Caution in succession planning for real estate used for business purposes

The amendment of the regulations on the interest barrier (§ 4h EStG) by the Secondary Credit Market Promotion Act may have unexpected consequences for the business asset exemption under §§ 13a, 13b ErbStG for real estate used for business purposes that is held in a separate real estate company.

What is it about?

At the heart of the discussion is the abolition of the exception of the group of companies of the same legal form within the meaning of Section 4h EStG. This change has unexpected effects on the preferential treatment of business assets for inheritance tax purposes, especially with regard to rented properties within company structures. Previously , these properties were included in the assets eligible for inheritance tax relief. However, as a result of the change in the law, these properties, which were previously favored as business assets, are now classified as administrative assets, which are not favored for inheritance tax purposes. This means that their value is subject to inheritance tax in the event of an inheritance or gift, which can have considerable financial consequences.

What needs to be done?

The necessary adjustments were provided for in the so-called Growth Opportunities Act, which has not yet been implemented. The situation is exacerbated by political uncertainties and delays in the adoption of the Growth Opportunities Act.

Practical note

In order to avoid negative effects, entrepreneurial families and their advisors must adapt their business succession strategy until a legal solution is found in order to prevent undesirable tax consequences.

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