GERMANY Trends and Developments Contributed by: Christian von Oertzen and Philipp Windeknecht, Flick Gocke Schaumburg
Introduction of a Foundation Register in 2028 The introduction of the foundation register, originally planned for the end of 2026, has been postponed to 1 January 2028. All foundations with legal capac - ity must be registered in this register, including both newly established and existing structures. Existing foundations must complete registration by 31 Decem - ber 2028. The primary objective of the register is to enhance transparency. Use of the online portal will be free of charge and accessible without prior registra - tion. Trusts in Germany German civil law does not recognise common law trusts, and their tax treatment remains restrictive, particularly regarding distributions to German-resident beneficiaries. According to Federal Fiscal Court ( Bun- desfinanzhof or BFH) case law and the 2023 adminis - trative guidance, a trust is treated as transparent if the settlor retains sufficient control over the trust assets, for example, through a right to revoke the trust and recover the assets. Otherwise, the trust is regarded as opaque. Distributions from opaque foreign trusts to German residents may be subject to both income tax and gift tax, while undistributed trust income can be attributed to German beneficiaries under certain circumstances. In 2023, the Münster Fiscal Court con - firmed that distributions upon trust termination may trigger both taxes, although a step-up for income tax purposes is available. In 2024, the Munich Fis - cal Court held that the gift-tax treatment of distribu - tions from foreign trusts or foundations is compatible with EU law, as it is justified by the coherence of the German tax system. The Schleswig-Holstein Fiscal Court further clarified in 2024 that assets of a val - idly established opaque trust do not form part of the settlor’s estate for German inheritance tax purposes if the settlor has not retained continued control over the assets. Consequently, such trust assets are not subject to German inheritance tax upon the settlor’s death. CFC rules regarding foreign family foundations and trusts partly violate European law Assets and income of a foreign family foundation are attributed to the founder, if they are subject to German unlimited tax liability, or otherwise to German resident beneficiaries or remaindermen. If a family foundation
has its place of management or its registered office in EU/EEA countries and if there are sufficient exchanges of information between the foreign country and Ger - many, this provision is not applicable under certain conditions. In December 2024, the BFH ruled that this restriction to family foundations in EU/EEA countries violates the free movement of capital. Thus, the provi - sion is applicable to all foreign family foundations if it can be proved that the foundation assets are legally and actually withdrawn from the power of disposal of the settlor, beneficiary and remaindermen. The sepa - ration 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 BFH extended the application of its decision to trusts. In the same ruling, the BFH stated that the qualifica - tion as a remainderman does not require an enforce - able claim, but merely a secured legal position with regard to the accrual of the assets. Possible reform of CFC rules regarding foreign family foundations and trusts Section 15 of the German Foreign Tax Act ( Außen- steuergesetz or AStG) attributes the income of foreign foundations and trusts to German settlors or benefi - ciaries under certain conditions, even without distribu - tions (“dry income”). Unlike beneficiaries of domestic foundations, who are taxed only upon receipt of dis - tributions, this results in a significant disadvantage. Following the BFH’s December 2024 decision, the Ministry of Finance proposed a reform of Section 15 AStG in a discussion draft of 18 November 2025. A central change would be the introduction of a low-tax threshold: attribution would apply only where income is low-taxed. Moreover, active income would remain sheltered. The concept of a family foundation would be expanded to related parties and persons acting in concert, while the corporate foundation concept would be abolished and indirect beneficiaries brought within scope. The current escape clause based on the settlor’s loss of control over foundation assets would be replaced by the BFH-inspired concept of an “arti - ficial arrangement”. This may exclude typical US/UK trust structures from attribution taxation. The escape clause would be extended to third countries in line with BFH case law. Multi-tier attribution would remain, but the possibility of proving the absence of an arti - ficial arrangement would be assessed at the level of
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