Inheritance Tax between the USA and Germany: What the Treaty Provides

Published on 13.10.2026

Inheritance Tax: USA-Germany Treaty

Anyone who owns assets in the United States, has emigrated to the USA or inherits from relatives in America faces the question of which state may tax. For inheritance tax between the USA and Germany there is a separate treaty that also covers lifetime gifts. However, it does not completely prevent a double burden; instead, it allocates taxing rights and mostly provides for a tax credit. Heirs resident in Germany in particular regularly remain taxable here, even if the deceased lived in the USA for decades.

This article explains the treaty from a German perspective. How the American estate and gift tax is calculated and which returns must be filed there should be assessed by an adviser admitted in the USA. The legal position is as at October 2026.

The Treaty at a Glance

The official title is “Convention between the Federal Republic of Germany and the United States of America for the Avoidance of Double Taxation with respect to Taxes on Estates, Inheritances, and Gifts”. It was signed on 3 December 1980 and amended by a Protocol of 14 December 1998, which entered into force on 14 December 2000. The current version was republished on 21 December 2000 (Federal Law Gazette, BGBl. 2001 II p. 65).

Germany has inheritance tax treaties with only a few states: besides the USA, with Denmark, France, Greece, Sweden and Switzerland. For all other countries, only the unilateral tax credit under Section 21 of the Inheritance and Gift Tax Act remains, which is described in the article on Inheritance tax and double taxation treaties. The treaty must be distinguished from the German-American treaty on taxes on income.

Two principles are essential for understanding it:

• The treaty does not create any tax. Whether German inheritance or gift tax arises follows first from the Inheritance and Gift Tax Act (Erbschaftsteuer- und Schenkungsteuergesetz, ErbStG). The treaty then decides whether Germany may exercise this right and how a double burden is avoided.
• It applies to estates and gifts. Under Art. 1, it covers estates of deceased persons and gifts of donors who were resident in one or both states at the relevant time. On the American side, it covers the federal estate tax and federal gift tax including the generation-skipping transfer tax, and on the German side the inheritance tax (gift tax) (Art. 2). This is an important difference from the inheritance tax treaty with Switzerland, which does not cover lifetime gifts.

Residence within the Meaning of the Treaty

Most legal consequences depend on the residence of the deceased or donor under the treaty (Art. 4 (1)):

• USA: A residence in the United States exists if the person is resident there or is a US citizen. According to this, US citizens living in Germany also have a US residence.
• Germany: A residence in Germany exists if the person has their residence or habitual abode here or is otherwise treated as having unlimited liability for German inheritance tax.

The second alternative is significant for emigrants. Under Section 2 (1) no. 1 sentence 2 letter b ErbStG, German nationals remain subject to unlimited tax liability as long as they have not been continuously abroad for more than five years without having a residence in Germany. Anyone moving from Germany to the USA will therefore regularly be resident in both states for treaty purposes during these five years. When a habitual abode in Germany exists is explained in the article on Habitual abode in tax law.

Tie-Breaker in the Case of Dual Residence

If there is a residence in both states, Art. 4 (2) allocates the person to one state in stages: first according to the permanent home, then according to the centre of vital interests, then according to the habitual abode and then according to nationality. If the question remains open, for example in the case of dual nationality, the authorities reach an agreement. The pattern is explained in the article on the Basics of double taxation treaties for emigrants.

The Ten-Year Rule of Art. 4 (3)

A special rule takes precedence over the tie-breaker. If, at the time of death or of the gift, a person was a national of only one of the two states, was resident in both states under paragraph 1 and had been resident in the other state for no more than ten years, their residence is deemed to be in the state of their nationality. This extends to members of their household who meet the same conditions. The rule therefore applies to the deceased or donor; in principle it does not apply to the heir or donee unless they belong to that person’s household. If an heir has a residence in both states, the tie-breaker of Art. 4 (2) must instead be examined for them, for example for the question of whether their residence within the meaning of Art. 4 is in Germany (Art. 11 (1)).

In practice, this matters in two typical situations:

• German emigrant in the USA: A German national without US citizenship who dies within the first five years after moving away is, as a rule, deemed to be resident in Germany for treaty purposes despite their centre of life being in America. Germany may then in principle tax the entire estate; the USA is limited to the types of assets allocated to it as the state where they are situated. Once the five-year period has expired, there is regularly no longer a German residence under Art. 4 (1), so that Art. 4 (3) no longer plays a role.
• US citizen in Germany: Anyone who holds only American citizenship and has been resident in Germany for no more than ten years is deemed to be resident in the USA for treaty purposes. However, this does not protect against German inheritance tax if the heirs live in Germany (see below).

The rule requires that the person is not also a national of the other state. Anyone who becomes a naturalised US citizen and keeps their German citizenship therefore falls outside it; this should be considered before naturalisation. An overview of questions of citizenship when emigrating is given in a separate article. How the USA determines residence for its estate tax should be clarified by a US adviser.

