BERLIN: Germany’s upper house of parliament approved a reform of the country’s inheritance tax rules, a move needed after the highest court had ordered an overhaul of the country’s corporate succession laws.
Under the bill, people inheriting family-owned companies would continue to receive preferential tax treatment if they hold on to the company and preserve jobs, but conditions for tax breaks have been tightened.
Germany’s highest court had ordered the government to meet a deadline of June this year to reform laws that benefit mainly the country’s richest families, or face a court discussion of possible amendments to the rules this autumn.
The court in 2014 ruled that the inheritance tax law violated the constitutional principle of fair taxation when preferential treatment was extended to all companies–including large corporations–without case-by-case checks as to whether such exemptions were economically justified.
The near-blanket exemption from inheritance taxes for corporate successions has helped make Europe’s largest economy home to some of the world’s oldest and wealthiest corporate dynasties and some of the most tightly held businesses in the world.
Family-owned companies account for 91% of German businesses, one of the highest levels in the world. The Mittelstand, the small to midsize companies that are the backbone of the German economy and its export prowess, are often family- owned.
They generate more than half of the country’s economic output and employ 56% of its workforce, according to the Foundation for Family Businesses.
