Oliver Eidel ·
March 09, 2026
Solve German Exit Tax By Setting Up a Liechtenstein Trust (yes, seriously)
To learn more about German exit tax, check out the introduction here, and take a look at the list of all posts on Germany's exit tax here. Also, disclaimer: I'm not a tax advisor, consult a tax advisor for individual tax advice.
In this episode of "I went down the rabbit hole of obscure solutions to Germany's exit tax", I present you with the "Liechtenstein Trust Solution". The biggest question first: If you're affected by the German exit tax, should you do set up a Liechtenstein trust? For 99% of humans, the short answer is "no." It was an interesting rabbit hole to go down though. First, the most important points!
In this episode of "I went down the rabbit hole of obscure solutions to Germany's exit tax", I present you with the "Liechtenstein Trust Solution". The biggest question first: If you're affected by the German exit tax, should you do set up a Liechtenstein trust? For 99% of humans, the short answer is "no." It was an interesting rabbit hole to go down though. First, the most important points!
In brief: Foundation in Liechtenstein
- Costs: 5k CHF setup (fixed price!), approx. 7 - 15k CHF / year "administrative" costs
- Account fees (!): approx. 0.3% - 0.5% / year (of the total portfolio volume etc.)
- Advantages: Does not trigger exit tax, the foundation pays no capital gains tax
- Disadvantages: Transferring existing German companies is usually expensive and complex
Now let's get to the details.
Basics of the Liechtenstein Foundation
Generally speaking, a foundation in Liechtenstein sounds great: Everything the foundation owns does not trigger German exit tax for you. How does that work?
Let's take the calculation example in my article What is the German exit tax, in which you own 100% of a GmbH making €100k annual profit. This would lead to an exit tax of approx. €460k if you move away from Germany and leave Germany as a taxpayer (yes, seriously).
So the ownership structure would be: You --> 100% --> German GmbH. And that's where exit tax applies.
Assuming you could magically transfer your GmbH to a Liechtenstein foundation, no German exit tax would apply. Problem solved! The ownership structure here would be:
Liechtenstein Foundation --> 100% --> German GmbH.
It is important to know here that legally speaking, a foundation belongs to "no one". So you theoretically cannot say that your GmbH belongs to you because the foundation belongs to you. A foundation belongs to no one. A foundation only has one or more "beneficiaries" and that could be you.
But precisely this "hack", that a foundation belongs to no one, leads to this foundation construct principally solving the problem with the German exit tax - because in the end, you only pay exit tax on companies (GmbHs or international companies) of which you own more than 1%. And since your GmbH no longer belongs to you, but to the Liechtenstein foundation, no exit tax applies anymore.
So far, so good.
Some tax advisors also very actively advertise the Liechtenstein foundation as a potential solution ("structuring") for the German exit tax. Initially, I also thought the Liechtenstein foundation was a great solution. In the meantime, however, I have moved away from it.
But first to the costs:
Let's take the calculation example in my article What is the German exit tax, in which you own 100% of a GmbH making €100k annual profit. This would lead to an exit tax of approx. €460k if you move away from Germany and leave Germany as a taxpayer (yes, seriously).
So the ownership structure would be: You --> 100% --> German GmbH. And that's where exit tax applies.
Assuming you could magically transfer your GmbH to a Liechtenstein foundation, no German exit tax would apply. Problem solved! The ownership structure here would be:
Liechtenstein Foundation --> 100% --> German GmbH.
It is important to know here that legally speaking, a foundation belongs to "no one". So you theoretically cannot say that your GmbH belongs to you because the foundation belongs to you. A foundation belongs to no one. A foundation only has one or more "beneficiaries" and that could be you.
But precisely this "hack", that a foundation belongs to no one, leads to this foundation construct principally solving the problem with the German exit tax - because in the end, you only pay exit tax on companies (GmbHs or international companies) of which you own more than 1%. And since your GmbH no longer belongs to you, but to the Liechtenstein foundation, no exit tax applies anymore.
So far, so good.
Some tax advisors also very actively advertise the Liechtenstein foundation as a potential solution ("structuring") for the German exit tax. Initially, I also thought the Liechtenstein foundation was a great solution. In the meantime, however, I have moved away from it.
But first to the costs:
Costs
The biggest cost factor with the Liechtenstein foundation is the so-called "trustee". The problem is that you need a kind of construct that conveys to the German tax office that you no longer have control over the foundation. For this, you need a trustee; this is usually a person in Liechtenstein who manages the foundation for you. And this person charges a lot for it, because that sums up (it feels like) the entire business model of Liechtenstein quite well.
