Insights · AXD Real Estate Dubai
Inheritance Tax on a Dubai Property in Germany 2026
Do I have to pay German inheritance tax on an inherited Dubai property?
Yes — if there is unlimited tax liability in Germany. § 2 (1) No. 1 ErbStG (German Inheritance Tax Act) covers worldwide assets, and therefore also the Dubai property. The UAE levies no inheritance tax, and no inheritance tax DTA with Germany exists. Double taxation therefore does not arise, but the full German inheritance tax applies according to tax class, allowance and valuation discount.
Allowances under § 16 ErbStG
| Relationship | Allowance | Tax class |
|---|---|---|
| Spouse / registered civil partner | 500,000 € | I (7–30 %) |
| Children / stepchildren | 400,000 € | I (7–30 %) |
| Grandchildren | 200,000 € | I (7–30 %) |
| Parents (acquisition on death) | 100,000 € | I (7–30 %) |
| Siblings, nieces, nephews | 20,000 € | II (15–43 %) |
| Others (unmarried partner, third parties) | 20,000 € | III (30–50 %) |
What practically matters for DACH testators
Valuation at fair market value (market value) on the date of death under § 31 BewG (German Valuation Act) — a RICS appraisal is recommended. For rented residential properties: 10 % valuation discount under § 13d ErbStG. A DIFC will bypasses the default Sharia distribution of the estate and secures the intended distribution. The German credit option under § 21 ErbStG comes to nothing in the absence of UAE inheritance tax — there is nothing to credit. Early asset planning (lifetime gift, family holding) can reduce the burden considerably — see Exit Tax DACH-HNWI 2026.
When does German inheritance tax not apply?
Only if neither the testator nor the heir has unlimited tax liability in Germany and the property is not German domestic assets. Note the extended limited inheritance tax liability under § 4 AStG (German Foreign Tax Act) for those who move away to low-tax countries — the UAE is regarded as a low-tax country, and German inheritance tax can still reach back for up to 10 years after departure.
Sources
§ 2 ErbStG — Personal tax liability (worldwide assets principle) § 16 ErbStG — Allowances § 19 ErbStG — Tax rates by tax class § 12 ErbStG in conjunction with § 31 BewG — Valuation of foreign properties § 13d ErbStG — 10 % valuation discount for rented residential properties § 4 AStG — Extended limited inheritance tax liability DTA Germany-UAE 2010 (no inheritance tax provision)
Note: Inheritance tax planning is highly individual. Tax classes, prior acquisitions (10-year period), dependants' allowances and extended limited tax liability require a case-by-case review by a tax advisor or a specialist lawyer for inheritance law.
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