Germany vs. Switzerland
Where can family wealth be structured in a legally secure and tax-optimized way?

Alpenlandschaft am See mit Logo der Stiftungsverwalter

Structuring family wealth requires foresight. Anyone planning asset protection and tax optimization across generations will inevitably encounter the family foundation. However, the legal and tax frameworks in Germany and Switzerland differ fundamentally.

1. Civil law: foundation purpose and beneficiary support

  • Germany: Maximum flexibility in the statutes. The traditional family maintenance foundation may finance the family’s general living expenses without time limitation and to the full extent.
  • Switzerland: Strict limitations under the Swiss Civil Code (Art. 335 SCC). Pure maintenance foundations are not permitted. Distributions can only be structured in a legally secure way if they are linked to specific purposes, such as education, endowment or hardship situations.

2. Ongoing taxation of income

  • Germany: Attractive, among other things, for commercial and real estate-related structures. Under the current tax reform, the corporate income tax rate is expected to gradually decrease from 15% starting in 2028 to as low as 10% in 2032. In addition, the established participation exemption applies, with 95% tax exemption on capital gains from shares.
  • Switzerland: Cantonal income and wealth taxes apply at foundation level. Distributions to beneficiaries are generally subject to full income taxation at recipient level.

3. Asset preservation: the substitute inheritance tax risk

  • Germany: The 30-year cycle. German tax law deems an inheritance between two children to occur every 30 years and levies substitute inheritance tax on the foundation’s assets. This requires forward-looking liquidity planning.
  • Switzerland: No periodic tax access to the asset base. The assets remain within the foundation’s capital across generations without recurring substance taxation.

4. Cross-border establishment (German tax residency)

  • Beware of tax traps: Anyone resident in Germany who establishes a foreign family foundation risks gift tax class III treatment upon the transfer of assets, meaning high tax rates and minimal allowances. In addition, if the structure is not carefully designed, attribution taxation under Section 15 of the German Foreign Tax Act may apply.

Conclusion for wealth succession

If the goal is flexible, ongoing support for the family and highly optimized reinvestment of profits, for example from real estate or corporate shareholdings, the German family foundation remains the go-to tool. If the main priority is the long-term preservation of wealth without periodic tax access to the asset base, Switzerland offers clear structural advantages despite its restrictions on permissible foundation purposes.

As a law and tax advisory firm, we support you from the feasibility study and drafting of the foundation statutes through to tax optimization.

Are you planning to establish a foundation or restructure your family business? Please feel free to contact us.