It is relatively surprising here how widely the prices diverge. Interestingly, some German tax advisors seem to offer you the establishment and administration of a Liechtenstein foundation - but what happens in the background here is that they ultimately just buy the service from a Liechtenstein firm and add their own markup (= margin).
I heard, for example, the statement from a German tax advisor that a Liechtenstein foundation costs €30k / year and that these would be the costs for the trustee.
Curiously, the costs are significantly cheaper if you ask Liechtenstein firms directly. They calculate based on hourly effort (at high hourly rates) and there you end up at approx. 7k - 15k CHF, depending on the effort. A relatively "passive" foundation can therefore get by with "only" 10k CHF administration fees - including costs for the trustee!
The first realization seems to be: If you want a Liechtenstein foundation, you should contact the Liechtenstein service providers directly yourself and not have the foundation set up "indirectly" by a German tax advisor.
Sounds feasible so far. However, the bigger problems and complexities reveal themselves when you want to put your German GmbH into the new Liechtenstein foundation. That is anything but trivial.
It is relatively surprising here how widely the prices diverge. Interestingly, some German tax advisors seem to offer you the establishment and administration of a Liechtenstein foundation - but what happens in the background here is that they ultimately just buy the service from a Liechtenstein firm and add their own markup (= margin).
I heard, for example, the statement from a German tax advisor that a Liechtenstein foundation costs €30k / year and that these would be the costs for the trustee.
Curiously, the costs are significantly cheaper if you ask Liechtenstein firms directly. They calculate based on hourly effort (at high hourly rates) and there you end up at approx. 7k - 15k CHF, depending on the effort. A relatively "passive" foundation can therefore get by with "only" 10k CHF administration fees - including costs for the trustee!
The first realization seems to be: If you want a Liechtenstein foundation, you should contact the Liechtenstein service providers directly yourself and not have the foundation set up "indirectly" by a German tax advisor.
Sounds feasible so far. However, the bigger problems and complexities reveal themselves when you want to put your German GmbH into the new Liechtenstein foundation. That is anything but trivial.
Transferring a German GmbH into a Liechtenstein Foundation
Somehow you have to "get" your GmbH into the Liechtenstein foundation. I have spoken with several tax advisors about this and the short summary is that it is probably not trivially possible, unless you have an enormously high budget for tax advisors and a high tolerance for lengthy proceedings with the tax office.
Here is a rough overview of my findings:
Here is a rough overview of my findings:
- You can sell your GmbH to your Liechtenstein foundation and simultaneously give the Liechtenstein foundation the purchase price as a loan (vendor loan). Sounds elegant in itself, but you create two new problems directly: 1) Because you have now sold your company, you have a sales profit which you must tax at barely 30% in Germany (partial income method). And 2), because your company is now moving away from Germany, you have to pay German exit tax at the GmbH level after all.
Actually, you haven't won anything here and just created a huge pile of complexity. - You could put your GmbH into a German foundation; for operative GmbHs that you hold privately, this is often possible tax-neutrally (keyword: need for exemption check / Verschonungsbedarfsprüfung). And after 7 (?) years, your German foundation could then sell the GmbH to the Liechtenstein foundation.
Probably less tax applies here (German foundations are only taxed at 15%, so less tax burden than if you sell privately to your Liechtenstein foundation), but you probably still cause an exit event, so the GmbH must pay exit tax.
And now you have two foundations (oh man). Even more complexity. The question is whether you really want that. - There are boutique tax advisors who sell you a kind of hyper-complex "custom construct" for a lot of money (€100k+) through which you get your GmbH into a Liechtenstein foundation tax-neutrally. Roughly, it works like this: you establish some exotic corporate form as a holding (e.g., GmbH & Co. KG, KGaA, etc.), put your company in there, and then transfer this exotic holding company to your Liechtenstein foundation with some complex "tricks".
Might work, but there's no guarantee for this. I suspect this model is aimed more at rich German family entrepreneurs who have a corresponding budget for it. The tax advisors usually take a share of the "saved" exit tax, e.g. 30%. So if you had a theoretical exit tax of €460k above, the model here would cost you €100k+.
Problematic here is also that there is no guarantee that it works and that it is likely to be audited in detail by the tax office. That then costs time and nerves again. The question is whether one is up for that. Probably not.
In short, one can summarize that there is actually no simple way to put a German GmbH into a Liechtenstein foundation, unless one has a lot of money for tax advisors or a lot of nerves to deal with the tax office, or both.
For "normal" people with a limited budget and limited frustration tolerance, the Liechtenstein foundation is probably not a viable solution for the German exit tax.
Liechtenstein Foundation for Wealth Accumulation
Theoretically (... very theoretically) the Liechtenstein foundation could be suitable for wealth accumulation. The idea here would be to set up a foundation in Liechtenstein and then establish all future companies directly in the possession of the foundation. Thus you don't have the problem of clumsily transferring your GmbHs into the foundation (see above).
