Family foundations and trusts are an established tool in international wealth and succession planning. However, for founders or beneficiaries residing in Germany, they have always carried a specific tax risk: the transparent taxation (Zurechnungsbesteuerung) under Section 15 of the German Foreign Tax Act (AStG). Under certain conditions, this rule attributes the income of the foreign foundation to the beneficiaries and founders residing in Germany. This is also referred to as “dry income” because income tax is incurred even though the affected individual receives no cash flow, such as through distributions. This is one of the reasons why Section 15 AStG is particularly prone to disputes in practice. Consequently, it is a regular subject of field audits and conflicts between taxpayers and the tax authorities in Germany.
A reform is now intended to provide clarity. On November 18, 2025, the German Federal Ministry of Finance (BMF) published a draft for a fundamental overhaul of Section 15 AStG. The draft was released under file number IV B 5 – S 1361/00010/001/047 and has been intensively discussed over the past few weeks. This reform is considered highly likely to pass and is already being taken into account in current advisory practice. With this reform project, the BMF aims to systematically align Section 15 AStG with the Controlled Foreign Corporation (CFC) rules found in Sections 7 et seq. AStG. The objective is to achieve a more uniform, legally secure taxation of foreign asset structures that complies with EU law. While the core principle of transparent taxation will remain unchanged, the prerequisites and legal consequences are being recalibrated.
New prerequisites and scope of transparent taxation
Introduction of a 15 percent low-tax threshold
In the future, income from a foreign family foundation will only be subject to transparent taxation for a German-resident beneficiary if it is taxed abroad at a rate of less than 15 percent. This introduces a clear quantitative threshold for the first time. For many structures, this may offer tax relief. At the same time, the actual effective tax burden at foundation level will come into sharper focus and must be reliably documented.
Expansion of the covered group of individuals
The definition of a foreign family foundation is set to be expanded. In the future, it will no longer affect only traditional family members, but also related parties as well as indirect beneficiaries or contingent beneficiaries. This may result in individuals being caught in the tax net who were previously not perceived as beneficiaries. Especially with discretionary structures, this significantly increases the need for review.
New proof of exemption: now also extending to third states
The current provision regarding proof of exemption under Section 15 (6) AStG, which primarily focused on the legal and factual deprivation of control, is to be replaced by the EU law criterion of an “artificial arrangement.” However, the draft bill does not provide a detailed description of when such an artificial arrangement is to be assumed. In practice, this will likely mean that the wording opens up significant room for interpretation and will probably only be fleshed out gradually by case law. As a result, we are likely facing many years of legal uncertainty, making reliable tax planning more difficult.
Particularly relevant in practice: This provision will no longer be limited to EU/EEA foundations and trusts, but will also be opened up to third states (e.g. Switzerland).
Elimination of the corporate foundation
The current special regulation for so-called corporate foundations is to be repealed without replacement. Consequently, foreign foundation structures with an entrepreneurial character will also be fully subject to transparent taxation under Section 15 AStG in the future. For entrepreneurial families with international foundation or holding structures, there is therefore an urgent need for adjustment.
Clarification on the treatment of multi-tier structures
In multi-tier structures, where additional companies or foundations are held below the foreign family foundation, the current system of multi-tier attribution will generally be maintained but selectively adjusted (Section 15 (6) of the AStG-E). In particular, the income of these lower-tier entities is to be attributed to the family foundation by applying the CFC rules accordingly, regardless of any proof of exemption provision. As a result, this income would also count toward the total income subject to transparent taxation at the family foundation level.
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Impact on international foundation and trust structures
The planned reform of Section 15 AStG marks a paradigm shift in the taxation of foreign family foundations and trusts. While it offers opportunities to mitigate excessive taxation, it simultaneously increases the requirements for structure, documentation, and tax advisory support. For high-net-worth families and entrepreneurs with international foundation or trust structures, one rule applies now more than ever: tax planning is welcome but only with clear economic substance and forward-looking strategy.
WINHELLER provides legally secure support
Our team of attorneys and tax advisors is ready to assist you with any questions or concerns regarding international tax law, family foundations, and trusts. Please feel free to get in touch, and we will advise you based on your individual situation.
