As an important tool in international tax law, our partner, Mr. Markus Krechel, offers consulting services for establishing family foundations.
Family foundations have their own legal personality:
Once the founder has transferred assets to the foundation, these assets belong to the foundation and are generally (after four years) protected from access by the family’s creditors.
Although the transfer of assets to the foundation is subject to inheritance tax, the benefits for business assets apply. The transfer of assets to family foundations is subject to tax class I, as is the transfer to family members.
Business assets benefiting from the family foundation are separated from available assets.
As the family foundation is not a charitable foundation, it is subject to corporation tax at a rate of 15% plus the solidarity surcharge as a legal entity. The family foundation is not subject to trade tax, which means that it also enjoys advantages in terms of current taxation.
Profit distributions made by the family foundation to family members are subject to withholding tax at the standard rate of 26.375%.
Despite the transfer of assets, the family retains extensive asset and management rights in the foundation. At the same time, the establishment of a family foundation can reduce the risk of compulsory portion rights and matrimonial property claims (especially in the event of divorce).
Due in particular to the increasing complexity and tightening of legislation in the area of exit taxation, the involvement of a domestic family foundation may prove to be a possible exit strategy in individual cases, as family members can generally change their place of residence freely after transferring their assets to the foundation without triggering exit taxation in Germany. This is because the founder is no longer a shareholder in the company (corporation). The reason for this is simply that exit taxation provides for the taxation of shareholders in corporations.
Dipl.-Kfm. Markus Krechel
Tax advisor / Specialist advisor for international tax law