Which State May Tax Which Assets

Assets taxable where situated (Art. 5 to 8). Immovable property may also be taxed by the state in which it is located (Art. 5). What it includes is determined by the law of the state where it is situated. The same applies to the assets of a permanent establishment or a fixed base used for independent personal services (Art. 6) and to interests in partnerships, to the extent that their value is attributable to such assets (Art. 8). Ships and aircraft in international traffic may be taxed only by the state of residence (Art. 7).

Other assets (Art. 9). Everything else, in particular bank balances, securities accounts, shares in corporations and receivables, may be taxed only by the state of residence, regardless of where it is located. A securities account with American shares held by a deceased who, for treaty purposes, was resident only in Germany and was not a US citizen is therefore allocated to German taxing rights under the treaty. Whether returns are nevertheless required in the USA, for example to release accounts, should be checked by a US adviser.

However, Art. 9 is subject to the proviso of Art. 11 (1), which decides most cases in practice.

The Proviso in Art. 11 (1): Citizenship and the Heir’s Residence

Under Art. 11 (1), the treaty does not prevent either state from taxing under its own law in certain cases despite the allocation rules:

• The USA may tax the estate or gift if the deceased or donor was a US citizen or was resident in the USA within the meaning of Art. 4. Former citizens and long-term residents who gave up this status principally, among other things, to avoid tax are also covered, for ten years after the loss.
• Germany may tax an heir, donee or other beneficiary who, at the time of death or of the gift, was resident within the meaning of Article 4 in the Federal Republic of Germany.

This heir rule corresponds to the basic principle of German law under which the entire acquisition is subject to unlimited tax liability if the deceased or the acquirer is a resident (Inländer) (Section 2 (1) no. 1 ErbStG). If the heir lives in Germany, German tax also covers a house in Florida or a securities account in New York.

Example: Ruth has lived in California for 30 years and is resident there. She leaves her nephew Tobias in Hamburg a holiday home in Arizona worth EUR 900,000. Whether US estate tax arises in view of the exemption amount there should be clarified by a US adviser. In Germany, the acquisition is subject to unlimited tax liability because Tobias is a resident; Art. 11 (1) permits this. As a nephew in tax class II, he has an allowance of only EUR 20,000 (Section 16 (1) no. 5 ErbStG). If no US tax arises, there is nothing to credit, and the German tax remains in full.

Credit under Art. 11: How the Double Burden Is Avoided

Art. 11 avoids double taxation on both sides by means of a credit. It does not provide for an exemption, such as the one Switzerland applies under its inheritance tax treaty with Germany to assets situated in Germany. From a German perspective, Art. 11 (3) is decisive: if Germany levies tax on the basis of the residence of the deceased, donor, heir or donee, it credits

• the US tax on assets that the USA may tax as the state where they are situated under Art. 5, 6 or 8 (letter a), and
• additionally the US tax on other assets if the deceased or donor was resident in the USA and the acquirer in Germany (letter b).

There are also rules that are often overlooked in practice:

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Questions of interpretation remain open: the American estate tax is owed by the estate as a whole, whereas German inheritance tax is owed by the individual acquirer. How the US tax is to be divided among several heirs and how the one-year deadline of the treaty interacts with the five-year limit in Section 21 (1) ErbStG must be examined in each individual case. Where the legal position is unclear, it is advisable to obtain a binding ruling (verbindliche Auskunft) from the tax office under Section 89 (2) of the Fiscal Code (Abgabenordnung, AO) before implementing an arrangement.

If taxation contrary to the treaty is threatened, the mutual agreement procedure under Art. 13 is available. The case must be presented within one year of the final settlement or rejection of a claim for exemption, credit or refund.

Typical Constellations at a Glance

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Allowances and Rules for Spouses

The treaty does not change the German allowances. If the acquisition is subject to unlimited tax liability, the amounts under Section 16 (1) ErbStG apply, for example EUR 500,000 for spouses and registered civil partners and EUR 400,000 for children. If there is only limited tax liability, for example because the deceased and the heir live in the USA and only German real estate is affected, the allowance is reduced proportionately under Section 16 (2) ErbStG, namely according to the ratio of the assets not subject to limited tax liability to the total acquisitions within ten years. For spouses, Art. 10 (4) contains a special rule. If assets that the other state may tax only as the state where they are situated under Art. 5, 6 or 8 pass to the spouse, they are included there only to the extent that their value exceeds 50 percent of the total assets included in the taxation. Community property is excluded. In Germany, no higher amount may be exempted than the allowance to which a spouse with unlimited tax liability would be entitled. The rule does not apply to US citizens resident in Germany or to former citizens or long-term residents within the meaning of Art. 11 (1).

Example: Frank, a US citizen resident in Texas, leaves his wife Clara, who also lives in Texas, a condominium in Munich worth EUR 600,000 as his only German asset. Clara has only limited tax liability in Germany. Under Art. 10 (4), the flat is included only to the extent that its value exceeds half of the assets included, limited by the spousal allowance. The interaction with Section 16 (2) ErbStG should be calculated before the return is filed.

