A Guide for Families to the German situs catalogue: why the question only matters when nobody is resident in Germany; what the Valuation Act lists and what it conspicuously omits; the proportionate allowance that applies in these cases; and why a German bank account is not what most families assume.
German inheritance and gift tax reaches a transfer on two different footings. Where the deceased, the donor or the recipient is resident in Germany, it reaches the whole worldwide acquisition and the situs of each asset is irrelevant. Where nobody is resident, it reaches only what the statute defines as German.
The second case is the one in which the catalogue matters, and it is narrower than families expect.
The mistake this page exists to prevent is the assumption that money in a German bank is a German asset for this purpose. It is not on the statutory list. German real estate is, German business property is, a shareholding of at least 10 per cent in a German company is, but an ordinary deposit account and a portfolio of securities held with a German bank are outside the charge where nobody involved is resident in Germany.
The corollary is equally practical: once anybody on either side of the transfer is resident in Germany, the catalogue stops mattering entirely, because the charge is then on everything wherever it lies.
(1) Where the deceased, the donor or the acquirer is an Inländer, German inheritance and gift tax applies to the entire worldwide acquisition and situs is irrelevant.
(2) Where nobody is an Inländer, the charge is limited to German situs assets listed in section 121 of the Valuation Act.
(3) The list includes German real estate, German business assets and permanent establishments, shareholdings of at least 10 per cent in German companies, German registered intellectual property, and claims secured on German land.
(4) It does not include German bank accounts or portfolio securities held with a German bank.
(5) In limited liability cases the personal allowance is not lost but is reduced proportionately under section 16(2) ErbStG, in the proportion the assets outside the German net bear to the whole acquisition.
(6) The Court of Justice of the European Union upheld that proportionate reduction in case C-394/20, while holding that the denial of a deduction for compulsory share claims in such cases is not compatible with the free movement of capital.
Part I. Why the question usually does not arise
Section 2(1) number 1 ErbStG imposes the tax on the whole worldwide acquisition where the decedent at death, the donor when the gift is made, or the acquirer when the tax arises, is an Inländer: a person with a dwelling or habitual abode in Germany, a German national who has not been permanently abroad for more than five years, a German national in German public service abroad, or a corporation managed or seated in Germany.
Any one of those is sufficient. A family with a daughter living in Munich does not need to ask what counts as German, because her residence brings the whole of what she receives into charge wherever it lies. The catalogue below matters only where the answer to all three limbs is no.
Part II. The catalogue, and what it leaves out
Where nobody is resident, section 2(1) number 3 ErbStG confines the charge to Inlandsvermögen as defined by section 121 of the Valuation Act.
| Asset | Within the German charge where nobody is resident |
|---|---|
| German real estate | Yes |
| German business assets and permanent establishments | Yes |
| Shareholding of at least 10 per cent in a German company | Yes |
| German registered intellectual property | Yes |
| Claims secured on German land | Yes |
| Deposit account with a German bank | No |
| Portfolio securities held with a German bank | No |
| Shareholding below 10 per cent in a German company | No |
Part III. The allowance in limited liability cases
A transfer caught only by the situs rule does not lose the personal allowance, but it does not get the whole of it either. Section 16(2) ErbStG reduces the allowance proportionately, in the ratio that the assets outside the German net bear to the whole acquisition from that person over the relevant ten-year window. A large foreign estate with a modest German property therefore attracts a correspondingly modest allowance against the German charge.
The Court of Justice of the European Union considered that mechanism in case C-394/20 and held the proportionate reduction compatible with the free movement of capital. In the same judgment it held that denying a deduction for compulsory share claims in limited liability cases is not compatible, which is a point to raise where such claims exist.
Part IV. Practical steps
- Answer the residence question before the situs question. If anybody on either side is resident in Germany, the catalogue is irrelevant and the charge is worldwide.
- Classify each German asset against the statutory list. Real property and a 10 per cent shareholding behave quite differently from a deposit account, and families routinely assume the opposite.
- Check the size of any German shareholding. The 10 per cent threshold is the whole of the test, and a holding that crosses it changes the answer for the entire stake.
- Compute the proportionate allowance before assuming relief. Section 16(2) reduces it in the ratio the non-German assets bear to the whole acquisition, so a large foreign estate leaves little allowance.
- Raise compulsory share claims separately. Where such claims exist, the denial of a deduction in limited liability cases is the point the Court of Justice held incompatible with the free movement of capital.
Conclusion
The German situs catalogue decides the charge only in the case where nobody involved lives in Germany, and in that case it is narrower than families assume: land and business property are caught, bank accounts and portfolio securities are not. Where anybody is resident, the catalogue is beside the point and the charge is on everything.
Sections 2(1) number 1 and 2(1) number 3 of the Inheritance and Gift Tax Act (ErbStG); section 121 of the Valuation Act (Inlandsvermögen); section 16(2) ErbStG (proportionate allowance); Court of Justice of the European Union, case C-394/20. Statuses are stated as of September 2026.
- 13 October 2026: page created.
- Inlandsvermögen, German situs assets
- Limited German tax liability
- Situs
- United States situs assets
- Betriebsvermögen, business property relief
- Real estate in Germany
- Freibetrag, the German personal allowance
- The two German-American double taxation treaties
- German inheritance and gift tax for American families
- United States estate tax on a German estate, and the treaty reliefs
- German real estate in an estate with American heirs
Contact
A family with assets in Germany but nobody living there is usually asking a narrower question than it realises. Ashford International Law PC advises families and their advisers on establishing whether anybody on either side is an Inländer; classifying each German asset against the statutory catalogue; computing the proportionate allowance in limited liability cases; advising on shareholdings near the 10 per cent threshold; the German return and the notification duty, alongside the family’s existing advisers or leading the United States side end to end.
The firm is led by attorney Caroline Esche Ashford, PhD, JD. A graduate of Columbia University Law School, her practice focuses on international estate planning and the cross-border taxation and administration of estates and trusts, including the German situs rules as they affect families holding assets in Germany from the United States. Dr. Ashford is also licensed to practice law in Germany. She advises in French and German as well as English.
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This guide is intended for general educational purposes and does not constitute legal or tax advice, nor does it create an attorney-client relationship. The matters described, German unlimited and limited inheritance and gift tax liability, the German situs catalogue in section 121 of the Valuation Act, and the proportionate allowance under section 16(2) ErbStG, depend on the specific facts, assets, countries and states concerned and on the law in effect at the relevant time, and they change. Statuses and figures are stated as of September 2026 and must be confirmed before any decision. Nothing here is advice on any particular estate or transaction. A family in this situation should obtain advice from qualified counsel in each relevant country promptly, and before any German asset is transferred.
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