Business succession is not only a matter of family, leadership, and strategy, but also a key tax decision. Section 13a of the German Inheritance Tax Act (ErbStG) can significantly reduce the tax burden on business assets in the event of inheritance or a gift\u2014provided that the tax exemption rules are carefully planned, documented, and adhered to over the years. In 2026, the constitutional complaint 1 BvR 804\/22 will also come into focus, as the Federal Constitutional Court is once again considering the preferential treatment of business assets. For business owners, this means: don\u2019t wait\u2014review your succession plan, asset structure, and risk buffers now.<\/p>\n
Business owners should familiarize themselves with Section 13a of the German Inheritance Tax Act (ErbStG) now, because the tax relief on business assets is subject to specific requirements, and subsequent corrections are often only possible to a limited extent. Under the standard exemption, 85 percent of eligible assets may generally be tax-exempt if the statutory conditions are met and the acquisition does not exceed the applicable limits. Under stricter conditions, the optional exemption may even allow for a 100 percent tax exemption. This is based in particular on Section 13a of the German Inheritance Tax Act (ErbStG) and the definition of eligible assets under Section 13b ErbStG.<\/p>\n
The practical point is this: These rules do not apply only at the time of the transfer. They extend into the future\u2014for example, through holding periods, wage cap regulations, and reporting requirements. Anyone planning a gift today must therefore know whether the business will still be able to meet the requirements tomorrow, in three years, and at the end of the relevant period. This is precisely why Section 13a of the German Inheritance Tax Act (ErbStG) should be addressed early on in any serious business succession plan.<\/p>\n
Inheritance tax on business assets can severely impact a company\u2019s liquidity if succession occurs unexpectedly. The exemption rules are intended to prevent productive business assets from being broken up or burdened solely because of a generational transition. At the same time, however, the legislature requires that the business continue to operate and meet certain asset and employment requirements.<\/p>\n
For entrepreneurial families, this sends a mixed message. On the one hand, the law offers a significant tax advantage. On the other hand, this advantage is not granted unconditionally. Anyone who violates retention requirements, makes harmful withdrawals, or fails to meet the minimum wage threshold risks a retroactive reduction or the loss of the tax benefit.<\/p>\n
That is why the link between legal structuring and operational business planning is particularly important. Articles of incorporation that look good from a tax perspective are of little use if planned sales, restructurings, or personnel measures do not align with them. Succession planning is not a one-time document here, but rather a process.<\/p>\n
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The tax exemption under the standard rule is often the starting point for planning. Under Section 13a(1) of the Inheritance Tax Act (ErbStG), 85 percent of the assets bequeathed remain tax-exempt, provided that the other requirements are met. In addition, under certain conditions, a deduction and other specific rules may apply, which could be relevant in individual cases.<\/p>\n
The exemption for options continues, but the requirements are more stringent. The purchaser may irrevocably declare that a 100-percent exemption deduction should be applied instead of the 85-percent exemption deduction. In return, among other things, the wage total and holding periods are extended to seven years, and the minimum wage total generally increases to 700 percent. Furthermore, for this full tax exemption, no more than 20 percent of the eligible assets may consist of business assets.<\/p>\n
In practice, the decision between standard exemption and optional exemption should not be based solely on which offers the greatest tax benefit. In my experience, it is important that the business can realistically meet the stricter conditions. An optional exemption can be attractive, but it also increases the demands on planning certainty, personnel development, and asset structure.<\/p>\n
Questions to Consider When Choosing an Exemption Option:<\/strong><\/p>\n Administrative assets are one of the most sensitive issues regarding inheritance tax on business assets. Section 13b of the Inheritance Tax Act (ErbStG) classifies, among other things, certain real estate transferred to third parties, securities, works of art, precious metals, and financial assets exceeding certain thresholds as administrative assets. Cash assets may become relevant, for example, if, after deducting debts, they exceed 15 percent of the assessable business assets.<\/p>\n The problem is not just the ratio as of the transfer date. Recently acquired financial assets and administrative assets can also affect the tax benefits because they are not automatically treated as harmless administrative assets. Anyone who transfers assets, builds up liquidity, or changes ownership structures shortly before the transfer should therefore have the tax implications of these actions reviewed with particular care.<\/p>\n For business owners, this means in practice: The balance sheet should not be reviewed only shortly before the appointment with the notary. An early review of the asset structure reveals whether assets necessary for business operations, financial resources, real estate, and equity interests are classified correctly for tax purposes. This creates room for maneuver, avoiding the need for rushed arrangements just before the succession.<\/p>\n The total payroll rule stipulates that the exemption applies only if the specified total payroll level is reached following the transfer. The total of the relevant annual payrolls must amount to at least four times the initial payroll within five years. There are graduated exemptions for smaller businesses, and for businesses with no more than five employees, the rule does not apply under the law.<\/p>\n I think this requirement isn\u2019t as abstract for many business owners as it might sound at first. It pertains to workforce planning, compensation structures, crisis management, and growth\u2014all of which are important to business owners. If a location is closed after the handover, if the workforce is reduced, or if a business division is sold, this can affect tax relief. Even during economically challenging periods, the payroll can be a significant burden.