Non-profit foundations based in Switzerland have to pay tax on income generated in Germany

Foundations based in Switzerland need to pay tax on their income generated in Germany, even if they pursue non-profit causes.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: According to a ruling of the Third Senate of the Finanzgericht Baden-Württemberg (Fiscal Court of Baden-Württemberg) dated April 23, 2015, a non-profit foundation based in Switzerland that generates income in Germany is not exempt from tax (Az.: 3 K 1766/13).

The foundation (http://www.grprainer.com/en/legal-advice/company-law/foundation-law.html) pursues non-profit causes and is therefore exempt from tax in Switzerland. Since the foundation generates income from renting and leasing in Germany, this is subject to a limited corporation tax liability. According to the FG Baden-Württemberg, Germany is not obligated to recognise non-profit status under a foreign jurisdiction as this is governed exclusively by German law. The Court went on to say that because the foundation pursues non-profit aims it is also capable of being exempted from tax in Germany, but this does not apply to foundations based in Switzerland due to the fact that Switzerland is neither a member of the European Union nor does it have appropriate agreements with Germany, which is why the free movement of capital is not restricted by the failure to achieve tax exemption. The Court also stated that the Agreement on the Free Movement of Persons between the EU and Switzerland is not applicable, as this applies to natural persons and not legal persons such as a foundation.

It is absolutely possible for foundations to benefit from tax concessions, especially if they pursue non-profit aims. Foundations that operate internationally also need to be mindful of international rules and regulations for tax optimisation to be successful. Tax advantages can apply not only to non-profits but also family foundations. The main purpose of family foundations is to ensure ongoing support for relatives, but they are also well suited as a means of preventing disputes among heirs and providing long-term security for assets.

If one is to make optimal use of the benefits associated with a non-profit foundation or a family foundation, it is essential to seek legal advice from lawyers who are competent in the fields of foundation law and tax law.

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