A foundation in Liechtenstein protects assets on emigration from Germany only to a limited extent: endowing it can trigger German gift tax, the income can continue to be attributed to the founder or to German beneficiaries, and the transfer of shares in companies can bring forward the exit tax under § 6 AStG. What can fall away, by contrast, is the substitute inheritance tax (Erbersatzsteuer) under § 1 (1) no. 4 ErbStG.
Anyone who wants to leave Germany and secure their assets quickly comes across the Liechtenstein foundation as an instrument of asset protection on emigration. Expectations range from protection against creditors and inheritance disputes, through avoiding the German substitute inheritance tax, to the hope that exit taxation can be circumvented. From a German perspective only part of this holds. This article describes the German legal consequences a Liechtenstein foundation triggers on emigration: gift tax on endowment, ongoing attribution of income, exit tax on shares in companies, challenge by creditors, supplementary compulsory portion (Pflichtteilsergänzung) and reporting duties. The law of Liechtenstein itself is not the subject; for that a local adviser must be consulted. The legal position is as of October 2026. The basics of the German family foundation and the attribution of foreign foundations are explained in addition in the article Family Foundation as Asset Protection for Emigrants.
What the Foundation Is Meant to Achieve and What Remains from a German Perspective
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| Expectation | Assessment under German law |
|---|---|
| Protection against creditors | Only limited: transfers can be open to challenge under the Creditor Avoidance Act (Anfechtungsgesetz) and in insolvency; the founder’s rights of revocation and influence weaken the protection |
| No substitute inheritance tax | Correct: it affects only foundations with their seat or place of management in Germany |
| No exit tax | Not across the board: the gratuitous transfer of shares to a foundation not subject to unlimited tax liability can itself trigger a deemed sale |
| Favourable gift tax | No: if the founder is a resident within the meaning of § 2 ErbStG or domestic assets are transferred, the endowment is subject to German gift tax; the tax class does not follow the family privilege |
| Discretion | No: automatic exchange of information and transparency rules apply |
| Protection against compulsory portions | Only limited: supplementary compulsory portion can also capture gifts to foundations |
Timing: Before or After Emigration?
Founding after emigration is not automatically unproblematic for tax purposes, because German gift tax continues to apply to German nationals for up to five years after they permanently stay abroad and no longer have a domicile in Germany. Many assume the opposite.
Gift Tax on Endowment
The formation or endowment of a pool of assets under foreign law whose purpose is directed at tying up assets is, under § 7 (1) no. 8 ErbStG, treated as a gift. German gift tax is linked to the person of the donor or of the acquirer. For German nationals, extended unlimited tax liability applies under § 2 (1) no. 1 sentence 2 lit. b ErbStG: anyone who has given up their domicile but has not stayed permanently abroad for more than five years without having a domicile in Germany continues to be treated as a resident. The Federal Fiscal Court (Bundesfinanzhof) did not object to this rule, using gift tax as the example, in its judgment of 12 October 2022 (II R 5/20). A constitutional complaint was filed against the decision (1 BvR 325/23); we are not aware of a decision by the Federal Constitutional Court. A foundation set up immediately after emigration therefore regularly does not escape German gift tax.
How high the gift tax ultimately is depends strongly on the structure. If the assets are ultimately to go to relatives, for example as part of the founder’s estate arrangements, the burden can be reduced considerably depending on the design. This requires careful coordination of the foundation’s statutes, estate planning and attribution.
No Tax Class of the Family Privilege
For domestic family foundations the tax class depends on the most distant beneficiary (§ 15 (2) sentence 1 ErbStG). By its wording the privilege applies only to foundations established in the interest of families in Germany. The Court of Justice of the European Union held in its judgment of 13 November 2025 (C-142/24) that this restriction is justified also in relation to a Liechtenstein family foundation and therefore does not infringe the free movement of capital under the EEA Agreement, because domestic family foundations are subject to the substitute inheritance tax. For the endowment of a Liechtenstein foundation, tax class III therefore comes into consideration, with an allowance of 20,000 euros (§ 16 (1) no. 7 ErbStG). A change in the legal position must be checked before any structuring and secured by a binding ruling.
No Substitute Inheritance Tax
The substitute inheritance tax every 30 years under § 1 (1) no. 4 ErbStG affects foundations that are subject to unlimited tax liability under § 2 (1) no. 2 ErbStG, that is, that have their seat or place of management in Germany. A Liechtenstein foundation with its actual place of management there is not subject to it. This is the point providers like to emphasise. It is correct, but only one side of the calculation, because the less favourable tax class on establishment and the ongoing attribution can outweigh it. The place of management must also actually lie abroad. If the foundation’s decisions are in fact made in Germany, its place of management is in Germany (§ 10 AO). Then § 15 AStG no longer applies. No advantage takes its place, however: if the foundation is not recognised as a foundation because of its seat of administration in Germany, assets and income are as a rule attributed directly to the founder. The substitute inheritance tax presupposes a foundation with legal capacity and in this case lapses according to BFH II R 30/22.
