New Draft on Taxation of Foreign Family Foundations – What Settlors and Beneficiaries with tax residency in Germany Need to Know

On November 18, 2025, the German Federal Ministry of Finance (BMF) published a discussion draft for the revision of attribution taxation of foreign family foundations (§ 15 AStG). The proposed changes primarily affect family foundations, trusts, and international wealth structures. For both settlors and beneficiaries, this is a crucial topic – as it determines when income from a foreign foundation becomes taxable in Germany.

Key Changes at a Glance

Low-Tax Threshold of 15% Income from a foreign family foundation will only be attributed if it is taxed abroad at less than 15%. Unlike the rules for CFC taxation, there is no distinction between active and passive income.

Expanded Circle of Beneficiaries In addition to relatives and descendants, the relevant family circle will now include related parties and indirect beneficiaries. This means individuals who were not previously considered may now fall under attribution rules.

Relief Proof Extended to Third Countries The exemption proof is no longer limited to EU/EEA foundations. What is required? You must demonstrate that the use of a foreign family foundation is not purely tax-driven. This requires solid documentation of economic reasons – such as estate planning, asset protection, or long-term family strategy.

Elimination of Entrepreneurial Foundation Rules The previous special provision for entrepreneurial foundations will be removed.

Multi-Tier Structures Remain Attribution across multiple levels will continue, but with clearer guidelines.

What Does This Mean for You?

If you have a foreign family foundation or trust integrated into your wealth structure, you should review whether these new rules impact your tax position. Key questions include:

• Is the foundation taxed abroad at less than 15%?
• Who will now be considered a “beneficiary”?
• Could your structure be classified as “artificial”?  

Our Conclusion

The draft is heading in the right direction (low-tax threshold, harmonization elements, relief proof for third countries). At the same time, critical issues remain unresolved: the inclusion of active income and the absence of a de minimis threshold for mixed income could lead to additional burdens and stand in the way of full alignment with CFC taxation. The decisive factor will be how the final legislation addresses these questions and whether the intended system is implemented consistently.