In the meantime, the first generation of so-called "Gastarbeiters" that arrived in Germany during fifties and sixties, come to the years in which facing their own deaths begins to play a role. Of course, that raises the question what would happen with their inheritance The situation becomes complicated when that inheritance is located in two countries: the Federal Republic of Germany and their home country. Many Croatian citizens who live here in Germany are facing that situation.
With respect to the German inheritance Law there is a whole range of counselling possibilities. However, here we want to give you a brief overview of the essential aspects of the Croatian inheritance law. We are available for any further questions.
Which law is applicable for inheritance?
For questions of inheritance German private international law provides in principle that for inheritance is applicable law of the country to which the deceased belonged at the time of his death (Article 25 paragraph 1 of the Introductory Act of the Civic legal book - EGBGB). This means that Croatian inheritance law is applicable (Inheritance Act - ZN) to Croatian nationals living in Germany and not the German inheritance law, as provided by the Civil law book - BGB (see articles 19, 22 and following of the BGB). However, for their real property located in Germany (such as house, land, apartment) deceased could choose German law (Article 25 paragraph. 2 of the EGBGB), which was the case rarely used in practice. In the meantime, there has been a significant change at the European Union level, where by-law rules on inheritance were enacted, which provides that the current application of the law of the state to which deceased belonged is changing, and the application of the principle of lex nationalis is changing to the application of the principle of law of the place where the deceased had its regular residence. This change can become very much of relevance for cases where deceased was for example a Croatian citizen who spent his whole working life in Germany and died there. Under the new European inheritance legislation, in the absence of written will, from 17/08/2015 the law of the country of regular residence will apply and in the example above that would mean an application of the German inheritance law.
Under Croatian inheritance law there are heirs of the first, second, third and forth rank. These ranks determine which persons within the family are becoming heirs. Heirs of the first rank are the descendants of the deceased and his spouse. In absence of descendants, heirs of the second rank are parents of the deceased and his spouse. Starting point within first two ranks is that spouse inherits half of the inheritance. If deceased had no descendants and both of his parents have died before him, then a spouse inherits the entire estate (§ 11 of the ZN). Brothers and sisters of the deceased can inherit part of the inheritance in case that deceased had no spouse and if both parents died before him. Third and fourth inheritance ranks apply if deceased had no descendants, no spouse, no living parents and they have left no descendants.
Very interesting and important constellation arises if the decedent has lived in common law marriage. It often happens that deceased has for a long period of time lived with his unmarried partner without that coexistence being empowered with the legal form of marriage. Although the heirs of the first rank, especially children, often can not and do not want to believe that, the non-married partner of the deceased is legally treated as a heir, i.e. as a spouse. But it is not always easy to apply the inheritance rights on common-law partner because certain conditions must be met with regard to the existence of a common law marriage, i.e., there is the influence of Croatian family law. Firstly, condition must be met that cohabitation has actually existed and that it was characterized as permanent emotional and economic community of unmarried partners. Additionally to the common-law marriages Croatian family law must be applied, what is very difficult and almost impossible if the cohabitation has been lived outside of Croatia and unmarried partners do not both have Croatian citizenship. One procedure for determining the application of Croatian inheritance and family law to common-law marriages is a major time challenge and such a procedure can take several years. Therefore, it is certainly advisable for life partners living in common-law marriages to sign to an agreement under the Croatian law on regulation of property issues in the form of the common law marriage under Croatian law. By doing that all doubts can be removed from the application for common-law partners certainly much more favourable Croatian family and inheritance laws.
Equality of all physical persons at the moment of creation of the inheritance was one of significant changes of the Croatian inheritance law from 2003. Since then married and non-married partners are treated equally, as well as the descendants born as a result of these relationships. Above that, non-married partner has a right on part of inheritance created in common-law marriage and on which can be compared with marriage acquisitions. Legal inheritance ranks are only applied if deceased has left no will. As in a German inheritance law, will is special foundation for the division of the inheritance and is an expression of the last will of the deceased who is with it disposing its inheritance. There are several formal conditions that need to be met in order for will to be valid. Croatian inheritance law recognizes different forms of wills that may be classified mainly as public and private wills. Private will is created personally by deceased and without the presence of the state – public institutions. It can be made personally and in written or orally and in front of witnesses. Public will can be either a Court will, i.e. made in front of a judge or a Diplomatic will, done abroad in Croatian diplomatic or consular missions. Written will, however, is still by the Croatian inheritance law foundational form of the will and can be relatively easy made. As a central point deceased have to determine which person will inherit which part of the inheritance.
Where inheritance procedures are conducted in Croatia?
