# BVerfG Reviews Inheritance Tax on Business Assets > The Federal Constitutional Court is reviewing whether inheritance tax relief for business assets is compatible with equality. Source: https://www.mtrlegal.com/en/bverfg-reviews-inheritance-tax-on-business-assets/ · Language: en · Updated: 2026-10-23 --- ## Bundesverfassungsgericht Reviews Inheritance Tax on Business Assets On 13 October 2026, the First Senate of the Bundesverfassungsgericht (BVerfG, Federal Constitutional Court) again heard [questions of inheritance tax](https://www.mtrlegal.com/bundesverfassungsgericht-verhandelt-zur-erbschaftsteuer/) in connection with business assets. The subject of the hearing was the constitutional complaint bearing the case reference 1 BvR 804/22. The hearing date had previously been announced by [Press Release No. 49/2026](https://www.bundesverfassungsgericht.de/SharedDocs/Pressemitteilungen/DE/2026/bvg26-049.html) of 30 July 2026. According to the introductory remarks by the President of the Bundesverfassungsgericht, Prof. Dr. Stephan Harbarth, the focus was on whether the differing inheritance tax treatment of preferentially treated and non-preferential assets is constitutionally justified or violates the general principle of equality. At the same time, it was noted that the equal tax burden on taxpayers affects many people’s sense of justice in a particular way. This does not imply that the court has reached a preliminary determination; the proceedings have not yet been concluded. Already on the previous day, 12 October 2026 at 2:00 p.m., the First Senate had held a hearing in another inheritance tax proceeding. This concerned the application for judicial review of statutes filed by the Free State of Bavaria regarding legislative competence, bearing the case reference 1 BvF 1/23. ## Starting Point of the Constitutional Complaint ### Private Assets as the Reason for the Proceedings The complainant challenged the inheritance tax burden on an acquisition upon death. According to published reports, he inherited a securities account and real property from his aunt with a value of around EUR 250,000. This resulted in inheritance tax of around EUR 47,000. His action before the Finanzgericht (Fiscal Court) was unsuccessful. Leave to appeal on points of law was not granted. A subsequent complaint against the denial of leave to appeal was dismissed by the Bundesfinanzhof (BFH, Federal Fiscal Court). The proceedings now pending before the Bundesverfassungsgericht therefore do not concern the final determination of an individual tax claim, but rather the constitutional review of the alleged unequal treatment. ### Relationship to Earlier Case Law The hearing follows on from the [decision of the Bundesverfassungsgericht](http://www.rechtsprechung-im-internet.de/jportal/portal/t/ppg/page/bsjrsprod.psml?doc.hl=1&doc.id=KVRE407641401&documentnumber=1&numberofresults=1&doctyp=juris-r&showdoccase=1&doc.part=L¶mfromHL=true) of 17 December 2014. At that time, the court objected to the inheritance tax [relief for business assets](https://www.mtrlegal.com/wiki/betriebsvermoegen/) in the form then in force and issued requirements to the legislature for new rules. The legislature subsequently responded with a reform that has been in force since 2016. The Federal Government was represented at the hearing by Michael Schrodi, Parliamentary State Secretary at the Bundesfinanzministerium (Federal Ministry of Finance). He pointed out that the 2016 regulation was also a political compromise within the framework set by Karlsruhe. ## Scope of the Constitutional Review ### Principle of Equality and Preferential Treatment of Business Assets The Senate initially addressed the question of what actual effects the inheritance tax provisions have on wealth distribution, the corporate structure in Germany, and the objectives pursued by the legislature. The contributions from academia and research gave the impression during the hearing that reliable statements are possible only to a limited extent due to the limited data available. At the same time, it was unanimously emphasized that, in view of the level of inheritance tax rates, the relief rules are of considerable importance for the corporate landscape shaped by family businesses. This was discussed particularly with regard to times of economic crisis. The issues under review included in particular: - standard relief, - optional relief, - the needs-based relief review under § 28a ErbStG (German Inheritance Tax and Gift Tax Act), - the advance deduction for family businesses under § 13a para. 9 ErbStG, - the so-called EUR 26 million threshold under § 13a para. 1 ErbStG. ### Experts and Differing Assessments Various experts and associations were heard in the oral hearing. Court-appointed experts included, among others, a scholar of tax law from a Munich research institute and an economist from an economic research institute close to the trade unions. According to published reports, the economist does not consider the relief for business assets necessary to safeguard companies and jobs. By contrast, the view was also expressed that the relief for business assets carries considerable weight with regard to business continuity, investment capacity, and employment. The oral hearing was therefore not confined to a single assessment, but addressed the economic and constitutional aspects within a broad framework. ## EUR 26 Million Threshold as a Central Point of Discussion ### Acquirer-Based or Company-Based Perspective The EUR 26 million threshold laid down in § 13a para. 1 ErbStG was discussed in particular detail. The Senate expressly asked why this threshold is linked to the acquisition and not to the company, even though the relief is intended to protect the company. The hearing on 13 October 2026 lasted almost six hours. In some instances, constitutional concerns were expressed to the effect that, where there is a large group of shareholders or partners, even very large partnerships may fall under standard and optional relief. These concerns did not relate to every possible set of circumstances, but to the stated constellation of large groups of shareholders or partners. In connection with the decision of 17 December 2014, the government draft of an act to secure business succession of 30 May 2005 had already been addressed. It provided for an acquirer-based maximum threshold of EUR 100 million. The legislature later opted for an acquirer-based threshold of EUR 26 million. This can be explained by the fact that inheritance tax, as a tax on acquisitions upon inheritance, is linked to the respective acquisition. ### Small Shareholdings and Large Family Businesses In 2014, the Bundesverfassungsgericht had already dealt with the question of whether small pooled shareholdings in corporations and small unpooled