March 3, 2024

FG Köln: Inheritance tax on rental properties in Canada |  Guidance

FG Köln: Inheritance tax on rental properties in Canada | Guidance

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Section 13c(1) ErbStG does not favor third country real estate.

FG Cologne considers that the full assessment of the property rented in the so-called third countries of the inheritance tax is contrary to European law.

real estate in canada

A delegate who, among other things, acquired shares in Canadian rental properties, is suing FG Cologne. These shares belong to his own assets. When calculating the inheritance tax, the tax office valued the property at its fair value.

Determine the inheritance tax

The plaintiff requested the application of Section 13c(1) ErbStG 2009. Accordingly, rental property is taxed at only 90 percent of the combined value. However, the regulation only applies to rental residential properties located in Germany, the European Union or the European Economic Area. From the plaintiff’s point of view, this constitutes a violation of the so-called free movement of capital of Article 63 TFEU in relation to a third country.

Arrangement for reference to the European Court of Justice

FG Cologne followed the plaintiff’s argument and submitted in its decision to the European Court of Justice the question whether Section 13c (1) and (3) No. 2 of the Inheritance and Gift Tax Act of December 24, 2008 (ErbStG 2009) against free movement of capital irregularities (file number In the European Court of Justice: C-670/21).

FJ Kowloon, Resolution 2.9.2021, 7 K 1333/19

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