Germany’s heirs gave away a record fortune in 2025. On 13 October Karlsruhe weighs the rules

Germany’s tax offices assessed a record €21.4bn in inheritance and gift tax in 2025, up 60.8 per cent on the year before. The federal statistics office, Destatis, put most of the increase down to one group: transfers of €20mn or more, where the tax assessed more than doubled.

Gift tax did much of the work. It rose 67 per cent, to €8.1bn, and gifts of shares in companies more than doubled. Owners of family businesses were handing them over while they were still alive.

There is a reason for the hurry. At 10am on Tuesday 13 October, the first senate of the Federal Constitutional Court in Karlsruhe hears a challenge to the rules that let business owners pass on their companies largely free of tax.

The relief on trial

Under the current law, an heir who keeps a business going for five years and broadly maintains its payroll can have 85 per cent of its value exempted. Keep it for seven years under stricter conditions and the exemption can reach 100 per cent.

Above €26mn, a needs test applies. If the heir cannot pay the tax from private wealth, it can be waived. In 2025 that test waived €3.7bn of tax, €3.4bn of it on gifts, according to Destatis.

An inherited share portfolio, flat or bank account gets no such treatment. The complaint before the court, case 1 BvR 804/22, argues that the difference breaches the constitution’s guarantee of equal treatment.

Third time in court

Karlsruhe has been here before. It struck down the business-asset rules in 2006, and again in December 2014, when it found the exemptions too generous for large companies. Both times the government rewrote the law and kept most of the relief.

The court is also hearing a second case this autumn, on whether property valuations, personal allowances and rates have kept pace with prices. Between them the two cases cover most of how Germany taxes inherited wealth.

Tax lawyers have been telling clients the window is narrowing. A ruling against the relief would probably come with a deadline for new legislation rather than immediate effect, as in 2014. But nobody knows how generous the next version would be, so the safest time to transfer a company is before the judges speak.

Who is waiting

The people with most at stake are not the headline billionaires, whose holdings often sit inside foundations already. They are the owners of the Mittelstand: engineering firms, food producers and retailers worth tens or hundreds of millions, many of them run by founders now in their seventies.

Business lobbies say that without the relief, heirs would have to sell or borrow against the companies to pay the tax. Supporters of the challenge point to the €3.7bn waived in a single year and say the needs test mostly benefits the very richest.

The oral hearing is only the start. Judgments in Karlsruhe usually follow months later. The record gift figures for 2025 suggest many owners have decided not to wait for it.

Sources

• Destatis via Presseportal: inheritance and gift tax reaches a record €21.4bn in 2025
• Federal Constitutional Court: oral hearing on relief for business assets, 13 October 2026
• CMS: Karlsruhe will decide whether inheritance tax is reformed
• anwalt.de: why case 1 BvR 804/22 is narrowing owners’ window
• ZDFheute: why taxing business assets fairly is difficult

Cover image: Guido Radig at German Wikipedia, Wikimedia Commons, CC BY-SA 3.0. Cropped.