Art. 10 (5) and (6) contain relief on US tax for deceased persons resident in Germany, for example a proportionate unified credit; their application should be clarified by a US adviser. Pensions paid by a contracting state, for example under social security law, are exempt from tax in the other state to the extent that they would be exempt in the paying state, but may be credited against the German pension allowance (Versorgungsfreibetrag) (Art. 10 (3)). Art. 10 (2) and (1) apply to charitable gifts and the deduction of debts for assets taxable where situated.

Gifts and Trusts

Because the treaty also covers gifts, the allocation rules and the credit under Art. 11 apply to lifetime transfers in the same way as on death. This opens up scope for planning: under Section 14 ErbStG, German allowances become available again every ten years, so that staggered gifts can reduce the overall burden. American gift tax and reporting obligations should be coordinated in advance with a US adviser.

For trusts, each state applies its own rules on when a transfer to or from a trust is taxable (Art. 12 (1)). If the same transaction is captured at different times, the authorities may discuss the case in a mutual agreement procedure where the interval is no more than five years (Art. 12 (2)). Under certain conditions, Art. 12 (3) gives beneficiaries an option, within five years, to be taxed as if a taxable event had already occurred at the time of the transfer. Whether a trust arrangement holds up under American law should be assessed by a US adviser.

Procedural Obligations and Deadlines in Germany

An acquisition subject to German inheritance tax must be notified to the tax office within three months of becoming aware of it under Section 30 ErbStG. For the credit, the assessment and payment of US tax must be evidenced.

Succession law deadlines run in parallel. Under German law, the period for disclaiming an inheritance is six weeks; it is extended to six months if the deceased’s last residence was only abroad or the heir is abroad when the period begins (Section 1944 of the German Civil Code, BGB). Which succession law applies and how a will with a connection to the USA should be drafted is covered in the article on Wills when resident abroad. For probate proceedings in the USA, a US attorney should be consulted.

Common Mistakes in Practice

• Assuming that no German tax arises if there is no US tax. High American exemption amounts do not protect heirs in Germany from German inheritance tax.
• Overlooking the ten-year rule of Art. 4 (3). After a move, the residence under the treaty can remain in the state of origin for a long time.
• Not considering the heirs’ residence. A child who moves to Germany can trigger a German taxing right via Art. 11 (1), even though the parents live in the USA.
• Missing credit deadlines. The one-year deadline of Art. 11 (7) begins with final assessment and payment; lengthy US proceedings should therefore be monitored continuously.

Anyone planning to move to the USA should examine the inheritance tax consequences together with the income tax consequences, for example as part of planning for German exit tax.

Conclusion

The treaty between Germany and the USA avoids a double burden mainly by means of a credit, not by waiving taxation. The decisive factors are residence under the treaty according to Art. 4 including the ten-year rule, the allocation of real estate and business assets to the state where they are situated, and the proviso of Art. 11 (1), which leaves the USA its citizens and Germany its heirs and donees. Because gifts are also covered, transfers can be planned if German and American advice is coordinated.

Frequently Asked Questions

Is there an inheritance tax treaty between the USA and Germany?

Yes. The treaty was signed on 3 December 1980, amended by the Protocol of 14 December 1998 and republished in the new version of 21 December 2000 (BGBl. 2001 II p. 65).

Do I have to pay inheritance tax in Germany if I inherit from relatives in the USA?

As a rule, yes, if you have your residence or habitual abode in Germany at the time of the inheritance. Art. 11 (1) allows Germany to tax; US tax is credited up to the amount of the proportionate German tax.

Who taxes real estate in the USA if the deceased lived in Germany?

Both states. The USA may tax the property as the state where it is situated (Art. 5), Germany as the state of residence. Germany credits the American tax including any tax of the US state (Art. 11 (3) and (4)).

Does the treaty also apply to gifts?

Yes. Unlike the treaty with Switzerland, under Art. 1 it also covers gifts by donors resident in one or both states.

What applies after moving to the USA?

German nationals remain subject to extended unlimited tax liability in Germany for five years. Under Art. 4 (3), their residence under the treaty is regularly deemed to be in Germany during this period, as long as they are not also US citizens. After that, provided no residence in Germany has been retained, Germany in principle taxes only German real estate and business assets as well as acquisitions by heirs resident in Germany.

Attorney Dr. Johannes Fiala and the Munich-based firm, which focuses on international succession law, tax law and asset protection, advise testators, heirs and donors with a connection to the USA on inheritance and gift tax planning from a German perspective, from examining residence under the treaty and the credit for US tax to lifetime transfers in coordination with US advisers. Dr. Fiala has published extensively on questions of emigration and asset protection. Please get in touch with the firm without obligation to discuss your individual situation in an initial consultation.