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German Inheritance Tax

Dr. Stefan Königer

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Federal Finance Court (II R 46/15) – August 30, 2017

If a third party make available its employees free of charge to an association, a gift inter vivos from the third party to the association is at hand.

In the case at hand, the saved expenses of the association result in an enrichment. Upon reversion, third party suffers a financial loss since its remuneration payments are not compensated by association. Therefore, a gift also occurs in cases of employment services without consideration.

From a practical perspective, this decision reveals the following: Firstly, an association can receive a gift as well. Secondly, in case of corporations as recipient of a gift, § 7 para. 8 Inheritance and Gift Tax Act may apply, i.e. their shareholders are considered donee, whereas partnerships are transparent for Inheritance and Gift Tax purposes resulting in a direct acquisition of their partners.

For more details see Koeniger, The German Inheritance and Gift Tax, 2017, p. 29, 69 et seqq.

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