German tax on inheritance lump sums from abroad

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Hello all. My grandfather has past away and left me a lot of property in the Dominican republic & South America. I have asked my relatives there to sell it and just wire me the money. Was this a dumb thing to do? Will I have to pay taxes on this here? Will the Finanz amt be seding me invitations?

 

Thanks in advance TTners.

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Officially, Prob. yes... But if you don't tell the FA, they will prob. never know..

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Are there lots of big plants with spikey green leaves giving off a heady smell growing on the land?

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a lot of property in the Dominican republic & South America

Sounds like a large amount of potential plata to me...

If your bank uses the SWIFT network for wire transfers, chances are high that the transaction will be reported to 'some' intelligence org who will in turn report it to the sending and/or receiving goverment orgs for further scrutiny. This is done to detect global terrorist financing patterns, criminal and/or suspicious wire xfr activities. Assume the worst in your 'planning'.

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use a 3rd part currency clearing house, using their own payment system

Yes... agreed

 

transferring loads of money in small 5k batches may still end up on some cumulative report.

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Yes... agreed

 

transferring loads of money in small 5k batches may still end up on some cumulative report.

Correct, if done in the US or using US banking facilities to avoid having the money transfers reported to the Treasury Department it is also illegal (I believe it is called structuring). No doubt some other nations have similar laws.

 

To the OP - talk to a tax advisor as to what your tax liability would be for receiving your part of the inheritance. This can get tricky with multiple jurisdictions involved, but you may have this potential tax liability as a German resident anyway. Receiving the money in the manner you have described (via bank transfer) may be viewed as a gift and may anyhow be taxable. Get some solid tax advice before making a decision as to what you will do.

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Normally, if you are resident in Germany for tax purposes, then you have to pay tax on all of your income here unless the country in which you have inherited has a mutual tax agreement with Germany, in which case you may be permitted to pay inheritance tax there.

As I inherited money from the UK it was quite simply a case of my paying inheritence tax there (at a lower rate than here!!), and the business was over and done with.

However, should you invest that money and somehow "forget" to declare your unearnt income you will be in BIG trouble!!

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I have a similar situation (except by sounds of it the amount involved is FAR less) following the death of my mother in UK...

 

A good friend of mine who is a recently retired Finanzbeamte (useful friend to have) said as the estate was outside Germany just keep quiet. Actually a long-retired Finanzbeamte pal of my father-in-law has said same thing. Whether that holds up in a court of law is another matter...

 

I should add that the amount of estate duty that was paid in UK on the estate far, far exceeded what would have been due if it had happened in Germany...

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Incoming payments from abroad in excess of €50,000 must be reported (by the recipient) "for statistical purposes" to the Landesbank. Your bank will advise you of this liability when crediting the money. The bank is also required to support "suspicious" transfers to the Finanzamt. "Suspicious" is not defined, but it might be the case where a pile of money arrives unannounced in an account that has been dormant for years for example, or an unusual flurry of smaller transactions - the bank makes their own rules on this, but if there is subsequently found to be criminal activity with money in one of their accounts they can be in trouble so they do tend to err on the safe side. Most banks have automated systems to identify allegedly suspicious account activity. As far as tax issues are concerned the issue is less with the incoming money but how and when you use it. If you have been earning (i.e. declaring for tax purposes) €25,000 a year for the last 10 years and suddenly go any buy a €1million house questions would be raised both with you and the bank to make sure the money is legally yours and has been taxed, where relevant, accordingly. Most transaction of a larger nature require some interaction with the Finanzamt (e.g. tax due on buying property) so alarm bells can quickly ring. If the money is the result of a bequest you also need to be very careful that it has been taxed reported correctly both in the country of origin and here in Germany - reporting may include a declaration to the Finanzamt - dual-taxation agreements may mitigate or even obviate any additional taxation due but you should take advice if you have concerns.

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JESUS!!! It almost makes me wanna turn it down. All this trouble for money that just landed on me basically? Okay, so I really don't need the money right now. So let's talk about offshore account. Is this really feasible? I heard that they report to my government if I am not a resident of their land.

 

What 2 do Waht 2 do...? Oh and to Mr. Nosey-- a big FU buddy.

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Actually I am assuming there may well be local taxes on the property as well?

 

Property is a little different from most other tax items because the local country always wants the "first" bite at the cherry.

 

Then I assume the estate may also be subject to death duties in the local country or countries?

 

Obviously as a resident of Germany you are here liable to taxation on the estate (but you know that already)

 

Read more here:

 

www.schweizer.com.au/articles/GermanInheritanceTaxes.pdf

 

Good News is that as a Grandchild your are a 1st class benefeciary (lower rates like 15% odd depending on value) but downside is that they like to spank property:

 

 

Taxation of Capital Gains

If a beneficiary inherits real property or securities, stocks and bonds from the deceased and these are sold, then income tax may be payable on the capital gain in addition to the inheritance tax

Obviously ideal situation is to try and declare etc so you can sleep nights. If its only 15% (and you get €51,000 tax free I think) then might be better.

 

Plan B is to leave the buggery money back in South America for a rainy day. Sure as hell don't wanna bring hundreds of thousand over here 'cos good chance they will get you, and get proper shitty as well.

 

e.g. As a 1st class bod you get €52,000 tax free, then 11% on the next €256,000 and Members of the first tax class do not pay inheritance tax on household effects, personal

effects and clothes up to a value of €40,000.00.

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Thanks Johny. I will look into opening a Bank account in Dominican republic, I could transfer the money from the other property here without incurring any taxes.

 

Thank you all for your input.

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I reckon swap the property for a signed gold Elton John waistcoat and declare as "personal effects".

 

Better still split the inheritance between 4 grandfathers. As long as you show the German authorities paperwork that has been signed, dated, photocopied and stamped twice it will be fine.

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I will look into opening a Bank account in Dominican republic, I could transfer the money from the other property here without incurring any taxes.

Bear in mind that as a tax paying German resident (I assume) your inheritance is in theory part of your worldwide income and should be declared to the German tax authorities at the outset. Theory and fact are often divergent bedfellows, so whether you declare this is your affair and any considerations to declare it must be balanced with the risk of being caught as a tax dodger if you don't. The same goes for any subsequent return on the invested inheritance. I'd say the Dominican Republic would be a relatively safe haven from the German authorities, but it might not always be so, and if you do decide to go out and buy that Aschaffenburg mansion you have your eyes on and they pick up on the subsequent mass import of Dominican Pesos into Germany they could go back up to 10 years to identify violations of tax law.

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It is not fair to pay taxes on something that my granfather left me. Why should the government get some of it? They did not go work for him every summer, I did. And they did not help him either when times were hard. So why should the German government get some of that money? My grandfather was not German, and i was not living here back then either.

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