Whether that is so great... no idea. I mean, 99% of people looking at Liechtenstein foundations here want to solve the exit tax of their existing companies and not set up a theoretical solution with which they pay no exit tax on future companies.
Nevertheless, the biggest advantage of the Liechtenstein foundation is of course that everything it owns does not fall under the German exit tax.
Whether that is so great... no idea. I mean, 99% of people looking at Liechtenstein foundations here want to solve the exit tax of their existing companies and not set up a theoretical solution with which they pay no exit tax on future companies.
Nevertheless, the biggest advantage of the Liechtenstein foundation is of course that everything it owns does not fall under the German exit tax.
Furthermore, the foundation itself pays no capital gains tax. What does this look like in practice?
Assuming you own a GmbH like this:
You --> 100% --> GmbH
Then logically your GmbH must tax its profits at approx. 30% (corporate and trade tax) and, if you then want to distribute the profits, you pay another approx. 26% capital gains tax. Results in a total tax burden of approx. 50%.
Assuming your Liechtenstein foundation would own your GmbH, like this:
Liechtenstein Foundation --> 100% --> GmbH
Then your GmbH must continue to tax its profits at approx. 30% (see above), but upon distribution into the Liechtenstein foundation, no capital gains tax applies! You can therefore invest the profits well within your Liechtenstein foundation (e.g., in ETFs).
On closer inspection, however, this advantage is not as big as it initially appears. Because:
- If you continue to live in Germany, you then do pay 26% capital gains tax upon distribution from your Liechtenstein foundation to you privately;
- The Liechtenstein foundation has relatively high administration costs (~10k CHF) and bank account fees (0.3% - 0.5% of total volume!).
- With a holding GmbH in Germany, you have almost the same effect - see below.
In the end, you have the same effect as with a German Holding-GmbH. If you didn't know the construct yet, here is what it looks like:
You --> 100% --> Holding-GmbH --> 100% --> operative GmbH
So you have a Holding-GmbH alongside your actual (operative) GmbH. You only own the Holding-GmbH, which in turn owns 100% of your operative GmbH. Your operative GmbH must continue to tax the annual profit at approx. 30%, but can thereafter distribute it 95% tax-free (!) to your Holding-GmbH. Since that also pays approx. 30% tax and 95% were tax-free, this results in a tax burden of 1.5%, so close to the 0% of the Liechtenstein foundation. And, here too, if you distribute further to yourself privately, you pay the 26% capital gains tax again.
You can therefore use the same retention / "compound interest" effect with a German Holding-GmbH as with a Liechtenstein foundation and the construct is significantly less "shady" than a foundation in Liechtenstein.
The exit tax problem is not solved by this, however, since your German Holding-GmbH would now also be covered by the German exit tax (haha). But what I wanted to show here is that this whole idea of "wealth accumulation in the Liechtenstein foundation" is not as good as it sounds.
The advantage of the Liechtenstein foundation would just be that no exit tax applies to companies in the foundation.
So if you are in the admittedly very unlikely situation that you 1) plan to move away from Germany in the medium term and 2) want to found a company right now, then the Liechtenstein foundation could theoretically be suitable for that.
Summary
One thing first: I found it interesting that the German tax advisors who praise the Liechtenstein foundation particularly often do not have a Liechtenstein foundation themselves (!) in the end and issue their invoices quite "normally" via their German GmbHs, which they in turn own themselves or via a Holding-GmbH. So the model doesn't seem to be that great, especially for "wealth accumulation" while one is still in Germany.
I have therefore found no good reasons for setting up a Liechtenstein foundation other than the partly unlikely scenarios above, especially as a supposed solution for the German exit tax.
If I have overlooked something here, however, I would be happy to receive a message! :)
I have therefore found no good reasons for setting up a Liechtenstein foundation other than the partly unlikely scenarios above, especially as a supposed solution for the German exit tax.
If I have overlooked something here, however, I would be happy to receive a message! :)
By the way: Are you also dealing with the German exit tax? Send me a message any time, I'm interested to talk to people like you. And if you'd like to connect with even more people, join this German exit tax Telegram community I created :)
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Clemens
·
about 1 month ago
Hi Oliver
One thing you should always consider with a foundation: Who does actually steer/lead the foundation? We've had a look into this for a Germany based family foundation, and it turns out that at least one of the members of the management of the foundation (not the board) _must_ be based in Germany. Usually your tax advisor/lawyer will offer himself for a "modest" fee (10K yearly is the normal rate for this), but he will not do anything interesting for this. I.e. if you realize that your company is in need of a directional change or something, he will probably just try to convince you to keep going as is to not risk his modest fee.
