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Section 13c(1) ErbStG does not favor immovable property in third countries.
The FG considers the full valuation of rental properties in third countries to be contrary to European law for the Cologne Inheritance Tax.
real estate in canada
An heir who, among other things, received shares in Canadian rental properties, is suing FG Cologne. These shares belong to his personal property. When calculating inheritance tax, the tax office valued real estate at its fair value.
assessment of inheritance tax
The plaintiff sought the application of section 13c(1) ErbStG 2009. As per this, rental properties are taxed only at 90 per cent of the normal value. However, the regulation only applies to rented residential properties that are in Germany, in the European Union or in the European Economic Area. From the point of view of the plaintiff, this is a violation of the so-called free circulation of capital from Art 63 TFEU in relation to a third country.
Order for reference of ECJ
FG Cologne followed the plaintiff’s argument and presented the question to the ECJ in its decision as to whether Sections 13c (1) and (3) No. 2 of the Inheritance and Gift Tax Act dated December 24, 2008 (ErbStG 2009) . Against the free movement of capital infringement (File No: C-670/21 on ECJ).
FG Cologne, Decision of 2.9.2021, 7 K 1333/19
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