The art of transferring cultural assets free of inheritance and gift tax in Germany

By Niels Webersinn, nbs partners

Collecting art is not only associated with a passion for art and culture. Popularly, this passion turns into a savvy capital investment approach due to the increase in value of art items collected, and eventually, the complete exemption from inheritance/ gift tax in Germany on these items.

The German tax administration grants tax exemption under certain conditions. The small cultural property exemption allows 60% of the value of art objects or an art collection to be exempted from inheritance and gift tax; for real estate under monument conservation, an 85% exemption if the following three conditions are met:

  1. the preservation of the cultural objects is in the public interest;
  2. the annual costs usually exceed the income generated; and
  3. the objects are accessible for research or popular education to an appropriate extent.

The major cultural property exemption grants a full tax exemption if the following conditions are also met:

  1. the taxpayer is willing to get applicated these items to historic preservation rules in Germany; and
  2. the items have been in the family for at least 20 years, or are included in the inventory of nationally valuable cultural property.

In addition to these requirements, a holding period of ten years must always be included after the transfer.

International investors and wealthy individuals interested in taxminimising design of asset transfers to the next generation should take advantage of this option.

As soon as an art collector wants to actively use this tax structuring, they should seek tax expertise at an early stage to ensure long-term compliance with all requirements. Because of the possibility of transferring large assets in such a tax-exempt manner, the German tax authorities are paying very close attention to compliance.

In addition, the hype around digital art objects (NFTs) that emerged last year will lead to many more questions regarding inheritance and gift tax exemption.


Niels Webersinn

Niels Webersinn

GGI member firm
nbs partners
Auditing & Accounting, Tax, Law Firm Services
Hamburg, Germany
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nbs partners is a multidisciplinary association of certified public accountants, lawyers and certified tax advisors, with a focus on the audit and advisory of small, mid-sized and large entities, as well as international groups and high-net-worth individuals.

Niels Webersinn is Director for international tax law, asset transfers and agricultural tax law at nbs partners in Hamburg. Niels Webersinn has lived in the USA and France for several years and is therefore familiar with the pitfalls of international tax regulations. He is married and has two kids.


Published: International Taxation Newsletter, No. 16, Spring 2022 l Photo: bluraz - stock.adobe.com

 

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