Anyone leaving Germany expects a clean break: new country, new rules. For inheritance tax that is not the case. Section 2 ErbStG treats German nationals as residents for five years after departure — and attaches to the deceased and the recipient at the same time. While the Federal Constitutional Court hears the case on the relief rules in October, Switzerland and Austria have each decided against an inheritance tax in recent months. This article sets out the three legal positions and shows which period starts running when.
What continues to apply after departure
German inheritance tax does not attach to assets but to persons. If one of the persons involved is a resident, unlimited tax liability arises — and it covers worldwide assets, wherever they are situated.
The decisive sentence sits in section 2 (1) no. 1 (b) ErbStG: a resident also includes anyone who, as a German national, has not lived abroad permanently for more than five years without maintaining a home in Germany. The home is given up, the tax liability is not. It continues, and its connecting factor is nationality.
Two features of this provision make it more expensive in practice than it first appears.
It bites on both sides. For unlimited tax liability it is enough that one of the persons involved counts as a resident — the deceased or donor or the recipient. To avoid it, both sides must therefore have the period behind them. Parents who have lived in Tbilisi for eight years trigger German inheritance tax the moment they transfer to a child who left only three years ago. The longer period on one side does not help the other.
It covers worldwide assets. While the period runs, it makes no difference for inheritance tax purposes whether an account is held in Frankfurt or in Tbilisi, or whether shares in a German or a Georgian company pass. A structure built abroad does not reduce the tax base during this window — it merely relocates it geographically.
In relation to the USA the window doubles: the protocol to the German-American estate tax treaty substitutes a ten-year period for the five years for the persons it covers.
This period must be distinguished from two others it is frequently confused with. Section 6 AStG taxes departure itself as a deemed disposal of shares — once, at the time of departure, irrespective of any later inheritance; see Staying Does Not Get Cheaper. Leaving Gets More Expensive. Section 2 AStG governs extended limited income tax liability on departure to a low-tax jurisdiction and reaches up to ten years. Three provisions, three periods, three triggers — anyone conflating them is planning around the wrong problem.
How the three countries diverge
The German position looks different as soon as it is placed next to its neighbours. In the German-speaking region inheritance tax is not a shared standard but the exception.
| Germany | Austria | Switzerland | |
|---|---|---|---|
| Inheritance tax at federal level in Switzerland direct descendants are exempt in most cantons | yes | no, abolished in 2008 | no, governed cantonally |
| Most recent decision Federal Constitutional Court 1 BvR 804/22; Austrian National Council; Swiss national vote | hearing on 13 Oct 2026 | motion rejected on 25 Feb 2026 | initiative failed on 30 Nov 2025 |
| Outcome Austria: ÖVP, FPÖ and NEOS against, SPÖ abstained | open | no majority in the National Council | 78.3% against |
| Continuing effect after departure section 2 (1) no. 1 (b) ErbStG attaches to nationality | 5 years, USA 10 years | none, no such tax | none at federal level |
| Assets covered under unlimited German liability regardless of where assets are situated | worldwide | — | cantonal, situs decisive |
Austria abolished inheritance and gift tax in 2008. A motion by the Greens to reintroduce it for estates above one million euros found no majority in the National Council on 25 February 2026; the ÖVP, FPÖ and NEOS voted against and the SPÖ abstained. The finance minister has personally spoken in favour of a millionaires’ inheritance tax, but it does not appear in the government programme. On the wider picture: Leaving Austria: The 2026 Location Audit.
In Switzerland competence sits with the cantons, and direct descendants are exempt in most of them. A national initiative sought to tax inheritances and gifts above CHF 50 million; it failed on 30 November 2025 with 78.3 percent voting no on a turnout of 42.9 percent. What Switzerland delivers as a second jurisdiction, and what it does not, is set out in Switzerland: Low Taxes, High Dependency.
What is being heard in Karlsruhe in October
On 13 October 2026 the First Senate of the Federal Constitutional Court holds an oral hearing on constitutional complaint 1 BvR 804/22 (press release 49/2026 of 30 July 2026). It is the court’s fourth engagement with inheritance tax law since 1995.
The case is unusually framed. The complainant inherited private assets only from his aunt. He does not argue that he pays too much, but that others pay too little: the reliefs for the transfer of business assets and the associated valuation rules, he contends, discriminate against him in breach of the equality principle, because his inherited private assets receive no comparable relief.
A consequence follows that is usually lost in the public debate: should the complaint succeed, the obvious correction is not relief for heirs of private assets but a narrowing of the relief for business assets. The group a win for the complainant would hit hardest is entrepreneurial families in succession — precisely those for whom sections 13a ff. ErbStG were created.
What remains is this: nothing has been decided. The court may uphold the provisions. An oral hearing is not a preliminary ruling, and no date for a judgment has been set.
