German tax on inheritance lump sums from abroad

61 posts in this topic

 

Why should the government get some of it?

Because they need it and have the power to tax you. That happens to simple peasants.

Your duty is to out smarten them and leave your wealth outside the country until you have found a way to circumvent that ugly nuisance. It is legal and done every day.If I had to do it I would temporary store it in Panama until you find a better place. Just don't do what my father did when he got his inheritance from overseas shortly before the first world war and kept it in German Reichsmark until it was worth not even a loaf of bread. The financial system worlwide is plenty screwed up as it is and nobody can really tell what is in store for us. My bet is on gold and silver and a place to stay.Gold allows you to transfer and dispose your wealth in small amounts, that was one of the reasons Governments got rid of it as money.Land is not a bad place either in politically stable countries. The choice is always between taxation and instability. The choice is yours.

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leave your wealth outside the country until you have found a way to circumvent that ugly nuisance. It is legal and done every day.

Incorrect. In this case it is 100% clearly ILLEGAL. No ifs, no buts, no maybes.

 

In this case this is not wealth he owned before coming to Germany. It is in effect NEW income.

 

You are talking about keeping pre-owned assets overseas, which is fine, there is no "wealth tax" in Germany but if those overseas assets generate an income that is taxable.

 

But the inheritance is triggered in 2008 and as a resident of Germany tax is due.

 

Personally, in my humble opinion, I think our arms are too short to box with God.

 

 

So why should the German government get some of that money?

Don't wanna get into the big moral rights and wrong of inheritance tax, but the short answer is BECAUSE YOU LIVE HERE and therefore expect tarmac on the streets, ambulances when you are sick,

police when you are in danger, and payments when unemployed. That is why we pay taxes. If you did not live here, then you wouldn't be paying this tax. If you had chosen to live in Switzerland

then you wouldn't be paying it. You chose to live here with its taxes and rules. They were never a secret and are only a mouse-click away.

 

Funnily enough I could almost argue a moral argument for 100% inheritance tax. You live, you die and 100% of what is left goes to a charitable foundation to help the poor.

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Somehow I don´t quite get the moral compass of this forum. On some other thread a poor sod who got caught riding the S-Bahn without a ticket and who tries to evade the fine gets blasted with moral indignation, yet on this thread the thread opener is openly advised to proceed with criminal tax evasion. As has been pointed out before the tax rate for that part of the estate that is taxable is only 15%. It´s hardly worth to take the risk of criminal prosecution to avoid that tax rate. Moreover, tax evasion costs money as well as you are limited in the ways how you can invest the money and as those people and institutions who are helping you are asking for inflated commissions.

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I agree. It's like this one I commented on:

 

Duplicate salary payment received

 

It is actually a rather interesting subject. Chapter 11 of the bestseller "Predictably Irrational" by Dan Ariely deals with it in some depth.

 

For instance in the USA in 2004 the total value of all robberies in the USA was $525 Million. The value of employee theft and fraud was estimated at $600 Billion per annum, insurance overclaims $24 Billion, and tax evasion $350 Billion. They even lose $16 Billion a year in retail from people who wear items once, then take them back for a refund!

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Jeez. Declare it. Pay the 15%. The world won't end. Better than crossing the line into illegality which you can't uncross later.

 

And get a good feeling everytime you are served by a poor, lowpaid worker a coffeshop that you are helping to at least help them subsist better than they otherwise would.

 

I wonder if people who intend to bequeath money ever think about how easily that good intention tempts the recipient (often a close family member) into all sorts of dysfunctional, risky behaviour be it law-breaking, hostile arguments with family , greed etc that they'd otherwise never go anywhere near.

 

Do many grandfathers relish the idea of their grandchild publically asking how to be a tax-evader and law breaker? Is that what they envisaged for someone who may well once have been the apple of their eye? Probably not.

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You live, you die and 100% of what is left goes to a charitable foundation to help the poor.

If it would go to the really poor I wouldn't mind, but the poor usually get a pittance if anything and the bulk goes to people we don't disagree with and who are not poor.

As for tax avoidance, it is perfectly legal and done every day by the rich.That's why off shore hedgefunds exist and tax advisers. And that's why most people can't handle money when they get suddenly into possession of some. Spending money is easy.Making money is not and keeping money is the most difficult. Actually we should not call it money. It is wealth we should talk about.

 

As for leaving money out of the country and not telling the tax people, you living in Landsberg (nice place)will maybe know the saying: was i ned woas macht mi ned hoiss. (what I don't know doesn't excite me). Applies to tax officials too.

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Tax avoidance is legal and legitimate, right. Not declaring and hiding income is not tax avoidance, it´s tax evasion and a common crime.

