High-net-worth individuals and entrepreneurs like to use the family foundation as an instrument for asset succession. It is a self-serving foundation based in Germany or another EU country, but enjoys more extensive tax advantages than corporations of other legal forms. If there is a German family foundation, the founders can also emigrate to Dubai – but certain points must be observed.
Principle 1: Tax Treatment of a Family Foundation
Family foundations are corporations under private law that are subject to unlimited corporate tax at the registered office or management in Germany (§ 1 (1) no. 5 KStG). In principle, they can earn all income within the meaning of the EStG (§ 8 (1) KStG) and thus also benefit from tax benefits. For example, a family foundation can sell real estate tax-free after 10 years (§ 23 (1) no. 1 EStG).
All income of the Foundation is subject to corporate tax of 15% and the solidarity surcharge. In sum, the family foundation thus comes to a tax burden of around 15.8 %, but is not subject to business tax.
If the foundation provides services to entitled persons, the so-called destinataries, this is capital gains. According to § 20 (1) no. 9 sentence 1 EStG, they are subject to the capital gains tax of 25 % (§ 32d (1) EStG). If the distributions have reduced the income of the foundation, they are charged with the standard tax rate at the Destinatär (§ 32d paragraph 2 no. 4 EStG).
2nd Family Foundation and Moving to Dubai: What to Consider?
If there is a family foundation in Germany and at the same time the plan to emigrate to Dubai, some special features must be considered. However, these are mainly general points.
2.1. Domestic seat or management
Even after emigration to Dubai, the family foundation still needs a seat or management in the country. Where:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.