What does the planned tax policy mean for private clients, family businesses and family offic-es?

New government, new tax policy: What tax policy is now bringing private clients

The first lines of the coalition agreement provide hope that there could be a change in the current tax policy for private clients.

“…Germany should become a safe haven for investors and entrepreneurs from all over the world. ...The focus should be on high achievers and their families. Performance and effort should pay off. Performance earns respect and recognition. Prosperity should be increased for everyone. ...To do this, among other things we will foster investment, innovation and competition; reduce taxes, charges and energy prices; improve incentives to work, support decarbonisation, reduce bureaucracy...”

The coalition agreement includes many positive things, but especially for private clients leaves crucial questions unanswered or only deals with them superficially, which means the situation regarding asset and succession planning continues on an uncertain footing.

Capital tax and global minimum tax for the super rich? 

The coalition agreement does not make any mention of capital tax or global minimum tax for the super rich in the G20, which can be found in the SPD party manifesto. It was clearly not possible to reach an agreement on these topics, something which does not rule out these topics resurfacing during the coming parliament.  

Discussion on inheritance and gift tax appears shelved

The coalition agreement does not contain a statement on inheritance tax either. This decision or discussion has probably been deferred until the Federal Constitutional Court makes its decision, which is still outstanding, on the constitutionality of exempting business assets. 

It should still be expected, however, that the current system of exempting business assets will not remain in the medium-term. The SPD, in particular, aims to abolish the privileged taxation of large business assets and to introduce effective minimum taxation for large business assets and family foundations holding assets. This idea is supported by the “Five Sages” of the German Council of Economic Experts, who point out that exempting business assets from tax is not economically advisable. This situation becomes more evident if we consider that the SPD will take control of the ministry of finance where a large part of the bills on tax law are drafted. 

Improvement to global mobility? 

In light of the declared goal of becoming the “home port” for investors and entrepreneurs, the question remains unanswered whether changes should be made to one of the greatest blockages to this – the current system of exit and “disjunction taxation”, or whether conformity with European law should at least be created by means of an indefinite interest-free deferral.   

No statement on the “speculation period” for real estate

The coalition agreement does not contain a statement on the “speculation period” (10 years in which privately held real estate can be sold tax-free), so that it remains uncertain whether or how long the speculation period will remain. At any rate, the SPD has the goal of abolishing it, with the support of prominent voices in the specialist literature. 

Support of a financial transaction tax

We consider that it would be good if the support of a financial transaction tax stayed on the EU level. A tax of this kind for required investments on the national level in Germany should be seen in a critical light. 

Light on the horizon – reducing tax bureaucracy

The reduction of tax bureaucracy is a central point in the coalition agreement. This is very much to be welcomed from the standpoint of the attractiveness of Germany as a place for business, and would be desirable if this perennial intention is aligned with stepping up the fight against tax crime and money laundering.  

Stepping up the fight against tax crime and money laundering

It would also be welcome in stepping up the fight against tax crime and money laundering, if the investigation procedure itself were reformed and proceedings did not continue (based on the current case law) to be started over minor matters for no recognisable offence. 

A company with an asset lock – an alternative to a foundation? 

The tracks have been laid and the legal form of a “Company with asset lock” (Gesellschaft mit gebundenem Vermögen) is to be created. But how and whether this legal form will be suitable for succession planning is still to be seen.

Planning ahead, taking opportunities, keeping an eye on uncertainties and tackling business and personal succession now! 

The coalition agreement includes a number of individual tax measures that could modernise the German tax system and strengthen the attractiveness of Germany as a place to do business for the long-term – if they are implemented properly and practically. Above all, this should offer new perspectives for structuring assets in Germany. 

But tax questions important to private clients are only handled superficially or not at all, which leads to uncertainty in planning, especially in the area of business and personal succession. Changes to the exemption of business assets are to be expected, however, so it should be advisable to study this subject soon, since the planning necessary usually takes a considerable amount of time. 

Questions on any of these subjects? We’ll be glad to analyse the potential impact of the planned changes on your individual situation and suggest expedient approaches. Intending to tackle succession?  We’ll be glad to render you our support and point out opportunities how you can optimise the tax on your assets when transferring them. 

We’re looking forward to hearing from you!