Inheritance tax question

[Liberi 11]

I've had a look through the forums to find info on this topic. I've found some good info, but I'm pretty worried.

 

I've just inherited about 150,000EUR from my dad. It's happened in the last two months and from what I've read here, I need to tell the finanzamt.

 

My problem is, I have been in Germany for four years but have not filed a tax return, apart from the first year I was here, when I only joined the company halfway through the year. The finance guy at work who filled out the form (at the time I spoke no German) told me that I probably wouldn't have to do it again, as long as my income situation didn't change, because I don't have any deductions to claim. Maybe he was annoyed at having to help me.

 

But a friend tells me I am crazy and should have checked with an accountant and maybe I should have been filing a tax return every year all along. So first off, I'm freaking about that and any possible fines.

 

He also tells me I will have to pay tax on my inheritance. I did not tell him the amount.

 

Will I have a big tax bill?

 

I know you will all say go and see an accountant and I will, but this is worrying me a lot and I thought someone here might have some answers to calm me down before I go and see anybody.

 

Thank you

 

Thank you in advance.

[MrNosey 5,325]

Firstly, yes you will be liable for tax on that inheritance. I don't remember the % off the top of my head but it is from a direct relative so is at the lowest rate. One of the the members here will give you a current exact % liability (probably pandamunich). Two months is nothing - don't sweat it.

 

Secondly, you can still submit tax returns for all 4 previous years and get tax back if you do it through a tax advisor. It's worth doing because you will get a tax refund.

[Liberi 11]

Thank you Mr Nosey.

 

My second question is what documents do I have to show? The money has gone into my savings account in my home country. Do I just tell them the amount, or show them my bank statement, or do I have to prove that the money was an inheritance with some other document?

[MrNosey 5,325]

There should have been lawyer's letter(s) detailing the total value of your inheritance (at least there is in the UK and I would think any other country would do it similarly) sent to you.

[soji 259]

Hi Liberi,

 

I'm sorry for your loss.

 

Luckily, you won't have to pay tax on an inheritance from your father unless it goes over 400 000 Euro (wikipedia link). I've just gone through the same thing and had this confirmed by my tax accountant.

 

I can't help you with your income tax problems though.

[soji 259]

I should also say, that on our accountant's and banker's advice, we are not reporting the inheritance at all (since it is under 400 000 Euro). We were told that we might get asked about the large amount of money deposited into our account (I have the money in an account in Germany), but that we would recieve a form to fill out if someone did decide to question it. I deposited the first part in early January and have yet to recieve such a form.

 

I will double check with my accountant about the reporting when it comes time to do 2012 taxes, and I would also suggest you contact an accountant to make sure that everything is done properly in your case. But there is probably nothing to worry about.

[Starshollow 6,066]

with 150k inheritance from your father you have NOT to pay any inheritance taxes. Children and spouses can inherit up to 400k EUR without being liable for taxes - only amounts in excess of this are then liable to be taxed. The link is to the complete set-up, first table shows to which inheritance tax class someone belongs depending on the relationship to the deceased. Second table show which amounts are tax free based on tax class/relationship and finally the third class is what tax rates you have to pay if your inheritance is in excess of these tax-free limits.

 

http://www.abc-recht.de/ratgeber/erbschaft/muster/erbschaft_steuer1.php

 

Cheerio

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[Freising 503]

Just to be clear, in Germany the tax is called Erbschafts- und Schenkungssteuer, because everything you get from other people (living or dead) without having to pay for it, might have to be taxed. So if your father already gave you an expensive car, while he was still alive that also needs to be considered. Same thing for a valuable painting or watch, that you might have taken out of his appartement after he died. As you can see, you might already need an expert to decide what is part of your taxable income (by inheritance or bestowal).

Everything you acquired (outside the realm of the usual between parents and child) within the last 10 years might count. If all of that together is less than 400k you don´t need to worry about taxes. There might be additional difficulties if you and your father didnt spend the whole period living in germany...

 

Usually the Finanzamt should be contacting you, asking for a tax declaration. Until this happened you don´t need to do anything. They might not contact you, because they can already see, that they won´t be getting any money.

 

One thing that isn´t clear in the original post and that might lead to additional difficulties is the question:

Who gave you the 150k? I would assume that, if the bank lets you transfer that money out of germany, the official process is already underway. Banks usually demand to see an Erbschein, before they let anyone access the account of a deceased person. An Erbschein is acquired from the Nachlassgericht and this court would have checked who the heirs are and what the inheritance contains. Then they would inform the relevant tax authorities.

[janjan 742]

I inherited €150,000 from my dad, too. That was about 12 years ago and i didn't declare it and no-one ever asked me about where the money came from. But it may well be that the authorities are keeping a closer look out nowadays.

[john g. 36,523]

I inherited 30,000 pounds after my mum´s death about 6 years ago, slung the paperwork with the rest and gave it to my accountant. He had to know why as the money had landed on my bank account. He told me there was nothing to worry about and I never heard anything from the Finanzamt ( apart from their usual offensive letters, that is!!) :)

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[robinson100 12,635]

@ John, I think that will be due to the limit of how much you can inherit in England before being taxed on it. I didn´t pay any on my inheritance either, as it was below the tax limit in England, where my Mother lived and died.

I am not sure where the OP's Father lived, but if in Germany, then the FA will have an interest in the inheritance.

[DG800 70]

 

But a friend tells me I am crazy and should have checked with an accountant and maybe I should have been filing a tax return every year all along. So first off, I'm freaking about that and any possible fines.

 

Why should you pay any fines for not filing a tax return? Assuming you're a permanent employee and get all your income tax withheld at source and have no other source of income, then you already paid what you owed and have nothing to fear. If you missed out on possible deductions than it's your problem, the FA won't be complaining about that for sure!

