The German Chamber of Commerce and Industry (DIHK) advocates maintaining the existing relief regulations for business assets in inheritance tax and developing them further practically. Reliable framework conditions for corporate succession are crucial, especially for family-run small and medium-sized enterprises, to secure investment, employment, and value creation in Germany.

"This is not about luxury goods"

© DIHK / Christoph Soeder

"The overwhelming majority of companies in Germany are family-run. For them, corporate succession is not about private wealth but about continuing economically viable businesses," says DIHK CEO Helena Melnikov. "Without relief rules, significant liquidity and financing pressure could arise, impairing investment and competitiveness, and jeopardising jobs and regional value creation. Given the substantial burdens arising from company value, tax rate, and lack of liquidity, the relief of business assets must remain a central element of inheritance tax law. It is not about luxury goods but about factory premises, production halls, machinery, or lorries with which people create the country's prosperity."

According to the DIHK, the current concept has proven its worth. It ties tax relief for business assets to clear conditions such as the continuation of the company and the safeguarding of employment. At the same time, the DIHK sees a need for action in the practical application of inheritance tax law. In particular, company valuation, regulations on administrative assets, and various proof and documentation obligations are often unnecessarily complex and lead to considerable legal uncertainties.

"Entrepreneurs need planning reliability when transferring their business to the next generation," says Melnikov. "Instead of additional burdens, we need simpler, more comprehensible, and legally certain rules accommodating family-run businesses' specifics." Therefore, the DIHK advocates for more practical company valuations, simpler regulations on administrative assets, and more flexible retention and wage sum periods. Additionally, investments and necessary liquidity contributions in the course of corporate succession must not be tax-burdened.

Wealth is usually tied up long-term in businesses

Concerning current reform proposals, the DIHK warns against higher burdens on business assets. "A higher burden would increase financial pressure during corporate successions and make investments, employment, and, in some cases, even the continuation of businesses more difficult. Especially in medium-sized businesses, a significant portion of wealth is tied up in companies long-term," says Melnikov.

A mere deferment would not be an equivalent substitute for relief, as it only spreads the tax burden over a more extended period. It does not eliminate the financial pressure. The funds tied up for tax payments are missing from the companies for investments, innovations, and employment.

Beyond that, competitive disadvantages loom: While family businesses must use funds to finance inheritance tax, companies without comparable succession burdens can directly invest those funds in growth. A higher burden on productively tied business assets would weaken the competitiveness of companies and Germany as a location.

Around 186,000 family businesses are facing transition

DIHK CEO Melnikov: "In the coming years, around 186,000 family businesses with nearly three million employees will be handed over to the next generation. The future of businesses, jobs, and entire regions is at stake here. An inheritance tax reform should not complicate these transitions but should facilitate them, secure investments, and preserve jobs."

DIHK demands

Background

27 per cent of around 9,600 businesses advised by the IHKs, which are due to be handed over, are considering closure. This corresponds to roughly 2,600 businesses. The reasons for this are diverse; however, the numbers illustrate how stressed the succession market already is and how problematic additional tax burdens would be.