Full text: Taxation of foundations in Europe

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was replaced by the final withholding tax as of 1 January 2009. Income (capital income and 
capital gains) is now taxed at a uniform final withholding tax rate of 25% (plus solidarity sur-
charge). 
? Upon liquidation 
Acquisition upon liquidation of the foundation is considered a gift inter vivos. In this case, as 
in the establishment of a foundation, family foundations benefit from tax advantages (see 
“Tax Treatment of Foundation Endowments”). 
4.2.2. Public Utility Foundation 
The meaning of “public utility” is defined in German law: To be considered as a public utility 
foundation, a foundation’s activities must be exclusively and directly aimed at altruistic pro-
motion of public welfare. Support of a foreign public must result in positive impacts on the 
German general public. 
Tax Treatment of Foundation Endowments 
The transfer of assets in connection with the establishment of a public utility foundation is 
exempt from inheritance and gift tax as well as from real estate transfer tax. 
At the foundation level, assets may be recorded at their book value if the donation is tax-
deductible as a special expense at the level of the donor. For the donor, the transfer of as-
sets has the advantage that he does not have to reveal hidden reserves as would have been 
the case in the event of a withdrawal of these assets. 
The donor may, within certain limits, record the endowment to a public utility foundation as a 
special expense. 
Regular Tax Treatment of the Foundation 
Public utility foundations are exempt from corporate tax and value-added tax (for general 
welfare, events or youth welfare) or subject to a reduced value-added tax rate of 7% (for 
other services). Moreover, public utility foundations are exempt from tax on land and build-
ings.
        

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