Ongoing Taxation: Attribution under § 15 AStG
A foreign family foundation is looked through for German tax purposes under § 15 AStG. Assets and income are attributed to the founder who is subject to unlimited tax liability, or alternatively to the beneficiaries or remaindermen who are subject to unlimited tax liability, in proportion to their share. It is a family foundation if the founder, relatives and their descendants are entitled to more than half of the benefits or of the remainder (§ 15 (2) AStG). The attribution does not apply to inheritance tax.
Liechtenstein belongs to the EEA. For foundations with their seat or place of management in an EU or EEA state, the attribution under § 15 (6) AStG falls away if it is proven that the foundation’s assets are legally and in fact withdrawn from the power of disposal of the founder and the other persons named in § 15 (2) and (3) AStG, and if the necessary information can be provided under the Mutual Assistance Directive or a comparable agreement. The proof is demanding in practice. Anyone who reserves rights of revocation, a right to give instructions or a position as de facto decision-maker will hardly be able to furnish it. This is at the same time a conflict of aims: what avoids the attribution takes control away from the founder.
In judgments of 3 December 2024 (IX R 32/22 as the leading decision, identical in content among others IX R 31/22, Swiss family foundations), the Federal Fiscal Court also held the restriction of this counter-proof to EU and EEA foundations to be incompatible with the free movement of capital. For Liechtenstein this is relevant only indirectly, but shows how fluid the legal position is.
On 18 November 2025 the Federal Ministry of Finance sent associations a draft of a new version of § 15 AStG. Among other things it provides for a low-tax threshold of 15 percent and intends to recast the proof of relief: instead of the withdrawal of power of disposal, what would matter is whether an artificial arrangement exists. As far as can be seen, no government draft yet exists; this is not current law. For a Liechtenstein foundation too, the current state must therefore be checked at the time.
If the founder moves away and their unlimited tax liability ends, the attribution to them falls away. Beneficiaries in Germany then come into consideration, to whom the income is attributed proportionally. If someone in the family remains resident in Germany and entitled to benefits, this triggers the mechanism.
Exit Tax and the Foundation
A widespread statement is that no exit taxation arises with a foundation. This holds for the emigration as such: § 6 AStG is linked to shares that the taxpayer holds and deems a sale at fair market value when unlimited tax liability ends. If you hold the shares through an already existing foundation structure, emigration is no longer the trigger, because you do not hold the shares.
The transfer itself, however, is the critical step. Under § 6 (1) sentence 1 no. 2 AStG, the gratuitous transfer of shares within the meaning of § 17 (1) sentence 1 EStG to a person not subject to unlimited tax liability is treated as a sale if the transferor was subject to unlimited tax liability for at least seven years in total within the last twelve years (§ 6 (2) AStG). Contributing GmbH shares to a Liechtenstein foundation can therefore have the same effect as emigration, without any purchase price flowing. This applies if the foundation is recognised in Germany; if it is managed from Germany and not recognised, there is no transfer to another person to begin with. The deferral under § 6 (4) AStG is tied to an application, spreading over seven annual instalments and, as a rule, provision of security. Details on exit taxation can be found in the article Avoiding Exit Taxation.
Asset Protection Against Creditors
A foundation protects only if the transfer cannot be challenged. Under the Creditor Avoidance Act, gratuitous performances in the last four years before the challenge (§ 4 AnfG) and legal acts that the debtor carried out with intent to disadvantage creditors in the last ten years before the challenge (§ 3 (1) AnfG) can be challenged, the latter if the other party knew of the intent; in insolvency the rules of the Insolvency Code apply. In addition, asset protection works preventively. A structure that comes into being only when claims are already threatening regularly helps little and can support an accusation of disadvantaging creditors. Providers occasionally cite short periods under Liechtenstein law. These periods concern the law there; before German courts and for assets in Germany, German law may remain decisive. How a foreign decision is enforced in Germany is covered by the article Enforcement of Foreign Judgments.
If the founder reserves a right of revocation or far-reaching powers of amendment, a creditor can reach the assets as if they belonged to the founder. How far this goes under Liechtenstein law must be assessed by a local adviser. Structuring mistakes in the statutes are addressed in the article Mistakes in Foundation Statutes.
Recognition of the Foundation in Germany
If the foundation is in fact managed from Germany, loss of recognition threatens. Towards third states, Germany follows the real seat theory (Verwaltungssitztheorie): what counts is where the foundation is actually administered, not its seat according to the statutes. Foreign entities that are not recognised on this basis are treated by German case law as a partnership or sole proprietorship, with personal liability (Federal Court of Justice, judgment of 27 October 2008, II ZR 158/06). The Federal Fiscal Court followed this in 2025 for a Swiss foundation (judgment of 4 June 2025, II R 30/22). Whether something different applies to Liechtenstein because of the EEA Agreement is open; proceedings II R 41/25 are pending before the Federal Fiscal Court. The hoped-for asset protection then turns into its opposite: there is personal liability for debts, for example from speculative transactions, the income is attributed to the participants, and anyone who does not declare it risks tax criminal proceedings.
