Stuttgart Method: Abolished Since 2009

The Stuttgart method (Stuttgarter Verfahren) was a tax procedure for valuing unlisted shares in corporations in Germany. It was abolished with effect from 1 January 2009. Anyone who still hears the term today encounters a historical standard or old articles of association that still mention it.

What replaced the Stuttgart method?

For tax purposes, the Stuttgart method was replaced by the simplified capitalised earnings method under sections 199 to 203 of the Valuation Act (Bewertungsgesetz, BewG), which capitalises the average annual earnings of the last three years at the fixed factor 13.75. The net asset value of the company forms the lower limit, and the method may only be applied if it does not lead to obviously inaccurate results.

Point	Stuttgart method (until 2008)	Today (Germany)	Source, retrieved
Legal basis	Inheritance tax guidelines (R 97 ff. ErbStR), § 11 BewG	§ 11 para. 2, §§ 199–203 BewG	Gabler Wirtschaftslexikon; Gesetze im Internet, 25.09.2026
Calculation logic	fair market value = 68 % × (asset value + 5 × earnings percentage), based on the nominal capital	sustainable annual earnings × capitalisation factor	Gabler; § 200 para. 1 BewG
Earnings basis	earnings percentage from past years	average of the operating results of the last three financial years	§ 201 para. 2 BewG
Factor	five years of excess profit in the calculation model	13.75, for valuation dates after 31.12.2015	§ 203 para. 1, § 265 para. 11 BewG
Lower limit	—	net asset value must not be undercut	§ 11 para. 2 sentence 3 BewG
Priority	derivation from sales, otherwise estimate	derivation from sales between third parties within one year, otherwise earnings-based	§ 11 para. 2 sentence 2 BewG

Sources: Gabler Wirtschaftslexikon, Stuttgarter Verfahren; § 11 BewG, § 199 BewG, § 200 BewG, § 201 BewG, § 203 BewG, § 265 BewG; all retrieved on 25.09.2026.

A factor of 13.75 corresponds arithmetically to a capitalisation rate of around 7.3 percent. Whether this standardised value fits a specific company is exactly the question on which the tax authorities and taxpayers regularly clash. How a market-appropriate rate is derived is shown in Capitalisation rate.

What the Stuttgart method was

The procedure served the tax authorities to estimate the fair market value (gemeiner Wert) of shares in unlisted corporations, above all for inheritance and gift tax. It combined an asset value (net assets) with a capitalised earnings value into a blended value. The approach was schematic and easy to apply, which explains its spread.

The formula shows how schematic it was. An illustrative example: if the asset value is 150 percent of the nominal capital and the earnings percentage is 10 percent, the result is a share value of 68 % × (150 + 5 × 10) = 136 percent of the nominal capital. With share capital of EUR 100,000 that would be EUR 136,000 — regardless of what a buyer would actually have paid.

This schematic nature was precisely its problem. The asset value was derived from tax balance sheet values, and goodwill was, by express statutory instruction, not included, as the Federal Constitutional Court describes in its 2006 decision. The method therefore generally led to values that were clearly below the actual market value.

Why it was abolished

By order of 7 November 2006 (1 BvL 10/02), the Federal Constitutional Court declared the then inheritance tax incompatible with the Basic Law. Levying tax at uniform rates was tied to tax values whose determination, for essential groups of assets — business assets, real estate, shares in corporations and agricultural and forestry businesses are expressly named — did not meet the requirements of the principle of equality under Art. 3 para. 1 of the Basic Law. Valuation had to be oriented uniformly to the fair market value; the legislator had to enact a new regulation by 31 December 2008 (BVerfG, 1 BvL 10/02, retrieved on 25.09.2026).

With the inheritance tax reform on 1 January 2009 the method was abolished. Since then the aim has been a uniform fair market value, which is meant to correspond to the market value. For tax purposes it was replaced by the simplified capitalised earnings method.

What applies in Germany today

The law sets a fixed order of priority. First, the fair market value is to be derived from sales between third parties that took place less than a year ago. If that is not possible, it is to be determined taking account of earnings prospects or another recognised method that is also customary in ordinary business — namely with the method that an acquirer would use as the basis for setting the purchase price (§ 11 para. 2 sentence 2 BewG).

The simplified capitalised earnings method under §§ 199 ff. BewG is a permissible route there, but not a mandatory one. It capitalises the average annual earnings of the last three financial years, adjusted for certain items, at the factor 13.75. Non-operating assets are additionally recognised separately at their fair market value (§ 200 para. 2 BewG).

For special companies the standardised factor can lead to values that deviate clearly from the value that makes business sense — upwards as well as downwards. For a gift or inheritance it is therefore often worth comparing with an expert valuation. The framework of inheritance and gift in business succession in Germany decides which value is taxed in the end.

