Anyone who owns a house or piece of land and knows that it will eventually pass to their children will sooner or later consider the right time to transfer it. The currently lower standard land values provide a specific reason to consider this question.
We have already explained the development of standard land values in Munich and its impact on the tax valuation of property in detail in our article “Lower standard land values in Munich in 2026: Time to review property transfers?”. This article therefore focuses primarily on the more specific question: Can it make sense to deliberately trigger gift tax instead of avoiding it at all costs?
Gift tax and early transfers – the key points at a glance:
- The valuation date can be decisive for the tax burden. In the case of gifts of land, the relevant date is generally the date on which the gift is notarised. In the event of death, it is the date on which the deceased died.
- Personal tax allowances generally become available again every ten years. An early transfer can prevent larger assets from being combined in a single acquisition at a later date and reaching a higher tax band. In principle, gifts and acquisitions upon death that the same person receives from the same other person within a ten-year period are aggregated when inheritance and gift tax is calculated.
- A reserved usufruct (Nießbrauch) can reduce the tax base while allowing the transferor to retain use of the property or the rental income.
- In addition to gift tax considerations, the transferor’s financial provision, rights of revocation, forced-heirship and equalisation arrangements, as well as income tax consequences, should be taken into account.
Why the valuation date determines the gift tax
Inheritance and gift tax are linked to a single day, known as the valuation date. In the event of death, this is the date of death; in the case of a gift, it is the date on which the transfer is carried out. For land, according to established case law, this is not only the date on which the transfer is entered in the land register. A gift is generally deemed to have been carried out once the conveyance (Auflassung), meaning the agreement on the transfer of ownership, has been notarised, the donor has authorised registration and the recipient is entitled to procure the change of registration. In practice, this means that the relevant date is generally the appointment with the notary, not the often months-long processing time at the land registry.
What applies on this valuation date is final. If the property subsequently increases in value, this has no bearing on the tax already assessed. The timing of the transfer is therefore itself a planning instrument.
Worked example: Why an earlier transfer may be more favourable despite gift tax
An example illustrates the scale of the difference. All figures are fictitious and are provided for illustrative purposes only.
Assume that a father transfers to his daughter a vacant detached house in the city of Munich, built in 1985, with a plot size of 800 square metres. As no comparative factors from the expert committee are available, the cost approach (Sachwertverfahren) must be applied. The building value under the cost approach—calculated on the basis of the statutory standard production costs, gross floor area, the construction price index and a regional factor, reduced by the age-related reduction in value—is assumed to be EUR 200,000 and remains unchanged in both scenarios. The value factor used to adjust the provisional value under the cost approach to the market value is assumed to be 0.9. The comparison focuses solely on the impact of the standard land value.
| Item | Scenario A: Valuation date 2024 | Scenario B: Valuation date 2026 |
| Plot size | 800 m² | 800 m² |
| Standard land value | EUR 1,400/m² | EUR 1,120/m² |
| Land value (plot size × standard land value) | EUR 1,120,000 | EUR 896,000 |
| Building value under the cost approach (fictitious, unchanged) | EUR 200,000 | EUR 200,000 |
| Provisional value under the cost approach | EUR 1,320,000 | EUR 1,096,000 |
| Value of the property for tax purposes (× value factor 0.9) | EUR 1,188,000 | EUR 986,400 |
| Less child’s tax allowance | EUR 400,000 | EUR 400,000 |
| Taxable acquisition | EUR 788,000 | EUR 586,400 |
| Tax rate (Tax Class I) | 19% | 15% |
| Gift tax | EUR 149,720 | EUR 87,960 |
In the example, the lower valuation level alone results in a EUR 61,760 reduction in tax. This is due to two effects: the taxable acquisition decreases, and it simultaneously moves into a lower tax band—from 19% to 15%. This is because inheritance and gift tax does not use a sliding scale, but bands: subject to cases involving hardship relief, the tax rate applicable to the band reached applies to the entire taxable acquisition.
A variation of the example shows how strongly the ownership structure affects the result: if the house belongs equally to both parents and each transfers their share, two personal allowances of EUR 400,000 each are available, provided that there have been no previous acquisitions to be taken into account during the preceding ten years. At the 2026 valuation level, each parent would then have a taxable acquisition of EUR 93,200, resulting in total tax of EUR 20,504.
