CJEU - Recent Developments in Direct Taxation 2024

1. Facts and legal Background of the Case

The German Inheritance and Gift Tax Act distinguishes between different tax classes, depending on the family relationship between the donor/deceased and the donee/heir. The tax classes are relevant for the amount of the tax allowance and the tax rate. The tax-free amount varies between EUR 20,000 in class III and EUR 500,000 for certain taxpayers of class I. The tax rates vary between 7% and 50%, depending on the amount of the donation and the tax class of the taxpayer. The transfer of money to a foundation is also subject to inheritance and gift tax. For transfers of money to foundations resident in Germany, the tax-free amount and the tax rate depend on the family relationship between the founder and the beneficiary who has the most distant family relationship. Transfers of money to foundations resident outside of Germany are always subject to tax class III. As a result, the lowest possible tax-free amount and the highest tax rate applies. Family foundations resident in Germany are subject to a substitute inheritance tax. Every 30 years, their property is treated as being transferred from parents to children. Non-resident foundations are n...