D3 Economic burden of a Liechtenstein foundation with assets in Germany
Double taxation agreement Germany – Liechtenstein
According to the double taxation agreement between Germany and Liechtenstein, the Liechtenstein private-benefit foundation is regarded as a resident company within the meaning of the agreement and is therefore generally eligible for the agreement on condition that it is structured in a non-transparent manner, an independence of assets has taken place and there is no abuse of rights and legal form of a PVS pp.
The real economy clause does not apply to foundations.
For a non-binding inquiry, contact us by phone or e-mail or use the contact form at the bottom of this page.
Dividends and interest
German dividends may be taxed in Liechtenstein, the country of residence of the foundation. Germany can only deduct withholding tax to a very limited extent.
If there is a direct holding of at least 10% of the voting shares of the German corporation over an uninterrupted period of at least twelve months, the German withholding tax is reduced to 0% of the gross income of the dividends.
If there is at least a 10% voting interest but the minimum holding period of twelve months is not met, the German withholding tax deduction is reduced to 5%.
If the minimum holding period of more than 10% is not met, the withholding tax is only reduced to 15%.
According to the double taxation agreement between Germany and Liechtenstein, German interest
can only be taxed in Liechtenstein.
German interest from public bonds is subject to income tax of 12.5% at the Liechtenstein foundation, but no withholding tax is levied in Germany.
Capital gains of material participations in a German corporation
As a rule, capital gains are tax-free in both Germany and Liechtenstein.
Profits from co-entrepreneurial share in German partnership / permanent establishment Capital gains
Liechtenstein fully exempts the German permanent establishment results of a Liechtenstein foundation from taxation in Liechtenstein.
The foundation remains subject to limited corporate income tax liability in Germany in the amount of 15% plus trade tax. The same applies to capital gains on German co-entrepreneurial shares.
According to the double taxation agreement between Germany and Liechtenstein, the permanent establishment state has the right of taxation using the exemption method. As a rule, the tax due in Germany (15% German corporate income tax plus trade tax) remains.
Taxation of co-entrepreneurial shares in German partnerships in DE, AT
DE: Taxation of current profits 15% German corporate income tax, plus trade tax up to 31.5% if applicable
Taxation of realized capital gains of the participation 15% German corporate income tax, plus trade tax up to 31.5% if applicable
AT: Taxation of current profits 25% Austrian corporate income tax, against which 15% German corporate income tax and German trade tax is credited. If applicable, trade tax overhang
Taxation of realized capital gains of the participation 25% Austrian corporate income tax, against which 15% German corporate income tax and German trade tax is credited. Possible trade tax overhang
Taxation of real estate located in Germany
In principle, the acquisition of a property located in Germany by a foreign legal entity is subject to real estate transfer tax.
If the transfer transaction is subject to gift tax, the real estate transfer tax liability does not apply, irrespective of whether the gift tax is only reduced or not applicable at all.
If shares in real estate companies are sold, a real estate transfer tax liability can be avoided if certain structuring variants are observed.
Foundations abroad are subject to limited corporation tax in Germany on their German income (15%).
In Liechtenstein, foreign rental and lease income and proceeds from the sale of real estate are exempt from income taxation, so that the result is that the tax burden remains in Germany.
Pure real estate ownership in Germany does not in principle constitute a permanent establishment and thus no trade tax liability in Germany, provided that the foundation merely manages assets in Germany.
Realised gains in the value of German real estate are tax-exempt both in Germany and in the case of the Liechtenstein private-benefit foundation outside a holding period of 10 years.
Taxation of German real estate in DE, AT
DE: Taxation of rental income 15% German corporate income tax
Taxation of realized capital gains of the property after dedication 15% German corporate income tax; outside a holding period of 10 years tax free
AT: Taxation of rental income 15% German corporate income tax
Taxation of realized capital gains of the property after dedication 15% German corporate income tax; outside a holding period of 10 years tax-free