Germany and Austria, then and now

	Then (DE, until 2008)	Today (DE, from 2009)	Austria
Method	Stuttgart method	Simplified capitalised earnings method	Vienna method (Wiener Verfahren)
Legal basis	decree/guidelines	§§ 199 ff. BewG	Decree (Wiener Verfahren 1996) as an estimation method for § 13 para. 2 BewG 1955
Structure	assets + earnings (blended value)	capitalised annual earnings	mean of net asset value and earnings value
Status	Abolished	In force, subordinate	In use

The Austrian counterpart: the Vienna method

In Austria there is, in the Vienna method, an analogous procedure, regulated by decree, for estimating the fair market value of unlisted shares. The legal basis is the decree “Wiener Verfahren 1996”. The law itself only gives the framework: if the fair market value of GmbH shares cannot be derived from sales, it is to be “estimated taking into account the overall assets and the earnings prospects of the company” (§ 13 para. 2 BewG 1955, RIS, retrieved on 25.09.2026). The Independent Finance Senate (Unabhängiger Finanzsenat) has accordingly classified the Vienna method as a method of estimation under § 184 BAO and at the same time held that, for asset-managing companies, departing from it may even be required (UFS, RV/0391-F/08, retrieved on 25.09.2026).

In business-administration terms it is an averaging method: the value results from the average of net asset value, derived from the book equity, and earnings value, derived from the results of the last three financial years.

Unlike the Stuttgart method, the Vienna method remains in use in Austria. If the fair market value is required for a tax purpose, it can be appropriate and less costly than a full expert valuation. For expert opinions under the Austrian professional standard a new framework has applied since recently: the expert opinion KFS/BW 1 (2025) was adopted in November 2025 and is to be applied to business valuations from 30 June 2026, the decisive point being the time the engagement is accepted (LeitnerLeitner, retrieved on 25.09.2026).

Old articles of association: what happens to compensation clauses

The Stuttgart method has its greatest practical significance today in articles of association and shareholder agreements that stipulate it as the yardstick for compensating departing shareholders. The clause does not automatically become invalid through the abolition — it merely refers to a calculation model that no tax office applies any more. For its validity, the Federal Court of Justice (BGH) has developed two lines:

Constellation	Legal consequence	Decision
The compensation restriction already leads, when agreed, to a gross disproportion to the market value	The right to withdraw is impermissibly restricted; the restriction is invalid	BGH, judgment of 16.12.1991, II ZR 58/91
The disproportion arises only later because the company value has risen	The clause remains valid; its content is adjusted in good faith by way of supplementary interpretation of the contract	BGH, judgment of 20.09.1993, II ZR 104/92

Sources: presentations of the decisions at gesellschaftsrechtskanzlei.com (II ZR 58/91) and gesellschaftsrechtskanzlei.com (II ZR 104/92), retrieved on 25.09.2026.

In practice this means: articles of association that still refer to the Stuttgart method today create potential for dispute precisely when a shareholder leaves — that is, at the least favourable moment. The cleaner route is an amendment of the articles while all shareholders agree, with a comprehensible valuation yardstick and a clear procedure for appointing an expert. That belongs with the notary and the company law specialist.

What this means in practice

For a transaction, none of these methods is the right yardstick. They determine tax values, not negotiated prices. Those who want to sell orient themselves on earnings value, DCF and market multiples, not on a standardised tax value — the differences are shown in Capitalised earnings method or DCF. A business valuation by market standards instead of the tax scheme is therefore the basis for every sale, and the sale of shares at market price instead of tax value presupposes a process with several interested parties. How the value can be raised deliberately is covered in the article Increasing company value.

A note for context: this article presents the methods and does not replace tax advice. Questions on inheritance, gifts or share valuation belong with the tax advisor or auditor.

The valuation terms in common use today are summarised in the M&A glossary. What a share would be worth in the market today can be estimated as a first step if you roughly calculate the market value of a GmbH share.

Frequently asked questions

Can I still apply the Stuttgart method?

Not for tax purposes in Germany. It was abolished with effect from 1 January 2009. It is relevant only where old shareholder agreements name it as a compensation clause, which in practice can lead to disputes.

How was the Stuttgart method calculated?

By the formula fair market value = 68 percent × (asset value + 5 × earnings percentage), each based on the nominal capital. The asset value came from tax balance sheet values; goodwill was not included.

What happens to old shareholder agreements that name it?

Such clauses initially remain valid under civil law. If a considerable disproportion to the market value arises over the years, the compensation is adjusted under the case law of the BGH by way of supplementary interpretation of the contract (II ZR 104/92). If the disproportion was already gross when agreed, the restriction can be invalid (II ZR 58/91). A review by a lawyer is advisable.

What applies in Germany today instead of the Stuttgart method?

Primarily the value from sales between third parties within the last year. Otherwise an earnings-based method or one customary in business — for example the simplified capitalised earnings method under §§ 199 ff. BewG with the factor 13.75. The net asset value forms the lower limit.

Is the Vienna method the same as the Stuttgart method?

They are similar in structure as averaging methods of net assets and earnings. The Vienna method, however, is the Austrian standard and remains in use, whereas the Stuttgart method has been abolished in Germany.

Does the simplified capitalised earnings method produce a realistic sale price?

Not necessarily. It serves tax purposes and works with standardised factors. The achievable purchase price can be well above or below it and is determined through market-based methods and negotiation.