for laymen. This applies particularly to international tax laws in conjunction with German tax laws. A lawyer can help to clarify inconsistencies of taxation.

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 Cologne, Berlin, Bonn, Dusseldorf, Essen, Frankfurt, Hamburg, Hannover, Munich, Stuttgart, Bremen, Nuremberg and London UK.
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