Germany's Constitutional Court is expected to rule this month on whether an exemption to the tax code that benefits business families is in line with the constitution,
the
Wall Street Journal
reported.
The German tax code exempts business succession from inheritance tax in most cases, the article said. “At present, companies can be transferred to heirs, prior [to] or after the owner's death, tax free as long as the heirs keep running the business for at least seven years and without substantial layoffs,” the
Journal
report noted. Non-business assets of more than €500,000 for spouses or €400,000 for children are taxable.
“This considerable privilege has made Germany home to some of the world's oldest and wealthiest corporate dynasties and some of the most tightly held businesses in the world,” the
Journal
reported.
The case was referred to the Constitutional Court by Germany's highest tax affairs court, and observers expect the Constitutional Court to request changes to the code to treat private and business assets equally, the article said.
According to the
Journal
, 92% of German companies are family-owned, “one of the highest levels in the world.” German lobbyists say that a change in the law would lead some families to sell, split up or liquidate their companies.
The
Journal
article said some family business leaders are speeding up succession plans because of the uncertainty.
The report said only 1% of Germany's total tax revenue comes from inheritance tax. “The country's highest tax affairs court has said it's too easy to convert private assets into non-taxable business assets,” the article said. (Source:
Wall Street Journal
, Dec. 9, 2014.)
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