Alternatively, if you have hired a manager that actually runs your company (Geschäftsführer), that person could also be the manger of the foudation. However in that case he can himself give orders from the foundation about what to do with the company, while you as a member of the board of the foundation cannot directly stop him from doing so (without going through the court). So in the worst case scenario, the manager could direct himself to sell your company in the name of the foundation....
Also something that one should not forget with a foundation: Just having a foundation in Lichtenstein will already trigger everyone that comes in contact with it that you are probably trying to reduce your taxes and trigger the respective behaviour. I.e. the tax office will probably have a closer look if everything has been done correctly, is _still_ done correctly etc. And with the amount of Gotchas I predict they will find some flaw sooner or later.
Anyway, just my two cents on this :-)
One thing you should always consider with a foundation: Who does actually steer/lead the foundation? We've had a look into this for a Germany based family foundation, and it turns out that at least one of the members of the management of the foundation (not the board) _must_ be based in Germany. Usually your tax advisor/lawyer will offer himself for a "modest" fee (10K yearly is the normal rate for this), but he will not do anything interesting for this. I.e. if you realize that your company is in need of a directional change or something, he will probably just try to convince you to keep going as is to not risk his modest fee.
Alternatively, if you have hired a manager that actually runs your company (Geschäftsführer), that person could also be the manger of the foudation. However in that case he can himself give orders from the foundation about what to do with the company, while you as a member of the board of the foundation cannot directly stop him from doing so (without going through the court). So in the worst case scenario, the manager could direct himself to sell your company in the name of the foundation....
Also something that one should not forget with a foundation: Just having a foundation in Lichtenstein will already trigger everyone that comes in contact with it that you are probably trying to reduce your taxes and trigger the respective behaviour. I.e. the tax office will probably have a closer look if everything has been done correctly, is _still_ done correctly etc. And with the amount of Gotchas I predict they will find some flaw sooner or later.
Anyway, just my two cents on this :-)
Hey Clemens, super interesting, thanks so much for your comment!
I didn't know that a German family foundation needs a local (German) manager who must be in Germany - that's interesting. But intuitively it does make sense because otherwise the tax office might assume that the location from where business decisions are made (Ort der Geschäftsleitung) has moved out of Germany, and then you'd be in the very weird position of having a German family foundation which is now located outside of Germany, so you do end up paying German exit tax on this whole construct and its holdings.. so yeah, super valid and interesting point!
And, on a more high-level view, this actually makes the German family trust sound similar to the GmbH & Co. KG solution where you move your shares into a newly-founded GmbH & Co. KG - that company also needs a German managing director for exactly the same reasons.
And 100% agreed on the tax office scrutiny re: the Liechtenstein trust. This was one of my biggest learnings while researching all of this - there are constructs which "fly under the radar", most notably winding down / selling your business or setting up a GmbH & Co. KG, but then there are other constructs which already obviously point the tax office in your direction, and setting up a Liechtenstein trust is very likely one of those.
Based on my research, you'll be, at minimum, interacting with the tax office on multiple fronts:
I didn't know that a German family foundation needs a local (German) manager who must be in Germany - that's interesting. But intuitively it does make sense because otherwise the tax office might assume that the location from where business decisions are made (Ort der Geschäftsleitung) has moved out of Germany, and then you'd be in the very weird position of having a German family foundation which is now located outside of Germany, so you do end up paying German exit tax on this whole construct and its holdings.. so yeah, super valid and interesting point!
And, on a more high-level view, this actually makes the German family trust sound similar to the GmbH & Co. KG solution where you move your shares into a newly-founded GmbH & Co. KG - that company also needs a German managing director for exactly the same reasons.
And 100% agreed on the tax office scrutiny re: the Liechtenstein trust. This was one of my biggest learnings while researching all of this - there are constructs which "fly under the radar", most notably winding down / selling your business or setting up a GmbH & Co. KG, but then there are other constructs which already obviously point the tax office in your direction, and setting up a Liechtenstein trust is very likely one of those.
Based on my research, you'll be, at minimum, interacting with the tax office on multiple fronts:
- Getting a binding reply (verbindliche Auskunft) on whether your trust is truly independent from you;
- Funding it with the initial 30k€, of which 10k€ is taxable as a gift (only 20k€ are tax-free for gifts to strangers, and your Liechtenstein trust is one);
- Valuing and moving your companies into the trust and likely paying the exit tax because the ownership of your companies now moves out of Germany.
So yeah. This is one of those solutions where you likely have to budget a five-figure Euro sum (or higher) for a fancy tax advisor to help you with the implementation.
For most normal humans running "small" profitable companies, this is probably out of the question :)