In its ruling of 28 February 2024, the Federal Fiscal Court (BFH) continued its case law in connection with the transfer of assets to a family foundation. Accordingly, the Determining the tax class and the tax-free amount the "most remote beneficiary" to the donor. According to the BFH, this means the beneficiary who according to the foundation statutes potentially can receive financial benefits from the foundation. It is irrelevant whether the person is already born at the time of the foundation transaction, will ever be born and will actually receive financial benefits from the foundation.
The facts of the case
The wife and husband set up the U-Family Foundation and endowed the foundation with assets. In the foundation deed and in the foundation statutes, it was stated that the purpose of the family foundation was to provide adequate provision for the wife and her husband, to provide adequate financial support for the daughter born to the founders and to provide adequate financial support for other descendants of the founders' lineage, but only after the previous generation had ceased to exist.
For gift tax purposes, the tax office regarded the transfer of the assets to the family foundation as the "most remote beneficiary" within the meaning of Section 15 (2) sentence 1 of the Inheritance Tax and Gift Tax Act (Inheritance Tax Act) did not recognise the born daughter, but instead assigned the acquisition to tax class I for "descendants of children and stepchildren" and consequently deducted an allowance of EUR 100,000 (old law) instead of EUR 400,000. The tax court agreed with the tax office in this respect.
Decision of the BFH
The BFH agreed with this decision by the tax court. According to the grounds of the judgement, the "most remote beneficiary" within the meaning of the § Section 15 (2) sentence 1 ErbStG are possible great-grandchildren of the founders, as they can potentially obtain asset benefits in accordance with the foundation statutes.
The fact that a great-grandchild generation has not yet been born when the foundation is established is not relevant for determining the "most remote beneficiary". In the opinion of the BFH, it is equally irrelevant whether possible Great-grandson actually ever receive financial support from the foundation.
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