The German inheritance tax exposure on a Dutch company is rarely modelled, and the reason is a reasonable one. The company is Dutch, the shares are Dutch, the register is Dutch, and the Dutch participation exemption has already removed most of the tax friction from the structure while everyone is alive. The German charge does not arise out of any of that. It arises out of where one person lives.
Section 2(1) number 1 of the Erbschaftsteuergesetz imposes unlimited liability where the deceased at the time of death, the donor at the time of the gift, or the acquirer at the time the tax arises is an Inländer, and it imposes it on the entire accrual, wherever the assets are. One German-resident heir is enough. The company can be Dutch, the deceased can be Dutch, and the German charge still reaches the whole of what that heir receives.
The connecting factor is a person, not an asset
The structure of the German charge is the opposite of what most families assume. They assume it attaches to German assets, and that a Dutch company is therefore outside it. Limited liability does work that way: section 2(1) number 3 restricts the charge to domestic assets within the meaning of section 121 of the Bewertungsgesetz. But it applies only where nobody involved is an Inländer.
Where anyone involved is an Inländer, unlimited liability applies to the whole acquisition. The provision is disjunctive. It does not require the deceased to have been German, or resident in Germany, or to have owned anything in Germany. A Dutch founder resident in Amsterdam who leaves shares in his own BV to a daughter who moved to Munich for work has created a German taxable acquisition in the daughter’s hands.
The exposure follows the heir, and the heir is usually the family member whose residence nobody thought to check. It is discovered after the death rather than before it.
Who counts as an Inländer, and the tail after leaving
Section 2(1) number 1 defines the term. It covers natural persons with a residence or habitual abode in Germany. It covers German nationals who have not been permanently abroad for more than five years without maintaining a German residence. It covers German nationals in public service abroad regardless of that period, and it covers corporations with their place of management or seat in Germany.
The five year tail is the trap in a mobile family. A German national who leaves remains an Inländer for five years, so a departure complete for income tax purposes is not complete for inheritance tax. Someone who left in year three and dies in year four is still within the unlimited charge, and so is a beneficiary in the same position.
The word to notice is Wohnsitz. A German residence maintained alongside a foreign one is sufficient. Families that keep a flat in Germany for a child at university, or a house nobody sold, are inside the definition on facts they regard as sentimental rather than fiscal.
What the Netherlands does, and what it does not do
The Dutch charge is built on a different connecting factor, and the difference is what produces the outcomes. Article 1 of the Successiewet 1956 levies erfbelasting on what is acquired by inheritance from a person resident in the Netherlands at death. The residence that matters is the deceased’s. The situs of the shares is not the test, and neither is the residence of the heir.
Article 3 extends that. A Dutch national who has been resident and then leaves is deemed still resident if death occurs within ten years of departure, and for gifts a one year rule applies to anyone who has been resident. The Dutch tail is twice as long as the German one and runs on nationality in the same way.
Two consequences follow. Where the deceased was resident in Germany and held a Dutch BV, the Netherlands charges nothing at all, because its charge is not triggered by a Dutch company. Where the deceased was resident in the Netherlands and the heir lives in Germany, both states charge in full on the same shares, one because of the deceased and one because of the heir.
There is no treaty
The obvious answer to overlapping charges is the treaty, and here there is none. On the Bundesfinanzministerium’s own list of double taxation agreements as at 1 January 2026, the agreements in the field of inheritance and gift taxes are those with Denmark, France, Greece, Sweden, Switzerland and the United States, and the Swedish provisions were repealed with effect from 1 January 2024. The Netherlands does not appear among them, and the section of the same document dealing with treaties under negotiation contains no entry for inheritance taxes with any state.
The Netherlands appears on that list twice, for the convention of 12 April 2012 on taxes on income and for the assistance and exchange of information agreement of 21 May 1999. Neither addresses inheritance tax, and unlike the Danish agreement the convention of 2012 carries no inheritance provisions inside it.
Relief from double inheritance taxation therefore rests entirely on the unilateral credit in section 21 of the Erbschaftsteuergesetz, which is a narrower instrument than a treaty and comes with its own conditions.
The rate and the allowances
Section 16(1) sets the allowances available under unlimited liability: 500,000 euros for a spouse or registered partner, 400,000 for children and for the children of a predeceased child, 200,000 for grandchildren, 100,000 for the remaining class I persons, and 20,000 for classes II and III. Section 16(2) pro-rates the allowance downwards under limited liability.
