Establish a foundation & save taxes: Tax advantages and asset protection

Family foundation: tax advantages and asset protection – A family foundation offers a wide range of tax advantages and opportunities for long-term protection of family assets. In particular, transferring real estate to a foundation can be an attractive option. In this article, you’ll learn how transferring real estate to a family foundation can save you taxes while protecting your assets. Learn more about the legal and tax aspects as well as the potential benefits of such a transfer.

Family foundation: At what point is it worthwhile?

Save taxes, optimize and design, but when is it worth it in a family foundation?

• From when is the foundation worthwhile? Only from 1 million equity capital, so that costs of the foundation and yield are really worthwhile
• Before preferring to work in a corporation (so-called Immobilien GmbH or vermögensverwaltende GmbH, GmbH und Co. KG, etc.), here you will find all legal forms in Germany

Overview: This is what you will learn in the guide

7 aspects to save taxes with the creation of a family foundation.

SAVE TAX	QUICKLY EXPLAINED
Benefit from tax advantages several times over	Donors can deduct capital as a special expense. Donations of assets are also deductible.
Inheritance and gift tax exemption	Assets can be transferred to the foundation free of inheritance and gift tax. Income of the foundation is tax-free.
Tax advantages of the family foundation	Corporate income tax of 15% and trade tax exemption. Capital gains and distributions are subject to favorable taxation.
Non-charitable character of the family foundation	Family foundation benefits the family exclusively. No comprehensive tax exemptions as with charitable foundations.
Gift and inheritance tax on incorporation	Gift tax class depending on relationship. Privileges for close relatives.
Taxation of subsequent benefits	Subsequent contributions are subject to certain tax rates. Tax-free allowance of 20,000 euros.
Inheritance tax for fictitious inheritance cases	Family foundations pay inheritance tax every 30 years. Allowance of 800,000 euros.

Take advantage of tax benefits: How you can benefit from a family foundation

You want to optimize your financial situation and save taxes? A family foundation could be the solution. But did you know that you benefit from tax advantages not just once, but several times over? In this article, we will show you how to take advantage of these benefits to reduce your tax burden and secure your assets for future generations.

Multiple tax benefits when establishing a family foundation

When you set up a family foundation, you can benefit from tax advantages in several ways. First of all, you can deduct the transferred capital as a special expense from your taxable income. Individuals have the opportunity to deduct up to 1 million euros within 10 years, while married couples can deduct up to 2 million euros. In addition, you can donate further assets to the foundation and also deduct these donations up to 20 percent of your income as a special expense.

Only 15% corporate income tax (rental income)

Once your assets are in your foundation, you can use and invest the assets you have.

Here’s the kicker. A foundation is subject to corporate income tax. So you pay only 15% corporate income tax instead of trade tax.

You only pay trade tax with a family foundation if it is commercial. However, the mere purchase, management and holding of real estate is not commercial. You are only putting your assets to work.

Even your rental income is now subject to corporate income tax at only 15%.

Real estate transfer to a foundation

Transferring real estate to a foundation also provides an effective asset protection mechanism. By transferring your real estate to a foundation, it is legally separated from your personal assets. This protects them from potential creditors or other financial risks. A family foundation can thus be a valuable security measure to protect your real estate assets from unforeseen events and ensure your family’s long-term financial stability.

• Transferring real estate to family foundation: transfer agreement

Inheritance and gift tax exemption

Another major advantage of a family foundation is that it is exempt from inheritance and gift taxes. By transferring your assets to the foundation, you can avoid these taxes. In addition, the income of charitable family foundations is tax-free, which means that the assets benefit the foundation’s purpose in full.

Taxation of the current income of the foundation

Foundations are normally subject to corporate income tax and, where applicable, trade tax. But tax-privileged family foundations are generally exempt from these taxes. This means that income from donations, asset management and economic activities in the service of charitable purposes are exempt from tax. However, taxes are incurred if income is generated through economic activities that do not serve the charitable purpose.

Tax advantages of the family foundation

The family foundation also offers tax advantages on the income tax side. With a corporate income tax of only 15 percent and the omission of a possible trade tax, you can significantly reduce your tax burden. Capital gains from real estate are treated similarly to an individual, and distributions to beneficiary family members are mostly subject to the 25 percent final withholding tax. If you want to use the family foundation for a holding structure or avoid exit taxation, even further tax advantages await you.

The non-charitable character of the family foundation

It is important to note that a family foundation does not benefit the general public, but rather, in accordance with the foundation’s purpose in the articles of incorporation, benefits you and your family exclusively. Therefore, the comprehensive tax exemptions of a charitable foundation do not apply. Nevertheless, family foundations offer many tax advantages for securing and preserving family assets.

Conclusion: Establish a foundation and save taxes

A family foundation can not only help you save taxes, but also help you secure your assets for future generations and support charitable causes. With multiple tax benefits upon formation, inheritance and gift tax exemption, and tax advantages on the income tax side, the family foundation offers an attractive way to optimize your financial situation. Remember that sound advice from a tax expert is recommended to take into account your individual tax and legal needs and to derive the best possible benefits from a family foundation.

With my experts you will establish your company safely and with all tax advantages.

• Establish a family foundation
• Contact

Of course, you can also transfer real estate to a foundation.