The operational component of an agricultural and forestry business is determined using special, income-oriented valuation methods that differ significantly from the valuation of pure residential properties.
For the residential portion of the farmstead, on the other hand, the general valuation rules for developed properties apply, meaning a separate assessment of business and residential assets is required.
Under certain conditions, such as continuation of the business by the heirs for a minimum period, additional inheritance tax relief provisions for business assets may apply.
Under the so-called standard exemption (Regelverschonung), 85 percent of the favored business assets remain tax-free, provided the business is continued for at least five years and certain wage sum thresholds are maintained; under the optional exemption (Optionsverschonung), it is even 100 percent with a seven-year commitment period.
If the retention period is not observed or the business is sold prematurely, the tax relief lapses proportionately with retroactive effect, which is why succession planning should be carried out early and carefully.
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