Liability of Banks for Inheritance Tax of Customers for Transfers Abroad

Banks are increasingly being asked to disburse inheritance assets abroad. However, such disbursements entail a considerable liability risk if the bank transfers assets abroad or makes them available to a foreign beneficiary before the tax triggered by the inheritance has been paid or secured (Section 20 para. 4 sentence 2 ErbStG).

Prerequisites for liability

The prerequisite for liability is that at the time of the transfer abroad or the provision to a foreign beneficiary, the bank has custody, for example, of the bank deposits, securities accounts and also of the assets held in custody at a dependent foreign branch abroad.

A so-called "foreign beneficiary" may be an heir or, under certain conditions, a legatee. A purchaser of an inheritance or a beneficiary under a contract for the benefit of third parties who is domiciled or habitually resident abroad may also be considered a "foreign beneficiary."

The bank's liability exists even if a foreign beneficiary acts through a domestic authorized representative, but it does not apply if it pays out the assets to a domestic executor or transfers assets directly abroad on the instructions of the domestic executor or makes them available to the executor, since an executor is not considered an authorized representative of a beneficiary but acts by virtue of his or her office.

In addition, the liability of the bank presupposes intentional or even negligent conduct. Negligent conduct is assumed if the bank disregards the due care required in the course of business, in particular if it learns of the death of a customer and nevertheless makes a disbursement or transfer.

Consequences

If the conditions are met, the bank is liable for the total inheritance tax owed for the respective inheritance case with the amount of the disbursement and is not liable only for the pro rata inheritance tax relating to the assets held at the bank. In the case of a joint account, liability is generally limited to the decedent's share.

Clearance certificate

In order to avoid liability under Section 20 para. 6 sentence 2 ErbStG, after the death of a customer, the bank should insist on the submission of a clearance certificate from the competent tax office regarding the payment or securing of inheritance tax prior to any transaction abroad or to a foreign beneficiary. If this clearance certificate is available, it may carry out the transaction abroad without fear of liability.

Section 20 para. 7 of the Inheritance Tax Act: The liability under para. 6 shall not be asserted if the amount paid in a tax case to a territory outside the scope of this Act or made available to beneficiaries residing outside the scope of this Act does not exceed 600 euros. This applies per heir. With the draft bill of the Federal Ministry of Finance dated 17.07.2023, the de minimis limit under the "Growth Opportunities Act" is to be increased from EUR 600 to EUR 5000.

If you have any questions, please do not hesitate to contact our Private Clients Team.