Compulsory Portion and Family
A foundation is no protection against compulsory portions. If assets are given to a foundation, a person entitled to a compulsory portion can demand supplementation under § 2325 BGB. The gift is taken into account in full in the first year before the date of death, thereafter reduced by one tenth per year, and no longer after ten years. For spouses the period begins only with the dissolution of the marriage. If the estate is subject to foreign succession law or a choice of law applies, the result may differ; more on this in the article Compulsory Portion Law and Foreign Assets.
Transparency and Reporting Duties
Accounts and securities accounts of the foundation are subject to the automatic exchange of information under the Common Reporting Standard. Anyone who is liable to tax in Germany or remains a beneficiary must declare the participation. Notification duties under the Fiscal Code (Abgabenordnung) and reporting duties for cross-border tax arrangements may be added. Anyone who builds a structure whose value rests on the authorities’ ignorance is building a criminal-liability risk, not protection. The framework of the reporting duties is described in the article CRS and Reporting Duties for Foreign Accounts.
Costs and Substance
A Liechtenstein foundation causes ongoing costs for bodies, trustees or foundation board members, audit, bookkeeping and advice in both states. Amounts circulating on the internet are based on guide values of individual providers and are not reliable. For German taxation, actual substance also matters, for example the place of management. A foundation without actual decisions on the spot is treated differently for tax purposes from one that is managed.
Binding Ruling Before Any Implementation
The legal position is in flux on several points: attribution under § 15 AStG and the counter-proof, the treatment of the tax class, exit tax on contribution. Before you transfer assets, the tax assessment should be secured by a binding ruling (verbindliche Auskunft) from the tax office (§ 89 (2) AO). It is possible for a precisely defined set of facts not yet realised, if there is a special interest because of significant tax effects. The tax office should decide within six months. A fee based on the value of the matter is charged for the application (§ 89 (3) to (7) AO); below a value of 10,000 euros it is waived. With a foreign connection, a ruling in the other state may additionally be sensible. On the procedure see Binding Ruling on Emigration.
Three Mistakes Laypeople Often Make
- Understanding the foundation as a tax saving. Endowment, attribution and exit tax together can cost more than the avoided substitute inheritance tax.
- Wanting to keep control and expecting protection at the same time. Anyone who keeps revocation, instruction and access generally loses protection against creditors and the exemption from attribution.
- Acting too late. A structure that comes into being only after claims have appeared can be open to challenge; emigrating shortly before an expected death does not change the five-year period.
Conclusion
The Liechtenstein foundation can pool assets and organise succession. As a means of removing German tax and creditor access on emigration, it is not suitable. The endowment can trigger German gift tax, the income can continue to be attributed, and contributing shares in companies can bring forward the exit tax. The decision belongs in an overall plan covering residence, asset structure, family situation and timing, secured by a binding ruling and advice in Liechtenstein.
Frequently Asked Questions
Does a Liechtenstein foundation avoid the exit tax?
Not across the board. Emigration itself affects shares that you hold personally. If a participation is transferred gratuitously to the foundation, however, § 6 (1) sentence 1 no. 2 AStG can deem a sale. Whether the conditions are met in the individual case is to be clarified in advance.
Does the substitute inheritance tax fall away with a Liechtenstein foundation?
The substitute inheritance tax under § 1 (1) no. 4 ErbStG affects domestic family foundations. A foundation with its seat and place of management in Liechtenstein is not subject to it. Instead, gift tax on endowment and the attribution of income are to be examined.
Can I found a foundation tax-free after emigrating?
Regularly not. For German nationals, extended unlimited gift tax liability applies for five years after emigration. Whether an exemption exists in the specific case depends on residence, nationality and timing.
Does a foundation protect against compulsory portion claims?
Only to a limited extent. A gift to the foundation can trigger the supplementary compulsory portion claim under § 2325 BGB. The amount taken into account decreases over ten years. Under foreign succession law, different rules are possible.
Do I need advice in Liechtenstein?
Yes. Establishment, statutes, bodies, supervision and the founder’s rights are governed by Liechtenstein law. German advice assesses the consequences in Germany and coordinates with the local adviser.
Attorney Dr. Johannes Fiala and the law firm, with a focus on international inheritance law, tax law and asset protection in Munich, advise entrepreneurs and wealthy families on securing assets before emigration, from the review of gift tax through attribution under § 15 AStG to the binding ruling. Dr. Fiala has published extensively on questions of emigration and asset protection. Contact the firm without obligation to discuss your individual situation in an initial consultation.