 

Ciao,

 

Dg800

[Guest]

I echo what DG800 says but also note that as a permanent employee with a straight forward situation there is a limit to the deductions that you would be able to claim. If you are a sufficiently good German speaker to put the returns in yourself then it is certainly worthwhile but, if you have to use a professional to do it for you, then the amount of return over the cost of advice is probably going to make the benefit marginal.

 

Ten years ago I got agreement not to continue submitting returns and I accept that it might be costing me a couple of hundred a year net, but the lack of hassle is worth it.

 

Naturally, if your tax situation is not straightforward (other income, wife not living with you, support for estranged wife/kids etc.) then it is a completely different story. I received a lump sum pension payout so I will have to do a tax return this year.

[Jeanie 2,596]

 

If you missed out on possible deductions than it's your problem, the FA won't be complaining about that for sure!

 

And if you do your tax returns now and are owed something, you will get it plus interest. At least, that's what happened last year when I submitted my tax returns for 2008, 2009 and 2010 together. The only difference between that and your situation is that it was the first time I had submitted any so it wasn't a case of my submitting one and then none for four years. But I think it still holds that if you are owed money for previous years they will pay you interest on it, just like if you owe them money from previous years, you will have to pay interest on it to them (but if you're just an ordinary employee then chances of you owing something are very slim).

[donaby 124]

A lohnsteuerverein is an economical way of filing your tax return, and they will be able to offer you advice and fill in the forms for a membership fee of ~€80. I think everyone is entitled to a little bit back as the cost of cleaning work clothes, travelling to work and the cost of having a bank account can all be deducted.

[Freising 503]

 

I think everyone is entitled to a little bit back as the cost of cleaning work clothes, (...) can all be deducted.

 

I hope you realize that the term "work clothes" (Berufskleidung in german) in tax law has a very restricted definition. It is not "the clothes I usually wear while working". Only the cleaning of clothes that are specifically necessary for work and would not be used outside of work, can be deducted. For example: the uniform of a soldier or policeman, a doctor´s overall, ...

 

There is an allowance of 110€ that often doesn´t get questioned by the Finanzamt, but of course even this should legally only be claimed, if one does actually have to wear clothes specifically for the job. In other words if you have an office job and wear normal everyday clothes you can´t claim the cost for cleaning.

 

If you really are able to deduct those cleaning costs, you would also be allowed to deduct the cost of the clothes themselves (assuming your employer didnt buy them for you).

[Guest]

Exactly - If I claimed everything I could possibly get away with then I might win 2-300 Euros - but how much is that hassle worth?

[YorkshireLad6 7,147]

I'm presuming (unlike others) that your Father died outside of Germany, possibly in Canada (as your profile shows you coming from Canada) and as you indicate that the money is currently sitting in your "home country"

 

First and foremost, any taxes that may be due are applicable principally in the country where he died and where his estate exists, and will relate to this entire estate, not just to any money he gave you. It is important that any liabilities in his home country are first dealt with. In many countries this means a submission for probate, even if no tax is due, should for example, the estate value fall below a certain amount. It is important you keep any documentation that the estate was correctly handled in your home country for any taxation or other liabilities.

 

Next, the question arises if, as a resident of Germany (I presume) any tax is due on his bequest to you. With a personal allowance to a direct child in Germany of 400,000€ then the answer is almost certainly no. If the bequest was higher, than there is an application of double taxation treaty, so a reduced, if any tax may be applicable, depending on how it was already treated in his home country.

 

Finally the question arises of your own income tax to date, which has nothing to do at this point with any inheritance tax that may or may not be due. If you are a "normal" employee paying tax from your salary and you have no additional untaxed income of any consequence then there is no requirement to submit a tax claim, unless the tax authorities specifically request it as they may do, every 4 or 5 years. It may be, however that it is in your best interests to submit a claim as there may be additional allowances that you have not already claimed that would result in a refund of tax. You should talk in the first instance to a Steuerberater or join a Steuerverein and seek their advice (cheaper...)

 

If you transfer large amounts of money (over 12,500€ per transfer) into Germany you are required to declare it to the Bundesbank, theoretically for "statistical purposes" - your bank should be able to help you with this - it's a simple form to complete. The Finanzamt are not involved, and won't generally have any interest in it. They may take an interest, however if you try to spend it, for example on a house, if it is not otherwise clear where the money came from. Optionally you can voluntarily declare your inheritance ("Erbschaftsteuererklärung") to the Finanzamt and request a certificate showing no tax to pay or that they are simply not interested. This is the cleanest way to avoid potential problems in the future, but for the relative small amount of money you are talking about probably way over the top.

[Liberi 11]

Thank you everybody. I have been very worried about this and now I feel very relieved. The first thing I am going to do is get a tax agent and file my returns anyway, just to be clear about everything.

 

My dad died outside Germany and I opened a term deposit in my home country, where it will sit for six months while I think of what to do with it. I was never planning to bring it to Germany anyway, but my friend told me I was breaking the law if I didn't declare all my money to the finanzamt.

 

I don't know what was worrying me worse. The thought of paying an inheritance tax or the thought of telling the finanzamt all about my finances and having to admit that I got to 40 and don't have any assets to declare, apart from this inheritance.

 

I want to thank everybody very sincerely. I feel a lot happier now.

[HEM 10,728]

 

but my friend told me I was breaking the law if I didn't declare all my money to the finanzamt.

 

You have to declare all the interest (capital gains) made on all your money, not the money itself - slight difference

 

At least - not until wealth tax is re-introduced depending upon who is next "in power".