(de-news.net) – The Social Democratic Party (SPD) has formally introduced a comprehensive proposal to revise Germany’s inheritance tax system, asserting that the existing network of special provisions and exemptions has generated persistent controversy for years. Under the new framework, substantial private fortunes would face higher taxation, whereas small and medium‑sized inheritances would experience a relative reduction in tax pressure. The SPD seeks to replace the current assortment of narrowly tailored exemptions with a unified personal allowance of approximately one million euros, while a five‑million‑euro threshold for business assets is intended to provide continuity and stability for family‑owned enterprises. At the same time, heirs to larger corporate holdings would encounter increased fiscal obligations. Because inheritance‑tax revenue flows directly to the Federal States, the reform would have immediate and measurable consequences for regional public finances.
According to a policy document issued by the SPD leadership, inherited primary residences would remain exempt from taxation provided that heirs continue to occupy them. Wiebke Esdar, the party’s deputy parliamentary leader, emphasized that the overarching objective of the reform is to strengthen distributive fairness within the tax system. The proposal reiterates that inheritance tax applies to all transfers triggered by death—such as cash holdings, real estate, securities, business shares, and other valuable assets—after the decedent’s outstanding debts have been deducted. Above the newly proposed allowances, the existing tax brackets, which currently range from 7 to 50 percent depending on the degree of kinship and the total value of the estate, would continue to apply.
Current law already permits substantial tax‑free inheritances: spouses may receive up to 500,000 euros without taxation, and children may receive up to 400,000 euros. Additional opportunities for legally minimizing tax exposure exist through lifetime gifts, which are subject to the same allowances and may be renewed every ten years. Heirs may also inherit a parental home tax‑free if they reside in it for at least a decade and if the living space does not exceed 200 square meters.
Long‑standing criticism has focused particularly on exemptions for business assets. These provisions were originally designed to prevent firms from collapsing when heirs lacked the liquidity to pay inheritance taxes from private funds. Under the current “relief” mechanism, estates valued at more than 26 million euros may be reclassified in ways that significantly reduce tax liabilities, a practice that empirical studies suggest disproportionately benefits individuals who are already among the wealthiest.
The SPD proposal has encountered strong resistance from the conservative Union parties and from major business associations. Union officials argued that the timing of the initiative sends an unfavorable signal during a period of economic uncertainty and that the reform would impose substantial new burdens on family‑run medium‑sized companies. Industry groups similarly warned that the proposed five‑million‑euro allowance for business assets is insufficient and that scaling back existing relief provisions would undermine firms’ ability to invest and to plan for generational succession. The German Chamber of Industry and Commerce projected that, if implemented, the SPD model would result in significantly higher tax obligations for business transfers.
In response, the SPD rejected these criticisms, maintaining that the reform is designed to enhance equity and expand opportunity, and asserting that many households and businesses would not experience tax increases under the new system. Nevertheless, the economic wing of the CDU/CSU declared the proposal incompatible with coalition stability, calling instead for tax reductions and characterizing the SPD plan as a threat to Germany’s major family‑owned enterprises. The Federation of German Crafts, which argues that existing relief mechanisms remain essential for safeguarding regional economic structures, urged lawmakers to refrain from altering business‑asset rules until the Federal Constitutional Court issues its forthcoming decision.