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Well, judging by the tone of the last few replies, the expatriates here have well and truly become dyed-in-the-wool socialists. Inheritance taxes are a scourge, and the last bastion of socialist envy.

 

My advice to the OP: stuff it in a tax haven and keep it there for a rainy day. If you pick a tax haven close enough to Germany you can periodically run some back to Germany in €9999 lots in cash.

 

Good luck and enjoy your good fortune and the proceeds of your Grandfather's hard work!

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Actually, politically, I am generally somewhere right of Attila the Hun - but ultimately taxes need to be raised from somewhere to pay for unemployment benefits and all the other lovely stuff.

 

The bad thing about raising it from death duties is that it is like a double taxation. In theory taxes have already been paid on the original earnings.

 

However the good thing about raising from death duties is that you are only hitting people on unexpected "winnings" that they may not have got for 10 years, 20 years, or ever at all. And the dead don't

have the chance to grumble or vote again.

 

And actually the German rates system look a little easier going than the UK version. I don't think 15% is onerous.

 

 

If you pick a tax haven close enough to Germany you can periodically run some back to Germany in €9999 lots in cash.

Quick word of warning to the unwise. The Germans set up periodic roadblocks to catch people running cash over the Swiss border. They did one about 6 weeks ago at the weekend. People don't expect it. They catch loads of people every time.

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Inheritance taxes are a scourge, and the last bastion of socialist envy.

There's an important economic argument in favour of inheritance taxes, in that they re-circulate economic resources back into the community, rather than let them accumulate for the inefficient use of one individual or one family. That's why such raging lefties like Warren Buffet and Bill Gates argued so strongly against cuts in US inheritance tax.

 

Imagine the situation (common in the 19th century) where a single family would inherit a large estate containing great unused potential - mineral resources, building land etc - but never developed it, because they lacked interest or ability or ready cash. The untapped resources were lost to the nation as a whole. Hence the development of death duties, to slowly pare that situation down.

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Quick word of warning to the unwise. The Germans set up periodic roadblocks to catch people running cash over the Swiss border. They did one about 6 weeks ago at the weekend. People don't expect it. They catch loads of people every time.

They do it on the border with Luxembourg as well (saw the sting ops on TV). :o

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There's an important economic argument in favour of inheritance taxes, in that they re-circulate economic resources back into the community, rather than let them accumulate for the inefficient use of one individual or one family. That's why such raging lefties like Warren Buffet and Bill Gates argued so strongly against cuts in US inheritance tax.

Yeah for some odd reason I was discussing Bernie Ecclestone and his £2.8 Billion or whatever the other week. I could see an argument that you only pass xxx onto your heirs (pick a figure - £10M???) and the rest goes into a worldwide charity pot. Put the figure at £10M and it only hits 0.0000001% of the mega wealthy.

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The Germans set up periodic roadblocks to catch people running cash over the Swiss border. They did one about 6 weeks ago at the weekend.

They must have had one back in September. My (British) colleague based in Duesseldorf flew with a number of fellow team members from our company to play in a football match in Zurich & the flight was delayed several hours due to all passengers being interrogated. They didn't want to believe that my colleague only had a few Euros with him (which was the case)...

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AFAIK the amount above which the Finanzamt becomes interested for inheritance is fairly high, some hundred thousand euro, but don't be tempted to try to bring the money here illegally. If the Finanzamt do become curious they're difficult buggers to shake and it can be very ugly and expensive indeed, with a spell in prison not such a distant possibility.

 

On the theoretical point of taxes for the very rich - unfortunately they will always pay less tax as a %age than we do because they can afford the advisers, and donations to political parties, to keep it that way. There is nothing that can be done about it as there are simply too many ways they can avoid tax in any one country by shuffling funds elsewhere. It's not worth getting all hot under the collar about it, however unjust it may be.

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Imagine the situation (common in the 19th century) where a single family would inherit a large estate containing great unused potential - mineral resources, building land etc - but never developed it, because they lacked interest or ability or ready cash. The untapped resources were lost to the nation as a whole. Hence the development of death duties, to slowly pare that situation down.

In my observation of the lives of the rich and famous, those who don't know how to handle money are soon parted from it. Warren Buffett always talks about a "meritocracy" which is a nice idea, but IMHO the state shouldn't be in the business of deciding which of your belongings/assets are passed on and which are given away. Where do they draw the line? If your Grandmother has some favourite chair, should that be sold to pay the government's share?

 

I release that I'm not going to change the situation in Germany, or any state with inheritance taxes by my arguments, but I sure won't refrain from trying to dissuade someone like the OP from voluntarily handing over his inheritance. He pays income taxes, consumption taxes, luxury taxes, etc etc already.