Unlike German inheritance law, inheritance hearings in the Republic of Croatia are held before the notary public. He is the one to invite heirs to inheritance hearing. If deceased has died in Croatia it is very important that heirs inform themselves before the competent municipal court about notary public that is responsible for the inheritance procedure. Notary public must invite all the persons that may be heirs. If he fails to invite all possible heirs, his inheritance decision can nevertheless become legally binding if the statutory appeal periods are not respected. The deadline for the appeal against the inheritance decision is eight days from a date of valid delivery of decision to all parties engaged at the proceedings. If notary public forgets one of the heirs, he may subsequently appeal against the inheritance decision.
What is inheritance tax rate in Germany?
As a rule with inheritance come an obligation of paying taxes to the state. Depending on the kinship towards the deceased and the value of the inheritance, tax varies between 7% and 50%. The spouse, children and grandchildren enjoy very high deductible rates. For spouse or life partner non-taxable rate is 500.000 €, for descendant (child) 400.000 €, for each child of the deceased child rate is 400.000 €, for child of the living child rate is 200.000 €, for parents, grandmother and grandfather is 100.000 €. For others from tax classes II and III non-taxable rate is significantly lower and amounts 20.000 €. Tax rate based on the value of the estate (after deduction of the so-called deductible rates) at the value of the inheritance of up to 75.000 € in tax class I (spouse, life partner, children, grandchildren, parents) is 7%, in tax class II (brothers and sisters, parents when donating) is 15%, in tax class III (for all others) is 30%. When the value of the inheritance is up to 300 000 € and for the same above-mentioned persons, in the tax class I tax rate is 11%, in tax class II tax rate is 20%, and in the tax class III tax rate remains unchanged up to the inheritance value of 6.000.000 €. When the value of the estate up to 600.000 € tax to be paid in the tax class I is 15%, in tax class II is 25%, up to 6,000,000€ 19%, in tax class III is 30%. Inheritance tax shall be paid to the tax authorities at the place of residence of the deceased where he has usually paid his taxes. Taxation of real estate is possible at the place where the property is located.
What is amount of tax on inheritance in Croatia?
In Croatia taxation of inheritance is regulated differently. Inherited and donated property which value is lower than 50.000 HRK (with the exception of used passenger cars, motorcycles, boats and aircrafts) is not taxed. Real estate transfer tax on inheritance, gifts or other acquisitions of real estate property without compensation is not to be paid by spouse, descendants and ancestors, adopted children and adoptive parents of the deceased or the donor. Exemption from payment of the transfer tax is realized through submission of the real estate tax application and the request for establishment of the right for the tax exemption. Real estate transfer tax has to be paid afterwards, if within ten years from the acquisition of the real estate that property become a subject of transfer, if the taxpayer move its residence outside of the areas of the special state concern and if the taxpayer with permanent residence does not actually reside in the area of special state concern. Tax liability on the basis of inheritance, donation and acquisition of property without compensation occurs at the moment when the judgment becomes legally binding, or decisions of state administrative bodies on the basis of which properties were acquired and the conclusion of the contract or other legal transaction on the basis of which the property was acquired. This applies to citizens and legal persons from EU Member States who acquire ownership of real estate in Croatia. Further detailed and comprehensive information is available on the website of the Croatian Tax Administration: www.porezna-uprava.hr
On inheritance and gifts tax has to be paid, including tax on cash, cash auction securities, and other movables, if their value is larger than 50 000 HRK. The tax rate on inheritances and gifts is 5%. It is left to the county jurisdictions to prescribe tax rates in their regions. However, in all counties the prescribed rate of tax on inheritances and gifts is 5%. In this respect, it is certainly prudent to carefully and accurately compare possible tax burdens when inheriting in the Republic of Croatia and the Federal Republic of Germany.
What measures should be taken in case of death?
When the deceased dies his relatives together with the heirs are required to take care of a few formalities and to solve them. These include acquisition of the death certificate and inheritance decision, if necessary. In Germany it is often not necessary in simple cases, while in the Republic of Croatia it is required as a rule. Relatives and heirs might have to decide about autopsy and/or body organs donation, in case the deceased was an owner of organ donation card. It is very important that funeral is organized the way deceased desired, and his wishes in the form of a written will or the oral tradition certainly have to be respected. The consequences of failure to comply with the wishes of deceased can be very uncomfortable because the other heirs who are able to prove the desire of the deceased may request the return of the decedent’s body to the desired funeral location, which can cause severe and arduous moments.
At the moment of death it is important to ensure the inheritance and create its list. If there is a will it is important to deposit it with the inheritance court or to make it available to the court. Contracts of deceased must be fulfilled and bills must be paid. If the inheritance is under large debts heirs need to accurately consider whether to accept or renounce the inheritance.
