Inherited Farmland in Germany: Inheritance Tax, Lease or Sell

Anyone inheriting agricultural land usually faces three questions at once: what is the land worth, what does the tax office want — and what do I do with it if I am not a farmer myself? This guide sets out the tax basics and the options available to you as an heir.

Key Takeaways

• Agricultural and forestry assets are valued not at market value but by an income-based method — the taxable value is often well below the market price.
• Personal allowances: 500,000 € spouses, 400,000 € per child, 200,000 € grandchildren, 20,000 € unrelated heirs.
• Relief for business assets may apply — tied to retention periods of five or seven years.
• A sale within the retention period can cost the relief retroactively.
• The acquisition generally has to be notified to the tax office within three months.

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How inherited farmland is valued

For inheritance tax it does not matter what a buyer would pay on the market. Agricultural and forestry assets are assessed under the special rules of the Bewertungsgesetz — as a rule via an income-based method that takes the sustainably achievable yield of the land as its basis.

The practical effect is considerable: the taxable value is often well below market value. Land that would fetch a six-figure sum on the market can be assessed for tax at a fraction of that. This is why inherited farmland frequently remains tax-free through the personal allowances alone.

The decisive value is determined by the tax office in a separate assessment notice. That notice can be challenged independently — it is worth reviewing rather than accepting unchecked.

Allowances: what stays tax-free

Personal allowances depend on the family relationship:

Allowances apply per person and per acquisition and can be used again every ten years. The tax rate then depends on the tax class and the amount of the taxable acquisition.

For siblings and more distant relatives the allowance of 20,000 € is low — which makes the favourable valuation of agricultural land particularly important.

Relief for agricultural and forestry assets

Beyond the personal allowances, German inheritance tax law provides relief for business assets, which can include agricultural and forestry property. Simplified, there are two routes:

• Standard relief — 85 % of the privileged assets remain tax-free, tied to a retention period of five years.
• Optional relief — 100 % remain tax-free, but with a retention period of seven years and stricter conditions.

Both routes require that the privileged use is continued. The precise conditions — in particular on payroll and on so-called administrative assets — are complex and depend on the specific structure of the inherited assets.

The critical point: leased land

This is the question heirs ask most often — and the one that can least be answered in general terms.

Land handed over to third parties for use may be classified as administrative assets, which can jeopardise the relief. For the leasing of agricultural and forestry land, however, the law provides counter-exceptions under which the relief is preserved.

Whether a specific lease remains privileged depends on details of the contract, the previous use and the person of the tenant. This is precisely where general guidance stops being useful and an individual tax assessment is required.

Selling: two periods that matter

The relief retention period

Where relief was claimed, a sale within the retention period costs the benefit — pro rata and retroactively. Additional tax becomes due, possibly years after the inheritance.

Before any thought of selling: check whether relief was claimed and when the period expires.

The ten-year period for private assets

If the land is held as private assets, a capital gain is subject to income tax where fewer than ten years lie between acquisition and sale. Heirs benefit from an important easing: the holding period of the deceased is credited. If they held the land for decades, the period has usually long expired by the time of inheritance.

The position differs where the land belongs to agricultural business assets: there a capital gain is generally taxable regardless of the holding period.

Leasing as an alternative to selling

Many heirs are not farmers themselves but still do not want to give the land up. Leasing is then the obvious route: ownership stays in the family, the land is farmed, and recurring income arises which is taxable as such.

How high the rent is depends on region, soil quality and type of use. For classic agricultural leasing, the guide Lease Prices for Arable Land gives an overview, and for drafting the contract see Agricultural Lease Agreement.

Solar leasing: much higher rent, but it needs checking

If the inherited land is well located — near a substation or a motorway, for instance — leasing for photovoltaics can bring a multiple of the agricultural rent: typically 3,000 to 5,000 euros per hectare per year instead of a few hundred. Details are in Photovoltaic Lease Prices 2026.

Two tax points matter here: the change of use from farming to energy generation can affect how the land is classified and any running relief. And if a agricultural lease still runs on the land, its remaining term has to be taken into account — notice periods in German agricultural lease law run up to two years.

Whether your inherited land is suitable for a solar project at all can be checked free of charge and without registration. The check shows grid connection, protected areas and eligibility in around ten seconds — a solid basis before you decide between leasing and selling.

What to do first as an heir

1. Notify the inheritance — the acquisition generally has to be reported to the tax office within three months of becoming aware of it, even if you expect no tax.
2. Take stock — gather the land register extract, parcel data and existing lease contracts. Remaining terms and notice periods drive everything that follows.
3. Review the valuation — do not accept the tax office's assessment notice unchecked.
4. Clarify any relief — was relief claimed, and when does the retention period end?
5. Weigh the options — hold, lease or sell; where the location is favourable, check suitability for photovoltaics.
6. Involve a tax adviser — at the latest before you sign anything.

Frequently Asked Questions on inherited farmland

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This article provides a general overview and does not constitute tax or legal advice. German inheritance and valuation law for agricultural and forestry assets is highly case-dependent; the relief rules and their retention periods in particular hinge on the specific asset structure. Have your case reviewed by a tax adviser before making any decision.