Investor Guide
2026-10-10 11:33

How do you pass German commercial property to your children by gift or inheritance?

Germany taxes gifts and inheritances with one tax on one scale: a child pays 7–30% above an allowance of €400,000, and gifts from one person are added together over ten years (§§ 14, 16, 19 ErbStG). German property is taxed even if neither the parents nor the children live in Germany, while a transfer to children triggers no real estate transfer tax. The relief for let property covers only housing, so a supermarket is taxed at its full value as determined under the Valuation Act (BewG).

Gifts and inheritances are taxed alike, with one allowance per decade

Inheritance and gift tax (Erbschaft- und Schenkungsteuer) is levied both on inheritances and on gifts made during the donor's lifetime (§ 1(1) ErbStG). A child's allowance is €400,000 from each parent, a grandchild's €200,000 and a spouse's €500,000 (§ 16(1) ErbStG). Gifts from the same person within ten years are added together, and the allowance counts only once (§ 14(1) ErbStG).
Exhibit 1. The rate applies to the whole taxable amount: a €5 million gift to a child is taxed at 19%
Taxable amount after the allowance, up to €
Children and spouse (class I), %
Unrelated persons (class III), %
75,000
7
30
300,000
11
30
600,000
15
30
6,000,000
19
30
13,000,000
23
50
26,000,000
27
50
over 26,000,000
30
50
Source: § 19(1) ErbStG. Just above each band threshold, a relief applies (§ 19(3) ErbStG).
Example (our calculation): a child receives as a gift a property with a tax value of €5 million and has had no other gifts from the same parent within ten years. The tax is then 19% of €4.6 million, or €874,000.

The Valuation Act, not the purchase price, sets the tax value

A let store is valued by the income approach if the usual local rent can be determined, and otherwise by the cost approach (§ 182(3), (4) BewG). The capitalisation rate comes from the local valuation committee (Gutachterausschuss); where it has none, the rate is 6.0% for commercial property (§ 188(2) BewG). The tax value may turn out higher or lower than market value. A lower value can be proven by a valuer's report or by a sale price within a year before or after the valuation date (§ 198 BewG).
A store gets almost no relief. The law grants a 10% discount only for let residential property (§ 13d ErbStG). The reliefs for business assets usually do not help with a share in a GmbH that lets a supermarket: property let to third parties counts as "administrative assets" (§ 13b(4) no. 1 ErbStG). A GmbH share is valued net of the company's debts (see Part 9 of the series German Prime Retail).

Non-residents pay tax only on German assets

If the donor or the child lives in Germany, all property received is taxed, wherever it is located. A German citizen who left no more than five years ago also counts as living in Germany (§ 2(1) no. 1 ErbStG). If neither lives there, only German assets are taxed: real estate and a stake of 10% or more in a German company, counting the stakes of related persons. An unsecured shareholder loan without profit participation is not among them (§ 2(1) no. 3 ErbStG, § 121 BewG).
The allowance is then reduced in proportion to the foreign assets received from the same person within ten years (§ 16(2) ErbStG). If a child received only a German property from a parent, the allowance remains in full.
Germany credits foreign tax only under unlimited tax liability (§ 21 ErbStG), and it has double tax treaties on inheritance only with Denmark, France, Greece, Switzerland and the United States (Federal Ministry of Finance).

No transfer tax applies, and the holding period passes to the child

A transfer to children is exempt from real estate transfer tax, whether by gift, by inheritance or even by sale (§ 3 nos. 2, 6 GrEStG). If the property belongs to the parent personally, a child who receives it as a gift continues the parent's ten-year holding period for tax on gains from a sale (§ 23(1) sentence 3 EStG). A gift of land requires a notarial contract (§ 311b(1) BGB), and the gift must be reported to the tax office within three months (§ 30 ErbStG).

Implications for investors

1. Start from the tax value, not the purchase price. A BewG valuation can differ from market value in either direction, and a lower value can be proven by a valuer's report.
2. Plan the transfer years ahead. Gifts from one person within ten years are added together, and after that period the €400,000 allowance per child from each parent is available again.
3. Reconcile both tax systems before signing. Germany taxes a German property wherever the parties live; calculate the tax in your country of residence, and how it is credited, with a local adviser.
What to check:
• the residence of the donor and of each child at the date of the gift: it decides whether all assets or only German ones are taxed;
• the property's tax value under the BewG and the local valuation committee's capitalisation rate;
• the stakes of all family members in the German GmbH: the 10% threshold counts the stakes of related persons together;
• gift and inheritance tax in the country of residence, with a local adviser.
See also: How is German property inherited when the heirs live abroad?; Can you sell property in Germany without paying tax?; How does a double tax treaty with Germany work?
Sources: §§ 1, 2, 13b, 13d, 14, 16, 19, 21, 30 ErbStG; §§ 121, 182, 188, 198 BewG; § 3 GrEStG; § 23(1) EStG; § 311b(1) BGB; Federal Ministry of Finance, status of double tax treaties as of 1 January 2026; the series German Prime Retail, Part 9; Gordon Real Estate Group calculations. Legal position as of 10 October 2026.
Photo: Jan-Philipp Thiele / Unsplash
This page is general information and not investment, legal or tax advice.