For such cases of private-law relations in which legal regulations of two or more states could apply, there are regulations on the application and conflict of laws in both the Federal Republic of Germany and the Republic of Croatia which clarify how the applicable law is to be determined. In the Federal Republic of Germany these regulations are contained as private international law within the framework of the Introductory Act to the Civil Code (EGBGB), in the Republic of Croatia within the framework of the Act on Resolving Conflicts of Laws with the Regulations of Other States for Certain Relationships (Conflict of Laws Act - GKolG). The Croatian CCL, like the German EGBGB, distinguishes between different areas of law, for which they provide different rules of application and conflict of laws. One such area of law is family law, which in Germany is regulated in §§ 13 to 24 EGBGB and in Croatia in §§ 15 and 32 to 45 GKolG. In addition to the differentiation between the different areas of law, German and Croatian regulations can also be differentiated according to substantive law (substantive regulations) and formal law (jurisdiction, procedural and formal regulations), so that German and Croatian law can be applied simultaneously in the case of a uniformly presented case for the outsider.
According to Croatian law, the personal requirements for marriage are determined by the law of the state of which a person has the nationality at the time of marriage (Art. 32 CCCL). A similar regulation exists in Germany (Art. 14 para. 1 EGBGB). Therefore, in the case of marriage between a Croatian and a German, the Croatian requirements must be met for the Croatian and the German requirements for the German; however, in the case of marriage in Croatia, no obstacles to marriage may exist under Croatian law for the German either. However, the form of marriage is then governed by the rules of the place where the marriage is to be contracted. This is provided for by both Croatian law (Art. 33 GKolG) and German law (Art. 13 para. 3 sentence 1 EGBGB). With regard to the question of which law determines the effects of the marriage - in particular the effects of the marriage on the spouses and their assets - both the JCLG and the ETUCGB offer a staggered sequence of applicable law. The EGBGB is primarily based on the nationality of both spouses, alternatively on their habitual residence and, alternatively, on their closest common relationship to a legal system (Art. 14 para. 1 EGBGB). The JSA is also based primarily on the nationality of both spouses, but alternatively on their place of residence, and further alternatively on their last common residence and alternatively on the law of the Republic of Croatia (Art. 36 p. 1 JSA). Unlike the CCL, however, the EGBGB also provides for the possibility of choosing the law applicable to the effects of the marriage under certain conditions. If both spouses have a different nationality and, for example, neither of them has the nationality of the country in which they have their habitual residence (Art. 14 para. 3 sentence 1 no. 1 EGBGB), they can decide on the law applicable to their marriage subject to certain formal requirements. For example, Bosnian and Croatian citizens living in Germany can decide whether they want to apply Bosnian or Croatian law to their marriage. This choice of law must be notarised in Germany (Art. 14 para. 4 EGBGB) and its effect ends as soon as both spouses regain the same nationality (Art. 14 para. 3 p. 2 EGBGB). The link to nationality is also more intensive in the EGBGB than in the GKolG. In the event of a change of citizenship, for example if one of the Croatian spouses living in Germany changes his or her citizenship, Croatian law continues to apply initially to both spouses under the EGBGB, because both were last Croatian citizens and one is still a Croatian citizen (cf. Art. 14 para. 1 no. 1 EGBGB). In contrast, the JCCL would require the application of German law, since both spouses are not Croatian citizens but have their residence in Germany (cf. Art. 36 p. 2 JCCL).
A different application of the law is also evident in the case of divorce. According to the JCCL, the law applicable to divorce is primarily the law of the state of which both spouses are nationals at the time of filing the divorce petition, secondarily, in the case of mixed nationalities, the law of both states applies cumulatively, and Croatian law applies as a substitute (Art. 35 para. 1 JCCL). However, according to the EGBGB, the law of the state according to which the general effects of the marriage are determined at the time of the lis pendens of the divorce petition (Art. 17 para. 1 sentence 1 EGBGB). Alternatively, German law applies if one spouse is a German citizen or was a German citizen at the time of the marriage and the marriage cannot otherwise be divorced (Article 17 para. 1 sentence 2 EGBGB). In the case of spouses with mixed nationality and residence in Germany, this can mean that in the case of divorce applications before German organs, they will be treated under German divorce law, whereas in the case of divorce applications before Croatian organs, they will be treated cumulatively under German and Croatian divorce law. This, too, illustrates the complexity that can arise in particular in family law issues with international connections. At the same time, however, this complexity can also offer advantages, as the spouses can in some cases choose the law under which they wish to have their marriage relationship handled. For example, they can decide in advance which court they wish to bring their case before. This, in turn, can bring advantages in the implementation of the entire judicial process. If the spouses can decide which court they want to go to, they can choose the one that most effectively meets their needs. In particular, they can avoid the problems and delays that can arise from splitting the recognition and enforcement procedures.