<\/p>\n That is why the payroll regulation should not be kept in isolation in the tax file; this is important. The payroll regulation belongs in the succession roadmap. Management, the family, the tax advisor, and, if necessary, the M&A or legal advisor should know which actions could be detrimental within the deadline and what documentation the payroll regulation requires.<\/p>\n The constitutional risk in 2026 significantly increases the sense of urgency.<\/p>\n It is evident that the discussion will be very lively in 2026. The reason for this is that the Federal Constitutional Court still has Case No. 1 BvR 804\/22 pending, which concerns tax benefits for business assets under inheritance and gift tax law. The Federal Constitutional Court\u2019s published annual outlook states that the constitutional complaint addresses the question of whether the preferential treatment upon the transfer of business assets is compatible with the Basic Law. The constitutional complaint also asks whether the transferee, who has no access to these provisions, is constitutionally disadvantaged. The Federal Constitutional Court has scheduled an oral hearing on inheritance tax\u2014the exemption of business assets\u2014for October 13, 2026.<\/p>\n This does not automatically mean that the existing rules will be immediately repealed. It does mean, however, that business owners cannot simply assume that the current legal situation will remain the same indefinitely. In my opinion, business owners should exercise caution. In 2014, the Federal Constitutional Court ruled against the then-current regulation on the tax exemption of business assets. Since then, the system has been reformed, but it remains a sensitive issue both politically and constitutionally. I\u2019ve seen that the system is still a touchy subject.<\/p>\n A clear approach really makes sense when it comes to planning. No one should transfer assets rashly out of fear of a possible 2026 Federal Constitutional Court ruling. Postponing business succession for years is also risky, because the family, management, and asset structure should have been ready long ago. I believe a clear approach is important so that business succession is not further delayed.<\/p>\n Good succession planning starts with transparency. I believe that an entrepreneur must know exactly which assets qualify for benefits, what administrative assets are available, what payroll amounts apply, and which legal rules facilitate or complicate the transfer of ownership. Only then can one decide whether an advance succession plan, a will, a family foundation, a holding structure, or another solution makes sense.<\/p>\n The issue of liquidity is important. I\u2019ve noticed that liquidity is often overlooked. Even if some of the business assets are spared, tax payments, claims for equalization, risks related to the statutory share, and financing needs can arise suddenly. If the company does not have a clear liquidity strategy, the lack of such a strategy will, in the worst-case scenario, place a burden on the company. The exemption rules are intended to protect the company, but without a plan, the company may still face financial strain.<\/p>\n A practical step-by-step guide for entrepreneurs that helps them:<\/p>\n A common misconception is the assumption that business assets automatically qualify for favorable treatment. In fact, it depends on the exact structure, the composition of the assets, and the legal requirements. Group companies, business spin-offs, real estate companies, and long-established family businesses, in particular, require a nuanced analysis.<\/p>\n A second mistake is underestimating the post-transfer phase. The tax benefits are often celebrated on the transfer date, but the critical phase really begins afterward. Sales, withdrawals, restructuring, and personnel decisions should be managed with tax advice throughout the relevant time periods.<\/p>\n A third mistake stems from a lack of communication. If successors, co-partners, or family members are unaware of the tax implications, well-intentioned decisions can end up being unexpectedly costly. For this reason, succession planning should be clearly documented and reviewed on a regular basis.<\/p>\n Why business owners should be paying attention to Section 13a of the German Inheritance Tax Act (ErbStG) right now: business succession, tax exemption rules, and a potential 2026 decision by the Federal Constitutional Court (BVerfG) are all interconnected. The tax benefits can be substantial, but they are contingent on certain requirements, deadlines, and sound business planning.<\/p>\n Those who start early gain more options. They can organize their asset structures, review business assets, realistically plan for payroll regulations, and choose the appropriate tax exemption strategy. Especially in light of Constitutional Complaint 1 BvR 804\/22 and BVerfG 2026, now is the right time to set up succession not only within the family but also in a way that is sound from a tax and strategic perspective.<\/p>\n Photos \/ Illustrations: AI-generated (created with Semrush Content Toolkit); Featured image (Federal Constitutional Court): Fionn Gro\u00dfe<\/a> on Unsplash<\/a><\/p>\n Source: Haufe, gesetze-im-internet.de, <\/a>bundesverfassungsgericht.de<\/a><\/p>\n Disclaimer: We assume no liability for the accuracy and completeness of the information. The information provided here does not constitute recommendations for action.<\/p>\n","protected":false},"excerpt":{"rendered":" \u00a7 13a of the Inheritance Tax Act (ErbStG): Why Business Owners Should Act Now\u2014Business Succession, Tax Relief, and the 2026 Constitutional Risk Business succession is not only a matter of family, leadership, and strategy, but also a key tax decision. Section 13a of the German Inheritance Tax Act (ErbStG) can significantly reduce the tax burden on business assets in the […]<\/p>\n","protected":false},"author":1,"featured_media":13361,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[629,628],"tags":[632,633,631,630],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n
Administrative resources often determine the quality of planning<\/h2>\n
What does the total payroll rule mean, specifically?<\/h2>\n
The 2026 constitutional risk changes the sense of urgency<\/h2>\n
Taking action now means preparing scenarios, not rushing to implement them<\/h2>\n
![\"\"](\"https:\/\/suw-steuerberatung.de\/wp-content\/uploads\/2026\/08\/Checkliste-Unternehmensnachfolge-en-US.png\")
<\/h2>\nCommon mistakes can be avoided through early planning<\/h2>\n
The Most Important Takeaway for Family-Owned Businesses<\/h2>\n