02.09.2016 | KPMG Law Insights

Criminal Tax Law – Donations by a foreign foundation to German beneficiaries may trigger gift tax

Donations by a foreign foundation to German beneficiaries may trigger gift tax

According to a ruling by the Baden-Württemberg Fiscal Court dated April 22, 2015 (7 K 2471/12), gifts made by a Swiss foundation to an individual domiciled or habitually resident in Germany are subject to German gift tax.

The facts

A family foundation under Swiss law had paid out support benefits to the member of a family in accordance with the foundation deed. The Tax Court of Baden-Württemberg considered this gift to be a taxable gift within the meaning of Sec. 7 (7) of the German Income Tax Act. 1 No. 9 Sentence 2 Inheritance Tax Act. According to this norm, the acquisition by intermediate beneficiaries during the existence of an estate under foreign law, the purpose of which is to bind property, is subject to gift tax.

The legal opinion of the court

In the opinion of the Tax Court, the definition of “assets under foreign law” includes trusts in particular, but also foreign foundations. The term “intermediate beneficiary” includes all persons who receive payments from the assets of the “foreign-law estate” during its existence. While corresponding gifts from domestic foundations are not subject to German gift tax, this is the case with foreign foundations.

The Tax Court did not consider this unequal treatment to be discriminatory against the Swiss foundation or a violation of the freedom of capital movements enshrined in Union law. The domestic foundation is subject to substitute inheritance tax every 30 years pursuant to sec. 1 para. 1 No. 4 Inheritance Tax Act. Payments to beneficiaries entitled under the foundation deed are not deductible in this respect, Sec. 10 para. 7 ErbStG.

The foreign foundation, on the other hand, is not subject to substitute inheritance tax. Thus, if the disbursement potential is recorded in the case of domestic family foundations in the context of substitute inheritance tax (Section 1 (1) No. 4 ErbStG), it is recorded in the case of foreign foundations when the disbursement is made (Section 7 (1) No. 9 Sentence 2 ErbStG). According to the court, this justifies the different taxation of the payouts.

Taxation Regime for Disbursements of Foreign and Domestic Foundations from the Perspective of the Fiscal Court

As a result, according to this legal interpretation, the taxation regime for disbursements by domestic foundations on the one hand and foreign foundations or estates on the other hand is as follows:

  • Unless payments to a natural person domiciled or habitually resident in Germany are in accordance with the articles of association, they are always subject to gift tax – regardless of whether they are paid out by a domestic foundation or a foreign estate or foundation.
  • Provided that disbursements are in accordance with a regulation laid down in the Articles of Association, there is no gift in the case of a domestic foundation. In the case of the foreign foundation or estate, on the other hand, there is a gift.

No appeal was allowed against the verdict. An appeal against this decision was filed with the Federal Fiscal Court (Case No. BFH II B 41/15).

Recommendations for practice

Payments to beneficiaries of an “estate under foreign law whose purpose is to bind assets” should be implemented with caution if the beneficiary of the payment is domiciled or habitually resident in Germany. This applies not only to foundations under foreign law, but also to all independent legal entities in the broader sense, i.e. trusts, institutions etc. For a limited company, the tax consequences may differ.

If you want to obtain legal certainty before making a payment, it may be advisable in individual cases to request binding information or to combine the grant with a reservation of revocation. If the gift is later deemed to be subject to gift tax, the gift tax may be retroactively eliminated upon exercise of the reservation of revocation.

If payments have already been made and these have not been reported or declared for tax purposes in Germany, this should be disclosed to the tax authorities as a precautionary measure. This disclosure should then, if applicable, also meet the formal requirements of a voluntary disclosure exempting the company from prosecution, in order to also prevent any risks under criminal tax law. Within the scope of this disclosure, a more favorable legal interpretation for the foundation and the beneficiary can nevertheless be sought. The procedure should be coordinated in advance with a consultant in each individual case.

Explore #more

08.12.2023 | PR Publications

Payout can be risky

In the current issue of Personalwirtschaft from 30.11.2023, there is a guest article by Stefan Middendorf and Gracjan Modrzyk. Some companies are once again…

07.12.2023 | PR Publications

Institutional Money – It’s all in the mix

Institutional Money 04/2023 discusses the opportunities offered by the Neighborhood Fund. The fund is ideal for real estate investors, as it is not limited to

01.12.2023 | PR Publications

WiWo: Best of Legal Awards – Philipp Glock Leader of the Year

On Thursday evening, WirtschaftsWoche honored outstanding projects and minds from consulting firms and law firms in Düsseldorf and celebrated the second Best of Professional Night…

29.11.2023 | KPMG Law Insights

Energy transition also opens up business opportunities

The energy industry’s complex, capital-intensive transformation process offers investors and banks a great deal of potential By Lars Christian Mahler and Marc Goldberg for Börsen-Zeitung,…

29.11.2023 | KPMG Law Insights

Guest article in ZURe – AI and the legal department of tomorrow

The current issue of ZURe (p. 48 ff.) contains a guest article by KPMG Partner Sina Steidel-Küster (Regional Director Southwest, Head of Stuttgart office) and…

29.11.2023 | KPMG Law Insights, KPMG Law Insights

Key Facts about the new draft of the “Data Act

On February 23, 2022, the EU Commission presented the new draft of the so-called Data Act, the “Regulation on harmonized rules for fair access to…

21.11.2023 |

Guest article in ZURe on the implementation of CSRD reporting in SMEs

The current issue of ZURe (p. 34 ff.) contains a guest article by Lena Plato (Director Legal & Compliance, FLABEG Automotive Group GmbH), KPMG Law…

20.11.2023 | Press releases

Statement by KPMG Law experts in Handelsblatt on the topic of sustainability cooperation in antitrust law

In the Handelsblatt, KPMG Law expert Jonas Brueckner is quoted in detail on the subject of cooperation in terms of sustainability. Until this summer, there…

15.11.2023 |

Legal 500 – Country Comparative Guide Germany

Gerrit Rixen and Jonas Brueckner provide an overview of the relevant legal regulations in the area of Competition & Litigation in a practical guide on…

14.11.2023 | Press releases

Tax and Law at a glance – New issue of the digital magazine “Talk

“Talk” stands for Tax and Law Compass, because that’s what the digital magazine wants to be: a navigation aid to the legal and tax aspects…


Dr. Heiko Hoffmann

Munich Site Manager
Head of Criminal Tax Law

Friedenstraße 10
81671 München

tel: +49 89 59976061652

Dr. Jochen Maier

Senior Manager

Heinrich-von-Stephan-Straße 23
79100 Freiburg im Breisgau

tel: +49 761 76999910

Arndt Rodatz

Head of Criminal Tax Law

Fuhlentwiete 5
20355 Hamburg

tel: +49 40 360994 5081

Philipp Schiml


Tersteegenstraße 19-23
40474 Düsseldorf

tel: +49 211 4155597150

Martina Vietz


Theodor-Heuss-Straße 5
70174 Stuttgart

tel: +49 711 781923-400

© 2023 KPMG Law Rechtsanwaltsgesellschaft mbH, associated with KPMG AG Wirtschaftsprüfungsgesellschaft, a public limited company under German law and a member of the global KPMG organisation of independent member firms affiliated with KPMG International Limited, a Private English Company Limited by Guarantee. All rights reserved. For more details on the structure of KPMG’s global organisation, please visit

 KPMG International does not provide services to clients. No member firm is authorised to bind or contract KPMG International or any other member firm to any third party, just as KPMG International is not authorised to bind or contract any other member firm.