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Well, judging by the tone of the last few replies, the expatriates here have well and truly become dyed-in-the-wool socialists. Inheritance taxes are a scourge, and the last bastion of socialist envy.

 

My advice to the OP: stuff it in a tax haven and keep it there for a rainy day. If you pick a tax haven close enough to Germany you can periodically run some back to Germany in €9999 lots in cash.

 

Good luck and enjoy your good fortune and the proceeds of your Grandfather's hard work!

So I guess that heirs don´t use the "socialist" police, "socialist" fire brigades, "socialist" ambulances? They don´t use "socialist" roads and they don´t send their kids to "socialist" schools either? Apparently those who have to work for their income are kindly invited to pay for such services while those who receive property without any effort of their own are freeloading.

 

And the claim that inheritance tax is "double taxation" is nonsense as well. How much taxes has the heir paid for the inheritance prior to receiving the inheritance? Zilch, nada. Before that any taxes that have been paid have been paid by the deceased (provided any taxes have been paid at all). Is it double taxation as well if I buy some stuff in a shop from my net income and the shopkeeper has to pay taxes on the profits from this sale? My income had been taxed already, after all.

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We could argue about the morality of taxation all day, and governments will tax anything they possibly can, but the reality is that inheritance taxes are a pittance in terms of the overall tax take. The reason they still exist is because the number of people affected by them is too small to be of danger to the political powers of the day, and they're popular with people affected by envy and indignation at their position in society.

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It's always both tragic and amusing to hear right-wing inclined sorts go on an on about the importance of enterprise and initiative, how hard they worked for their money and how terrible it is to have the left-wing goverments taxing their effort - only so as to go off and squander the money on rewarding "freeloaders" who are presumed to have done nothing to deserve it.

 

But when it comes to being on the receiving end a gift of inheritance they typically did absolutely nothing for, involves no enterprise or iniative, and no amount of work, often these same individuals get even madder and more irate at having to a pay a little bit of tax on the free stuff they are getting.

 

Fair enough, there are cases such as a farm where a person might work all their life for pittance in expectation of getting the family farm at some point, or a kid whose parents die young and he is left with little else to support him, and probably other exceptional cases also. But the vast bulk of cases involve middle aged men and women just wanting to cash in on their parents (or uncles or aunts or great uncles or aunts or whoever!) property when they pass away.

 

So what is it going to be? As a society, should we in the business of rewarding hard work and effort, or are we in the business of giving that money to people who do nothing for it other being lucky enough to have economicly-successful relatives to bequeath them lots of wealth.

 

Should a person's wealth in life be a product of how hard they worked and how much they did over their lifetimes, or should it be a product of how wealthy their anscestors are going back generations?

 

And to the original poster, why not just pay the 15% tax and be happy enough with all the stuff you are getting for free which the rest of us here aren't, no matter how hard we work or not.

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We could argue about the morality of taxation all day, and governments will tax anything they possibly can, but the reality is that inheritance taxes are a pittance in terms of the overall tax take. The reason they still exist is because the number of people affected by them is too small to be of danger to the political powers of the day, and they're popular with people affected by envy and indignation at their position in society.

The actual reality is that those who receive large sums through inheritance tend to be politically powerful and have successfully used that power to cut inheritance rates and raise inheritance tax limits very significantly over the past decade or so in many developed economies.

 

The idea that Johnny whose parents are leaving him a million in property assets in his early-50s is somehow a downtrodden member of a persecuted minority is a funny one.

 

The wealthy and powerful are very good at passing their advantages in life onto the next generation i.e. saddling everyone elses' kids with disadvantages. It is bad enough that parental wealth often dictates a kid's opportunities at education and living in a decent neighbourhood and being exposed to the culture and world around them over their formative years of childhood and adolescence - and during which of course kid has done little or nothing to warrant getting anything less than a fair shot in life.

 

But to then come along 40/50 years later and just throw more money at those persons who were already lucky enough to have wealthy parents to begin with, and expect them not to pay even a small fraction of it in tax (so as to lessen the tax burden on others)... that's a pretty intense and profound rejection of any notion of equality of opportunity or trying to give everyone a fair roll of the dice.

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Fair enough, there are cases such as a farm...

Farms are often the worst examples of the destructive power of inheritance taxes as they are usually cash poor but asset rich(er) because of the land, especially true for smaller family owned farms, an ever rarer entity. When the farm passes to the next generation inheritance tax is calculated on the value of the farm, often forcing the sale of part of the land to pay the tax, making the farm less viable. Either that or the farm is part of a huge corporation owned mega farm which earns a lot of money by the virtue of being big and are quite happy to buy up these bits of land and get bigger. The rich always win.

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