Inheriting apartment buildings in Berlin: tax exemptions for business assets

Business assets vs. private assets

Residential properties used solely for passive asset management are subject to regular inheritance tax when transferred through inheritance or gift. However, the German Inheritance and Gift Tax Act (Erbschaftsteuer- und Schenkungsteuergesetz, ErbStG) provides relief for business assets under Sections 13a and 13b: under standard relief (Regelverschonung), 85 percent of qualifying assets are tax-exempt; under optional relief (Optionsverschonung), 100 percent.

Residential property portfolios can also fall within the scope of this provision under certain conditions. The key factor under Section 13b(4)(1d) ErbStG is whether the rental activity goes beyond passive capital investment and qualifies as a commercial operation.

The 300-unit threshold

The frequently cited threshold of 300 residential units is not a statutory limit. It comes from tax audit practice: above this level, tax authorities tend to examine more closely whether the owner's activities amount to a commercial enterprise.

The authorities review the corporate structure, whether the owner maintains dedicated operational units, employs staff for property management, and the nature and scope of additional services such as tenant support, maintenance, or professional asset management. Simply holding and renting out apartments is generally not sufficient to qualify for the exemption.

What this means for Berlin portfolios

Based on our market data, the average transaction price for an apartment building in Berlin in 2025 was approximately 4.9 million euros. With a typical building size of 20 to 30 units, a portfolio reaches the 300-unit threshold at around 10 to 15 properties, corresponding to an estimated total volume of roughly 50 to 75 million euros.

For owners in this range, the tax classification as business assets can make a considerable difference when transferring property. If you are considering selling an apartment building or transferring it within your family, you should consult a tax advisor about inheritance tax structuring well in advance.

Holding periods and reform debate

Anyone using the tax exemption under Section 13a ErbStG must continue operating the assets for at least five years after the transfer (standard relief) or seven years (optional relief). Sales or significant structural changes within this period can cause the exemption to be revoked retroactively.

The German Council of Economic Experts (Sachverstaendigenrat) recommended restricting business asset tax exemptions in its 2025/2026 annual report. No concrete legislative changes have been introduced so far, but the political discussion continues.

Professional guidance

Classifying a residential portfolio as business assets requires tax expertise, business knowledge, and an understanding of the regulatory framework. A thorough property valuation provides the foundation for tax classification and subsequent asset transfer.

If you want to stay informed about current conditions on the Berlin apartment building market, our Market Intelligence provides up-to-date transaction data and price trends.

This article is for general information purposes only and does not constitute tax or legal advice. The content does not replace individual consultation with a tax advisor or attorney. No liability is assumed for accuracy or completeness.