German court says estate tax exemption for family-run business unconstitutional

Germany’s highest court ruled on Wednesday a law allowing family-run companies to hand over their assets free of estate tax was unconstitutional, and asked the legislature to make an amendment by mid-2016.

The Federal Constitutional Court in Karlsruhe said the 2009 law ensured small and medium-sized enterprises (SMEs) to secure their position and maintain employment at their succession, but was disproportionate if the exemption extended to big enterprises without necessary tests for economic justification.

Under the current law, Germans can inherit company assets with a partial or even complete exemption of estate tax if they keep the business for several years and maintain employment.