Unlike Germany, Hungary does not levy inheritance or gift tax on direct relatives – an interesting advantage for German investors who wish to pass on Hungarian real estate assets within the family. But be careful: if you are resident in Germany for tax purposes, your global assets are subject to German inheritance tax.
In this article, we clarify when tax liability arises in Germany, the difference between direct land register shares and Kft company shares – and when a transfer of residence to Hungary can make tax sense.
A note in advance: we have researched and compiled the information to the best of our knowledge, but cannot accept any liability for consequences arising from errors or outdated information, for example due to recent changes in the law.
If in doubt, please consult an expert!
Difference between unlimited and limited tax liability
Unlimited tax liability (section 2 (1) no. 1 ErbStG)
If the testator or donee is resident or ordinarily resident in Germany, their entire worldwide assets are subject to German inheritance and gift tax.- Regardless of the location of the property or company
- Hungarian real estate and Kft shares are also taxed
- Allowances applicable under German law (e.g. € 400,000 for children)
Limited tax liability (Section 2 (1) No. 3 ErbStG)
If neither the testator nor the beneficiary live in Germany, but <strong “Domestic assets exist (e.g. a German property), the limited tax liability applies.- Only German assets are taxable
- Hungarian real estate or company shares are not affected
- Allowances do not apply or only apply proportionately
Comparison table: Tax liability for inheritance/gift
| Criterion | Unlimited tax liability | Limited tax liability |
|---|---|---|
| Residence DE (testator or acquirer) | Yes | No |
| Taxation of worldwide assets | Yes | No |
| Hungarian property is taxed | Yes | No |
| Allowances under German law | Yes | Only limited |
Direct land register shares vs. company shares (kft)
A distinction is made between investments in Hungary:- Direct real estate shares entered in the land register
- Shares in a Hungarian Kft (corporation, similar to a limited liability company)
Comparison table: Inheritance or gift
| Aspect | Land register share | Kft share |
|---|---|---|
| Form of transfer | Transfer to the land register | Notarized share purchase agreement & register entry |
| Hungarian tax liability | None (in direct line) | None |
| German tax liability (with unlimited liability) | Yes | Yes |
| Valuation | Market value of the property | Enterprise value of the Kft |
| Allowances (e.g. child) | Yes, up to € 400,000 | Yes, up to € 400,000 |
Options for tax avoidance
1. relocation of residence is not automatically tax-free
Relocating to Hungary can help to avoid German inheritance tax on foreign assets in the long term. The decisive factor here is not whether the entire assets are transferred – but whether the inherited or gifted assets are taxable in Germany.- German assets (e.g. a rented apartment in Berlin) remain taxable
- Hungarian assets (real estate or Kft shares) may be exempt from German inheritance tax
2. consciously plan the use of limited tax liability
Anyone who moves their entire center of life to Hungary and only invests there can build up new assets outside of German tax liability. Even with limited tax liability, these assets located in Hungary are generally not subject to German inheritance tax.3. option for unlimited tax liability (Section 2 (3) ErbStG)
Anyone with limited tax liability can apply to be treated as a person with unlimited tax liability in order to use the full tax-free amount (e.g. €400,000 for children). This only makes sense if the taxable income is less than the tax-free amount.4. staggered gift with allowances
Allowances can be used again every ten years. With early planning, it is therefore possible to pass on larger assets tax-free in several tranches.Example: Inheritance with mixed assets
- Person A lives and has lived in Hungary for 5 years
- A still owns a rented apartment in Berlin → limited tax liability in Germany
- A bequeaths his shareholding in a Hungarian Kft or his Hungarian apartment to child B (also resident in Hungary)
Result:
- The Berlin apartment is subject to German inheritance tax
- The Hungarian property or Kft shareholding does not – it remains tax-free in Germany
Conclusion
Even if Hungary itself does not levy inheritance or gift tax in the direct line, German tax liability remains a decisive factor for German investors. Those who structure their investment in a Hungarian property or Kft in good time and plan their residence accordingly can achieve considerable tax advantages or avoid becoming subject to full tax liability.
Status: October 2025
Note: This article does not constitute tax or legal advice. The information has been carefully researched and is based on the information available at the time of publication. For binding information on your individual situation, please contact a tax consultant or a specialized law firm.
