For entrepreneurs, moving abroad always comes with obstacles. But a move can also generate tax advantages. We present a design with a family foundation in which the departure is tax-neutral and at the same time is the key to a particularly favorable future taxation.

1. Moving away with family foundation tax optimize – Introduction

In recent months and years, the exit tax has developed into a complex of topics discussed more and more often with our clients. The reasons for this are numerous and varied. Many successful entrepreneurs want to fulfill their dream of living abroad. For them, for example, a life in Belize, Mauritius or Trinidad and Tobago comes into consideration. Others hope for lower taxes abroad.

No matter what the motivation for moving abroad may be, such a step wants to be well thought out – and planned as long as possible. In any case, many clients ask us which is the best solution for achieving their goals. And although we always proceed individually in our advice, there is actually a relatively blanket answer to this question, namely to design the move with family foundation.

2. Moving abroad with a family foundation

How do you proceed if you want to move abroad tax-optimized as an entrepreneur through a family foundation? Obviously, the establishment of a foundation is the first step in this direction. In principle, one can only choose one variant, namely the establishment of a family foundation in Liechtenstein. After all, you want later profits to flow as tax-optimized as possible into the private account. With a German family foundation, more taxes would be incurred. In addition, one should manage one’s own company as far as possible in the legal form of a GmbH & Co. KG in order to avoid the exit taxation that would result from the transfer of the company’s shareholding to the foundation in Liechtenstein. On the other hand, if you have a GmbH, you can set up a GmbH & Co. KG as a holding company in order to meet this requirement.

In both cases, the family foundation can therefore be used to move abroad tax-neutrally – without an exit tax or another form of tax easing. However, one must at the same time manage to transfer the company as tax-neutrally as possible to the Family Foundation in Liechtenstein. How to do this, the next chapter will tell you.

3. Moving away with family foundation: Optimizing gift tax

The gift transfer of companies to a foundation in Liechtenstein is therefore a process that in principle triggers gift tax. If there are still real estate in a company, then the acquisition of the company by the foundation is also subject to real estate transfer tax. In contrast to the real estate transfer tax, however, the gift tax can be minimized. Finally, the property transferred by donation is an undertaking. And for companies, the exemption regulations of §§ 13a, 13b and 13c ErbStG are available. Under certain circumstances, however, a spare requirements test according to § 28a ErbStG may also be considered. In this case, even a gift tax waiver is possible.

However, the prerequisite for achieving these benefits is that companies do not have harmful administrative assets. Furthermore, it must be noted that there is a blocking period of five or seven years. In addition, it is necessary to preserve some parameters of employment of employees existing at the transmission date. The latter is tested by recording wage sums. This must be proven to the tax office over the duration of the selected blocking period. In successful companies, however, these requirements are easily met by the foundation. Therefore, the move abroad with the family foundation as our design tool is usually no significant tax obstacle in the way.

4. Liechtenstein Family Foundation: Moving away with tax optimization

So, we fulfilled all the requirements and finally moved happily abroad. How do we benefit from this new tax structure?

Let us look at the individual steps that are now being taken with regard to taxation. Operating GmbH & Co. KG makes ongoing profits. Alternatively, if it is a holding GmbH & Co. KG with a GmbH as an operating subsidiary, the same taxation principle applies. Specifically, we are talking about the transparent taxation of a partnership. In practice, this means that the shareholders of GmbH & Co. KG alone bear the taxes. Since we have set up a foundation as the sole shareholder, it pays the income tax of GmbH & Co. KG. As a corporation, however, a foundation is subject to corporate tax instead of income tax. And the corporate tax rate is a flat rate of only 15%. This is already a clear tax optimization compared to the taxation by income tax, which was previously subject to a partnership.

In addition to corporate tax, corporations in principle also bear the trade tax liability. One would therefore have to expect that the foundation also has to pay trade tax. However, since it only carries out an asset management activity, it can also avoid this levy by clever design. In any case, the move abroad with the family foundation has been completely successful and taxation optimized.

5. Tax optimization by moving away with family foundation – Conclusion

With a move abroad, various goals can be achieved. Among other things, this also includes the potential to reduce taxes. This is done by introducing a family foundation in Liechtenstein as a taxable partner. This releases oneself as a taxable person in order to leave this position to the more tax-advantageous foundation. In addition, the Family Foundation in Liechtenstein is ideally suited to avoid exit tax or any other form of tax easing. However, this only works if a whole series of conditions are met during implementation. Therefore, it is crucial that the planning is solid. We recommend a long-term approach anyway, in which you work as early as possible on the goal, namely moving abroad with a family foundation in Liechtenstein.