What sits on the other side
Georgia levies no wealth tax and no inheritance or gift tax within the close family. For private individuals with Georgian tax residency, foreign investment income is tax-free under the territorial principle; the detail is in Georgia Territorial Taxation: Tax-Free Foreign Income. Tax residency arises after 183 days, or alternatively via the HNWI programme — Georgia Tax Residency: 183-Day Rule and HNWI Program.
What Georgia does not do: shorten a German period already running. Liability under section 2 ErbStG arises in the country of origin, attaches to nationality and covers worldwide assets — a Georgian account or a Georgian company sits inside that reach, not outside it. Anyone sold otherwise should change provider.
The difference arises after the period expires, not before. That is not a loophole but a question of timing.
What follows from this
The construction produces an order of operations that runs against the usual approach.
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Establish both periods separately
When did each person give up their domestic home completely? For the deceased and for every intended recipient that produces its own date. Only when both dates lie more than five years back is unlimited tax liability over — ten years in the case of the USA.
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Plan transfers inside the period deliberately
A gift in the third year after departure is, for inheritance tax purposes, a domestic gift with a worldwide tax base. Anyone free to choose the timing gains more by waiting than by any structure.
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Do not conflate this with section 6 AStG
Exit taxation arises once on departure and grows with the company valuation; the inheritance tax period runs independently of it. One argues for leaving early, the other for patience afterwards. Both belong in the same plan, but on separate lines.
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Have the determination made in the country of origin
When the period starts, whether the home has been given up and how assets are valued are questions of German law. They belong in the hands of a tax adviser at home, not a foreign service provider. What can be settled from Tbilisi is the structure that follows.
The sober finding is therefore this: Germany taxes income during your lifetime, departure under section 6 AStG at the moment of leaving — and through section 2 ErbStG the transfer of assets for five years beyond it. Three points of access, three legal bases, one timeline. Anyone who knows that timeline makes different decisions from someone who discovers it when someone dies. The parallel debate about existing wealth is covered in German Wealth Levy: What Is Planned for EUR 2.8 Trillion.
Frequently asked questions
Do I still pay German inheritance tax after leaving?
Possibly yes. Under section 2 (1) no. 1 (b) ErbStG, German nationals continue to count as residents for five years after giving up their domestic home. While that period runs there is unlimited inheritance and gift tax liability — and it covers worldwide assets, not only those situated in Germany. The connecting factor is nationality, not residence.
Does the five-year period apply to the deceased or to the heir?
To both. Unlimited tax liability arises as soon as one of the persons involved counts as a resident — the deceased or donor, or the recipient. To avoid it, both sides must therefore have the period behind them. This is the point most often overlooked in practice: parents who have lived abroad for eight years still trigger German inheritance tax if the inheriting child has not yet been away five years.
What is different in relation to the USA?
A ten-year period applies there instead of five. The basis is the protocol to the German-American estate tax treaty, which substitutes a ten-year rule for the five-year rule for the persons it covers. For planning a move to the USA, the window in which both sides remain within German reach therefore doubles.
What is being heard in Karlsruhe on 13 October 2026?
The Federal Constitutional Court holds an oral hearing on constitutional complaint 1 BvR 804/22. The complainant inherited private assets only and argues that the relief rules for business assets discriminate against him in breach of the equality principle. The outcome is open: the court may uphold the provisions or declare them incompatible with the Basic Law. Nothing has been decided.
Does Georgia levy an inheritance tax?
Georgia levies no wealth tax and no inheritance or gift tax within the close family. That does not, however, affect a German period already running. Liability under section 2 ErbStG arises in the country of origin and attaches to the nationality of those involved; the destination state has no influence on it.
How do Austria and Switzerland differ?
Austria has levied no inheritance or gift tax since 2008; a motion to reintroduce it for large estates found no majority in the National Council on 25 February 2026. In Switzerland inheritance tax sits with the cantons and direct descendants are exempt in most of them; a national initiative targeting assets above CHF 50 million failed on 30 November 2025 with 78.3 percent voting no. Neither country has any period comparable to the German continuing effect.
This article is general information and does not constitute legal or tax advice. The legal references relate to section 2 of the German Inheritance and Gift Tax Act, sections 6 and 2 of the German Foreign Tax Act and the consolidated Georgian Tax Code as in force at the time of writing. The pending proceedings are before the Federal Constitutional Court under 1 BvR 804/22; the hearing date follows press release 49/2026 of 30 July 2026. The tax figures come from the Federal Statistical Office (inheritance and gift tax assessed, reference year 2024), the Austrian vote from the Parliament of the Republic of Austria (25 February 2026) and the Swiss result from the national vote of 30 November 2025. The “FairErben” concept is a discussion paper of the SPD parliamentary group from January 2026 with no force of law. Establishing when the period starts and the tax base in an individual case belongs in the hands of a tax adviser in the country of origin. As of August 2026, subject to changes in the law.