Section 19(1) then applies the rate to what remains. The bands run at 75,000, 300,000, 600,000, 6,000,000, 13,000,000 and 26,000,000 euros. In class I the rate runs from 7 per cent to 30 per cent, in class II from 15 per cent to 43 per cent, and in class III from 30 per cent to 50 per cent. Section 19(3) softens the step at each band boundary by collecting the increase only out of half the excess, or three quarters where the rate exceeds 30 per cent.
A shareholding of any real size in an operating company sits in the upper bands. For a child inheriting a controlling interest in a profitable BV, the marginal rate is the top of class I and the allowance is a rounding difference. What decides the outcome is not the rate table. It is whether the relief in sections 13a and 13b applies.
Business property relief reaches a Dutch BV, but only above 25 per cent
Section 13b(1) number 3 defines when shares in a corporation are relievable, and its territorial condition is wider than families expect. The company must have its seat or its place of management in Germany, in a member state of the European Union, or in a state of the European Economic Area, at the time the tax arises. A Dutch BV satisfies that condition on both limbs.
The participation condition is the one that decides most cases. The deceased or the donor must have held directly more than 25 per cent of the nominal capital. It is more than 25 per cent, not at least 25 per cent, and it is a direct holding. A founder who has already diluted below that line, or who holds through an intermediate vehicle, does not meet it and the shares are not relievable business property at all.
Sentence 2 allows the threshold to be reached by pooling. Shares of other shareholders count where all are bound to dispose only uniformly or only to other bound holders, and to exercise voting rights uniformly against shareholders outside the arrangement. That is a shareholders’ agreement drafted for the purpose, and it has to exist before the death.
The conditions attached to the relief
Section 13a(1) grants relief of 85 per cent of the relievable property, provided the acquisition does not exceed 26 million euros, aggregating earlier acquisitions from the same person within ten years. Breaching the threshold removes the relief on the earlier acquisitions retrospectively. Section 13a(2) adds a deduction of 150,000 euros which tapers away at half of the excess and can be used once per ten years per donor.
Two periods then run. Section 13a(3) imposes a wage bill period of five years with a minimum cumulative wage bill of 400 per cent, and section 13a(6) a retention period of five years. Section 13a(10) offers an irrevocable election for 100 per cent relief instead, at the cost of a seven year wage bill period at 700 per cent, a seven year retention period, and administrative assets of not more than 20 per cent. Section 13a(9) provides a separate discount for family companies capped at 30 per cent, conditional on constitutional restrictions that were in place two years before the tax arose and must hold for twenty years afterwards.
Section 13c handles acquisitions above 26 million euros. On application, the relief reduces by one percentage point for each full 750,000 euros above that figure, and under the 100 per cent election no relief remains at all from 90 million euros. A Dutch operating group of any scale is therefore in the tapering zone, and the wage bill tests must be met by a workforce that is not in Germany.
Valuing the shares, and the credit that may not be there
Section 12 of the Erbschaftsteuergesetz refers the valuation to the Bewertungsgesetz, and section 11(2) of that Act sets the standard for unlisted shares. The measure is the common value. Where it cannot be derived from arm’s length sales less than a year old, it is determined from earnings prospects or another method a purchaser would use to fix the price, with the net asset value as a floor that may not be undercut.
The practical effect for a family BV is that the valuation is contested rather than given. There is usually no recent sale, so the value is built from the earnings, and the floor stops any argument that a minority position or a restrictive articles clause reduces the figure below the assets.
Section 21 then decides whether the Dutch tax is creditable, and its conditions are cumulative: a foreign tax corresponding to the German one, a case of unlimited liability, an application by the taxpayer, a foreign tax assessed, borne by the acquirer, actually paid and not reclaimable, a computation made separately for each state, and a German tax arising within five years of the foreign tax. Section 21(2) defines foreign assets, and where the deceased was an Inländer it does so by reference to assets of the kinds listed in section 121 of the Bewertungsgesetz, which lists shares in a corporation only where the holding is at least one tenth of the capital. Read across to a Dutch company, a smaller holding may not be foreign assets for credit purposes at all, and the Dutch tax paid on it may have nowhere to go. That is where the absence of a treaty stops being a technicality.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.