Recent developments in German taxation of distributions of foreign trusts and foundations to their Germany-based beneficiaries

Abstract

Abstract Distributions of foreign trusts and foundations to their Germany-based beneficiaries may be subject to German income and gift tax. Fortunately, German tax authorities now have implemented a judgment of the German Federal Fiscal Court rendered on 3 July 2019 stating that distributions made by a foreign foundation to its Germany-based beneficiaries are not subject to German gift tax provided that (i) the distribution has been made in accordance with the foundation’s statutes and (ii) the beneficiary does not have a claim regarding the distribution received. However, there are still some cases in which gift tax may be levied on such distributions, so that the risk of potential double taxation with both income and gift tax is still not completely off the table.