interests in partnerships may receive preferential inheritance tax treatment. The differentiation based on legal form was also the subject of review at that time and was then regarded as constitutionally justified. As a result of that review at the time, it was apparent that even very large family businesses with fragmented ownership structures may fall within the scope of standard and optional relief. In the discussion, labor market and industrial policy considerations, among others, were cited as justification. Large family businesses can be of considerable importance for smaller suppliers and related companies and may be relevant from an economic policy perspective for the development of structurally weak regions. ## Needs-Based Relief Review and Ability to Pay ### Use of Private Assets The needs-based relief review occupied a broad part of the discussion. It goes back to the Bundesverfassungsgericht’s decision from 2014. The representative of the Federal Government justified its constitutionality, among other things, on the basis that, under this provision, the acquirer must use the private assets acquired at the same time as well as non-preferential assets acquired within ten years after the acquisition to pay the tax. According to this argument, the acquirer is taxed in accordance with his or her ability to pay. At the same time, it was argued that large companies unquestionably secure numerous jobs, which is why their relief is required. Whether and to what extent the Bundesverfassungsgericht follows this assessment remains reserved for the still-pending decision. ### Classification of Transfers to Family Foundations In the oral hearing, it was also made very clear that transfers to assetless family foundations were not readily classified as tax structuring. The experts and associations heard unanimously confirmed that, in practice, the establishment of a family foundation is not undertaken for tax reasons, but may serve to preserve the company. Particular emphasis was placed on the purpose of counteracting a possible fragmentation of ownership structures. It was also stressed that the transfer of a company to a family foundation is a serious and far-reaching decision. It is not taken lightly solely for tax reasons. ## Deferral and Flat-Tax Models as Alternatives ### Proportionality Review in Focus Alternatives to the current relief were also discussed in the context of the proportionality review. These included, among other things, deferral models and flat-tax models, which had already played a role in the decision of 17 December 2014 and in the legislative process. According to the assessments addressed during the hearing, the existence of a legitimate purpose and a suitable means in the relief rules is undisputed. A university professor of tax law presented this as an expert heard by the court. At the same time, he emphasized that the selection and specific design of a preferential treatment model fall within the legislature’s prerogative of assessment and legislative discretion. ### Liquidity Burden on Companies The discussion of deferral and flat-tax models showed that such approaches can cause substantial liquidity outflows. This could significantly restrict companies’ investment opportunities over a period of years. Deferral in particular was discussed as an alternative to relief. Experts pointed out that deferral, too, could withdraw capital from the company. According to published reports, it was also argued that such a solution would be viable only at tax rates of up to around 10 percent. The director of a business-oriented research institute stated that, in order to pay each euro of inheritance tax, roughly twice that amount in profit would have to be generated, because the tax is economically financed from the company. The Zentralverband des Deutschen Handwerks (German Confederation of Skilled Crafts) considers the model of the needs-based relief review in force since 2016 to be ineffective. ## Parallel Proceedings on Legislative Competence ### Bavarian Application for Judicial Review of Statutes On 12 October 2026, the First Senate held a hearing in another proceeding concerning inheritance tax. This proceeding concerns Bavaria’s application for judicial review of statutes bearing the case reference 1 BvF 1/23 and thus the question of legislative competence. Bavaria’s Finance Minister Albert Füracker appeared on behalf of the Free State. Minister-President Markus Söder did not attend the hearing in Karlsruhe. No other federal state supported the Bavarian application. North Rhine-Westphalia expressly opposed it. This parallel proceeding must be distinguished from the proceeding concerning relief for business assets, but it is connected in terms of timing and subject matter with the current constitutional court review of inheritance tax. ### Political Context Without Pre-empting the Judgment Inheritance tax also continues to be the subject of intense political debate. Federal Finance Minister Lars Klingbeil stated on 11 October 2026 that inheritance tax was in need of reform and announced that proposals by the SPD would be implemented once the Bundesverfassungsgericht had clarified the legal framework. However, such political statements do not replace the decision of the Bundesverfassungsgericht. For the constitutional assessment, the only decisive factor remains whether the existing statutory rules are compatible with the Grundgesetz (German Basic Law). ## Fact-Oriented Hearing Despite Controversial Debate According to the available reports, the oral hearing was conducted in a markedly more fact-oriented manner than some public and political debates on inheritance tax. The Senate dealt in detail with economic, tax law, and constitutional aspects. A date for pronouncement has not yet been set. Following the extensive oral hearing, the decision is not expected for several months. As things currently stand, a decision before the end of the current year does not appear certain. ## Significance for Business Succession and Tax Planning The proceedings show that the inheritance tax treatment of business assets continues to be of considerable importance for business successions, family businesses, investors, and high-net-worth individuals. At the same time, it remains open whether and to what extent the Bundesverfassungsgericht will confirm or restrict the existing relief rules or issue new requirements to the legislature. For those affected, a future decision may give rise to significant tax and corporate law follow-up issues. Anyone wishing to assess developments regarding business inheritance tax in connection with succession, ownership structures, or asset transfers can find support from MTR Legal as part of its [legal advice in tax law](https://www.mtrlegal.com/rechtsberatung/steuerrecht/).