GERMANY Trends and Developments Contributed by: Christian von Oertzen and Philipp Windeknecht, Flick Gocke Schaumburg
under certain conditions. In 2025, the Federal Fiscal Court ruled that this restriction to family foundations in EU/EEA countries violates the free movement of capi - tal. Thus, the provision is applicable to all foreign fam - ily foundations if it is proved that the foundation assets are legally and actually withdrawn from the power of disposal of the settlor, beneficiary and remainderman. The separation must be considered on a legal and not on an economic basis. However, the German tax authorities still use an economic approach. In a press release, the Federal Fiscal Court extended the appli - cation of its decision to trusts. In the same ruling, the Federal Fiscal Court stated that the qualification as a remainderman does not require an enforceable claim, but merely a secured legal position with regard to the accrual of the assets. Taxation of Crypto-Assets In 2025, the German tax authorities released their latest guidelines regarding the taxation of crypto- assets, updating the guidelines published in 2022. These guidelines define common terms such as min - ing, tokens, wallets or staking. According to the tax authorities, each transaction involving a crypto-asset of any kind may qualify as a taxable event, even if the transaction does not involve an exchange into fiat money. The Nuremberg Fiscal Court ruled in 2025 that the taxation of these transactions without an exchange into fiat money is not unconstitutional. The mere trading of crypto-assets (even in great volume) does not qualify as a commercial activity from a Ger - man tax perspective, if this activity is conducted in the usual manner of private investors. If crypto-assets are privately held, they can be sold income tax-free after a holding period of more than one year. This is not the case for crypto-assets which qualify as commercial assets. Where the sale of the crypto-assets is subject to German income tax, the gain is calculated either on the basis of the first-in-first-out method or the average method at the taxpayer’s discretion. Special activi - ties, like forging or mining crypto-assets, are always considered as commercial activities. Taxation of Foreign Currency Exchange Gains Investing into foreign currencies can be reasonable from an economical point of view. According to a 2022 decree of the German tax authorities, gains from for - eign currency exchanges are taxed at the personal tax
rate or at the 25% flat tax for capital gains depending on circumstances, such as whether the foreign cur - rency account is interest bearing. Gains may even be tax free after a holding period of more than one year. German Limited Inheritance Tax Liability in the Case of a Real Estate Legacy In 2022, the Federal Fiscal Court ruled that German real estate was not subject to limited inheritance tax liability if the real estate was transferred by bequest. Generally, German real estate is taxable in the case of limited inheritance tax liability, especially if the benefi - ciary is appointed as an heir. However, if the benefi - ciary is “only” a legatee (according to the applicable law of succession, a legatee only acquires a claim against the heir to transfer the real estate), this claim was not subject to limited inheritance tax liability. This principle also applied if the real estate was later trans - ferred to the legatee in order to fulfil the claim. The German legislator then amended the Inheritance and Gift Tax Act to put domestic and foreign legatees on equal footing. Application of the German Forced Heirship Law Despite Choice of English Law of Succession The German Federal Court ruled in 2022 that the Ger - man forced heirship law is applicable even if the tes - tator, an English national, has chosen English law to govern their succession. The last habitual residence of the testator was in Germany and hence German law of succession was generally applicable. According to the German Federal Court, the choice of English law was (partially) in violation of the German ordre public since English law of succession does not provide any kind of forced heirship rights. Therefore, the choice of English law was (partially) invalid and consequently, German forced heirship law was applied. Deductions of Liabilities in the Case of Limited Inheritance Tax Liability Generally, estate liabilities are deducted from the tax - able acquisition. In the case of limited tax liability, debts and encumbrances were not deductible in so far as they are not economically related to assets that are subject to limited tax liability. Hence, the German Federal Fiscal Court ruled that claims arising from the compulsory portions were not deductible in the case of limited inheritance tax liability. In 2021, the CJEU
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