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No Inheritance Tax on Acquisition through a Foreign Legacy

06.09.2022

(updated on

07.04.2026

)

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If a person living abroad is granted domestic real property by way of a legacy from a testator who also lived abroad, the beneficiary under the legacy does not have to pay German inheritance tax on the real property.Decision of the Federal Fiscal Court:A testatrix who had lived in Switzerland until her death bequeathed a property in Munich to her niece who was living in the United States. After the death of the testatrix the niece was entered in the land register as owner of the property. When, however, the tax office demanded inheritance tax from the niece for the acquisition of the property, she brought an action before the Federal Fiscal Court.The court held that, unlike German nationals and persons who have their residence or habitual abode in Germany, heirs from abroad or legatees are only subject to limited tax liability. In principle domestic real property is also covered by this. If, however, the testator bequeaths a domestic property in a will to a foreign heir or legatee, this remains tax free for the reason that the beneficiary under the legacy acquires only a claim to transfer of title to the domestic property and not the property itself.It must be borne in mind, however, that in certain EU countries a beneficiary under a legacy acquires direct ownership of the domestic real property and is therefore liable to tax. The EU Succession Regulation must be observed in this respect. In addition, a foreign heir would also be subject to tax in the case of intestate succession.

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