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Germany Business Inheritance Exemption Guide (Unternehmensnachfolge)

A comprehensive guide to the business succession exemption (Unternehmensnachfolge) under §13a–§13c ErbStG, covering the 85% Regelverschonung and 100% Optionsverschonung, the 5/7-year holding periods, wage tests, and Verwaltungsvermögen limits that can make business inheritance almost entirely tax-free.

Germany offers some of Europe's most generous inheritance tax relief for business assets (Betriebsvermögen) under §§13a–13c ErbStG. The rationale is to protect jobs and prevent forced sales of family businesses. Two options exist: the 85% Regelverschonung (standard exemption) and the 100% Optionsverschonung (full exemption), each with progressively stricter requirements. For related reading, see our Inheritance & Gift Tax Guide → and Inheritance Tax Allowances Guide →.

Option 1: 85% Exemption (Regelverschonung)

  • Exemption amount: 85% of the business asset value (Betriebsvermögen) is exempt from inheritance tax. The remaining 15% is taxable, subject to the personal allowance (Freibetrag) based on Steuerklasse.
  • Holding period (Behaltensfrist): The business must be held for at least 5 years from the date of inheritance or gift. If sold or the business is closed within this period, the exemption is retroactively revoked (verschonungsbedarfsprüfung applies).
  • Wage test (Lohnsummenregelung): The aggregate wage bill over the 5 years must be at least 80% of the average wage bill in the 5 years before transfer. For businesses with fewer than 5 employees, this test does not apply.
  • Administrative assets limit (Verwaltungsvermögen): The business must not exceed 90% in Verwaltungsvermögen (non-operating assets such as cash in excess of needs, securities, real estate not used for operations, art, etc.). If exceeded, no exemption applies.

Option 2: 100% Exemption (Optionsverschonung)

  • Exemption amount: 100% of the business value is exempt from inheritance tax — full relief with no residual taxable amount.
  • Holding period: The business must be held for at least 7 years — two years longer than the Regelverschonung.
  • Wage test: The wage bill must be maintained at 100% of the pre-transfer average over the 7-year period (tougher than the 80% threshold for the 85% option).
  • Administrative assets limit: Lower Verwaltungsvermögen threshold applies, and the business must be primarily operational. Financing structures that shift assets into Verwaltungsvermögen are scrutinised.
  • The decision between the two options must be made in the tax return (Steuererklärung) and cannot be changed later. Professional advice is strongly recommended given the complexity of the requirements.