The BFH ruling (II R 50/22) was published in the Federal Tax Gazette on 18 August 2025 and is therefore declared to be generally applicable beyond individual cases. According to the BFH, it is possible that pension payment claims from a foundation are subject to inheritance tax can. It thus overturned the judgement of the Cologne Fiscal Court dated 6 September 2022.
Overview of the dispute and decision of the Cologne Fiscal Court
The plaintiff is the daughter of a founder who died in 2015 and had established a family foundation under Liechtenstein law in 1990. In 2009, the Board of Trustees passed a resolution amending the regulation on succession benefits to the effect that the pension was to be paid to the claimant. In 2010, the Board of Trustees amended this provision by resolution to the effect that the annual pension payment to the claimant began during the founder's lifetime. The payments made by the foundation to the plaintiff during the founder's lifetime were subject to gift tax for the plaintiff.
The tax office was of the opinion that these pension payment entitlements (the so-called "pension entitlement") should be qualified as a taxable gift by way of inheritance (effectively a gift "on death").
At first instance, the Cologne Fiscal Court did not consider the pension rights to be taxable. The assets of a family foundation under Liechtenstein law were not part of the deceased's estate. It does not pass to the founder's successor beneficiaries as an acquisition by inheritance if the powers of control that the founder and testator had reserved for herself in accordance with the relevant provisions in the mandate agreement and the by-laws of the family foundation and on the basis of which the foundation assets continued to be attributed to her as her own assets during her lifetime were not inheritable, but expired without replacement upon the death of the testator. In this case, the legal successor with regard to the foundation's assets was the foundation itself.
The opinion of the Federal Fiscal Court
The Federal Fiscal Court overturned the judgement of the Cologne Fiscal Court and at the same time gave it some homework to do. In the opinion of the BFH, the tax court did not make any findings as to whether an acquisition by way of a gift on death can be deemed to have taken place. Furthermore, the tax court did not determine whether such a promise to make a gift by the testator with regard to the annual pension amount to be paid to the plaintiff by the foundation had already been made during the testator's lifetime or had been communicated by the foundation.
Practical note
It is important to note that the BFH not - at least in this judgement - has conclusively determined that every such case is taxable in any case. For other cases with a similar structure, the judgement is likely to point the way forward, particularly in the case of foreign foundations with beneficiaries in Germany. The BFH has clarified that unilateral legal transactions such as the foundation statutes are not contracts in favour of third parties within the meaning of sec. § Section 3 para. 1 no. 4 ErbStG. The specific structure of the statutes and the legal assessment of the legal position must be examined on a case-by-case basis.
It is therefore all the more surprising that the tax authorities want to apply the judgement on a case-by-case basis. This is in line with our finding after evaluation of another judgementthat the tax authorities still like to attack FL foundations.
Yours TAXGATE Team supports wealthy private individuals and family businesses with complex tax issues and represents their interests vis-à-vis the tax authorities.