Changed circumstances favour an early review
In addition to the current valuation level, the uncertain development of inheritance and gift tax is another reason not to postpone planned property transfers unnecessarily. Current reform proposals and pending proceedings before the Federal Constitutional Court point to changing conditions for succession planning. It is currently impossible to predict reliably how the legal position will actually develop.
We explain which reform proposals are being discussed and what significance they may have for succession planning in detail in our article Inheritance tax in transition: Which reform proposals are currently being discussed.
Why a deliberately taxable gift may make sense
- First, the banded tax rate: if the entire estate is transferred only upon death, the property, bank accounts and other assets are combined in a single acquisition and are therefore more likely to reach a higher tax band.
- Second, personal tax allowances, which become available again every ten years.
- Third, future appreciation: any increase in the property’s value after the gift accrues to the child’s assets and is not taxed again as part of the transfer of wealth from the parents.
- Fourth—and often decisive in practice—the reservation of usufruct. If the transferor reserves the right to use the property, the capitalised value of this right reduces the child’s enrichment and therefore the tax base for gift tax.
Gift tax that is payable today and can be planned for may therefore make more economic sense than postponing the transfer in full until the death of the transferor.
Other considerations when transferring property
As important as the figures are, tax should never be the sole deciding factor. The family situation and the transferor’s own financial provision are equally significant: how many children are there, is the property intended for only one of them, and will the donor’s remaining assets provide sufficient security in old age?
Financial provision, rights of revocation and equalisation between siblings
These matters can be addressed contractually. A usufruct allows the transferor to retain personal use of the property or the rental income, meaning that their financial provision remains economically unchanged. Rights of revocation should be secured by a priority notice of conveyance (Rückauflassungsvormerkung) in the land register—only then will the right of revocation be effective against third parties. In relation to the siblings, the transfer agreement can already stipulate that the gift is to be taken into account against the forced share (Pflichtteil) or equalised between the children. Such provisions must be made at the latest when the transfer takes place; it is no longer possible to make them later.
Further tax aspects of transferring property
A number of other points must also be examined for tax purposes: subject to strict conditions, the owner-occupied family home can be transferred free of tax during the owner’s lifetime, but only between spouses, and upon death also to children. For rented residential property, the law provides for a ten per cent valuation discount. If the property value for tax purposes is higher than the actual market value, a lower market value can be demonstrated by means of a properly prepared valuation report or a purchase price agreed within one year before or after the valuation date.
Finally, the income tax consequences should be examined, including, for example, the continuation of the speculation period and depreciation.
Conclusion: Lower standard land values as an opportunity for succession planning
Lower standard land values change the starting position for property transfers, but they do not apply everywhere or to every property in the same way. Whether the lower value has an impact depends on the valuation method, the type of land and the planning-law assessment. Where a lower land value applies, gift tax can now be saved compared with the past.
Anyone planning to transfer their assets to the next generation should therefore not wait, but use the current situation as an opportunity to plan their succession at an early stage and take advantage of the options still available under the current conditions.
We support you throughout the process—from the tax valuation and legal structuring through to coordinated implementation from a single source, always with a view to the long-term consequences.
Your ACCONSIS contact
Andreas Hopfgartner
Tax consultant
Authorised signatory of ACCONSIS
Service phone
+49 89 547143
or via email
a.hopfgartner@acconsis.de
Your ACCONSIS contact
Leon Feyler
Lawyer
Authorised signatory of ACCONSIS
Service phone
+49 89 54 71 43
or via email
l.feyler@acconsis.de
FAQ: Answers to Frequently Asked Questions about Standard Land Values and Gift Tax
Can gifting property make sense despite gift tax?
Yes. A completely tax-free transfer is not always the most economically favourable solution. If assets are transferred at an early stage, personal tax allowances can be used and larger assets may potentially be transferred at lower tax bands. However, the individual financial and family circumstances are always decisive.
What role does timing play when gifting property?
The valuation date is decisive for inheritance and gift tax. In the case of a gift of land, this is generally already the point at which the conveyance (Auflassung) has been notarised, the donor has authorised registration and the recipient is entitled to procure the change of registration. Subsequent increases in value no longer affect the tax assessed for that gift.
What advantages can a usufruct offer when gifting property?
If the transferor reserves a usufruct, its capitalised value can reduce the tax base for gift tax. At the same time, the transferor can retain personal use of the property or the rental income.
What should be taken into account in addition to gift tax when transferring property?
In addition to the tax burden, particular consideration should be given to the transferor’s financial provision, the family situation, possible rights of revocation, forced-heirship and equalisation arrangements, as well as income tax consequences.
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