Why You Should Sell Inherited German Property Within 12 Months from the Date of Death

German Inheritance Tax on Property

If you inherit real estate located in Germany, it is generally subject to German inheritance tax (Erbschaftsteuer). Whether you actually have to pay tax in Germany depends on the total value of the estate (Erbmasse) and your familial relationship to the deceased (Verwandtschaftsverhältnis). However, a potential German tax liability always looms.

How the German Tax Authorities Value Property

The German tax office (Finanzamt) assesses the property through a specialized department within the tax authority. They issue a binding valuation (verbindliche Wertfestsetzung) specifically for the purpose of calculating inheritance tax.
This assessment can lead to both pleasant and unpleasant surprises. The valuation determined by the Finanzamt may turn out to be unexpectedly low, but in recent years—particularly in major cities—it has often been extremely high. In several recent probate cases (Erbfällen) involving properties in Berlin, Frankfurt, or Munich, the valuation set by the tax office was €100,000 higher than what actual buyers were willing to pay.

The Catch: The Strict One-Year Deadline

You might think: “Well, that’s fine. Once the German property is sold, we will just inform the tax office of the actual purchase price and apply for a retrospective adjustment—meaning a reduction of the inheritance tax.”
Under German tax law, however, this is only possible within one year from the date of death. If the property is sold after this one-year period has expired, the Finanzamt’s valuation remains legally binding for inheritance tax purposes. This holds true even if that valuation has proven to be completely unrealistic and inflated.
 
Please note that for this deadline, the relevant date is the signing of the notarial deed (Notartermin), which corresponds to the exchange of contracts.

Why One Year is Tighter Than You Think

Twelve months passes incredibly quickly when dealing with cross-border estates. Within this single year, you must:
  • Apply for and obtain a German grant of probate (Erbschein)—bearing in mind that German probate courts (Nachlassgerichte) operate slowly.
  • Instruct an estate agent (Makler) with all the KYC and AML paperwork this requires (certified and apostilled ID and other documents).
  • Find a buyer and negotiate the terms
  • complete the sale at the German notary’s office (all German property sales must be recorded by a German civil law notary)

As you can imagine, this tight deadline often becomes extremely critical—especially in cases where the succession is unclear, or where disputes arise regarding the validity or interpretation of a will (Wirksamkeit oder Auslegung eines Testaments).

Conclusion: Avoid the Valuation Risk

If you inherit property in Germany and definitely intend to sell it, do not delay. The clock is ticking if you want to avoid paying inheritance tax on an unrealistically high valuation imposed by the German tax authorities.
 

For further information on inheritance, probate proceedings (Nachlassverfahren), and inheritance tax in Germany, please see these articles:

 
 

The law firm Graf & Partners and 25 years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. We advise and represent foreign clients who wish to purchase, sell or lease property in Germany. In case you would like to obtain specific advice on a specific case or need assistance in buying, selling or leasing property in Germany, please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

Featured picture licensed from Magnific.com

Tags: