Strategically structuring private and business assets is one of the fundamental decisions made by successful entrepreneurs in Europe. Over time, the difference between an unstructured tax position and an optimised wealth architecture can add up to millions.
Three structuring tools dominate in practice: the holding company, the family foundation and the trust. Each of these structures comes with specific tax implications as well as practical pros and cons.
A holding company acts as a parent entity that holds shareholdings in operating companies, property or securities portfolios. For European entrepreneurs, it is often the backbone of their asset structure. In a European context, this is commonly implemented via the German GmbH, the Dutch BV, the Luxembourg S.à r.l., the Austrian GmbH or the Irish Limited, each with its own tax advantages and disadvantages.
The holding acquires and manages shareholdings, property or securities portfolios. The key tax advantage lies in the exemption under § 8b KStG: dividends and capital gains on disposals are 95% tax-exempt. In addition, note that the 95% exemption for ongoing dividend income requires the holding to hold, at the start of the calendar year, a direct participation of at least 10% in the share capital of the subsidiary (§ 8b(4) KStG), whereas disposal gains on the sale of shares remain privileged regardless of any minimum participation threshold.
In concrete terms: with exit proceeds of ten million euros, the tax is only around €80,000. If sold from private assets, it would be roughly €2.7 million — a saving of €2.62 million. The liquidity remains in the holding and can be reinvested tax-efficiently.
While the German GmbH convinces with familiar legal structures, other jurisdictions offer specific advantages: the Netherlands (BV) with an extensive double-tax treaty network, Luxembourg (S.à r.l.) as a traditional holding location with an overall tax burden below 25%, Ireland (Limited) with 12.5% corporation tax for IP-intensive business models, or Austria (GmbH) with favourable group taxation.
A holding structure is recommended for entrepreneurs with multiple operating companies, property portfolios or planned exits. It offers maximum flexibility for reorganisations and near tax-free disposal gains.
For serial entrepreneurs who build and sell several companies, a holding is indispensable. The tax saving on a €10 million exit is more than €2.6 million compared with a private sale.
Disadvantages: ongoing administrative costs (€5,000 to €15,000 per year), full transparency towards the authorities, and capital gains tax on private withdrawals.
Family foundations have a centuries-long tradition in Germany, Austria, Switzerland and Liechtenstein. For wealthy entrepreneurs, they primarily serve the long-term preservation of business assets, tax-efficient succession planning, and the provision for family members across multiple generations.
A foundation has no owners. The contributed assets are separated out and serve the foundation’s statutory purpose — typically providing for family members and preserving the assets.
Especially relevant for entrepreneurs: the foundation can hold operating companies over the long term without generational change leading to fragmentation. As an “everlasting shareholder”, the foundation prevents conflicts arising from communities of heirs and offers protection against hostile takeovers.
In Germany, foundations are subject to corporation tax of 15% plus the solidarity surcharge. Where it is purely asset management, no trade tax is due. Participation income benefits from tax exemption under § 8b KStG.
A critical point is the substitute inheritance tax under § 1(1) no. 4 ErbStG: every 30 years a deemed inheritance tax, as if the assets had passed to two children. Allowance: €800,000. On €20 million, this results in roughly €4.5 million of tax every 30 years.
However, business assets may be exempt if the requirements under §§ 13a, 13b ErbStG are met. With at least a 25% participation in operating companies, 85% or 100% relief is possible if wage-sum and holding-period requirements are complied with.
Liechtenstein offers highly attractive conditions: no substitute inheritance tax, a minimum annual tax of CHF 1,800, and a high degree of flexibility. However, careful planning is required with regard to German exit taxation and controlled foreign company (CFC) inclusion rules.
Foundations are suitable from five to ten million euros of assets, ideally with business assets, where long-term preservation across generations and protection against fragmentation are the key priorities.
They are particularly valuable for family business owners who want to keep operating companies in family hands permanently. After successful exits, the sale proceeds can be contributed to the foundation and reinvested there tax-free.
The trust originates from Anglo-Saxon common law and is used primarily in the United Kingdom, the USA and offshore jurisdictions such as Jersey, Guernsey or the Cayman Islands. Through the Hague Trust Convention of 1985, it is recognised in many continental European legal systems.
With a trust, the settlor (founder) transfers assets to a trustee, who manages them for the benefit of the beneficiaries. Unlike a foundation, no separate legal person is created — the assets are held in trust.
The design freedom is considerable: with discretionary trusts the trustee decides, at their discretion, on distributions to the beneficiaries. Fixed trusts follow clear distribution rules set out in the trust deed. Revocable trusts can be revoked by the settlor, whereas irrevocable trusts are final and offer greater asset protection.
The tax classification of trusts for entrepreneurs resident in Europe is complex and varies by country of residence. In most continental European jurisdictions, the substance-over-form approach applies: if the settlor retains significant influence or access to the trust assets, the tax authorities attribute the assets to them for tax purposes — the trust is treated as transparent.
European entrepreneurs must observe increasing transparency obligations. Automatic reporting regimes such as the Common Reporting Standard (CRS) also capture trust structures. Breaches of notification obligations can result in significant fines. Contributing assets to a trust can be treated as a gift in many jurisdictions and trigger corresponding tax liabilities.
Especially for cross-border structures, the CFC/inclusion taxation rules of the respective home states must be considered. Germany, France, Austria and other EU states have implemented extensive anti-abuse provisions that capture aggressive trust arrangements.
If structured correctly — in particular with irrevocable discretionary trusts without reversionary rights for the settlor and with genuine economic substance — a degree of tax separation may be achievable in certain circumstances. However, this requires the highest level of expertise, full documentation and regular compliance reviews.
Trusts are suitable for international asset situations, especially where assets are located in common-law jurisdictions (UK, USA, Singapore) or where business activities are concentrated there. They enable maximum flexibility alongside asset protection and can allow discreet asset management.
For cross-border family structures — for example where family members live in different countries — trusts often provide better solutions than continental European foundations. The adaptability of discretionary trusts makes it possible to respond flexibly to changing circumstances of the beneficiaries.
The choice of the optimal structure should be made using the following criteria:
Asset level: holding structures from one million euros, foundations from five to ten million euros, trusts typically from 20 million euros or in special international situations. The decisive factor is the type of assets: shareholding assets benefit most from holdings due to § 8b KStG.
Tax optimisation goals: to minimise the ongoing tax burden while actively reinvesting, the holding is optimal. Anyone seeking long-term retention of profits without periodic inheritance tax chooses the Liechtenstein foundation. Trusts enable tax arbitrage in international situations.
Control requirements: entrepreneurs with a strong need for active control choose the holding. Foundations and trusts require giving up direct power of disposal.
Succession planning: foundations prevent fragmentation and secure continuous corporate governance. Holdings require classic succession planning via gifting of shares (€400,000 allowance per child every ten years). Trusts offer the greatest flexibility for cross-border family constellations.
International dimension: where assets are in common-law countries or where there are multinational family structures, trusts offer advantages. For pan-European activities, international holdings (Netherlands, Luxembourg, Ireland) are suitable.
Exit strategy: if you are planning company sales, the holding is the instrument of choice. Near tax-free disposal saves more than €2.6 million on a €10 million exit.
With increasing international regulation, compliance requirements rise significantly:
Common Reporting Standard (CRS): automatic exchange of information between more than 100 jurisdictions. Financial institutions report account information worldwide.
Economic substance requirements: many jurisdictions require genuine economic substance. Shell companies risk being disregarded for tax purposes.
DAC6 reporting obligations: cross-border tax arrangements must be reported in the EU. Breaches can cost up to €25,000 in fines.
Exit taxation: relocating shareholdings of more than one million euros abroad triggers immediate taxation of hidden reserves; on application, against security, payable in instalments over seven years (§ 6(4) AStG).
Anti-abuse rules: the EU Anti-Tax Avoidance Directive (ATAD) implements minimum standards. Artificial arrangements without economic substance lose tax recognition.
Modern structures optimise taxes legally and transparently, with full disclosure to the relevant authorities.
The decision for an asset-management structure should never be made without a comprehensive analysis. The best time is earlier than many assume — ideally when building the first successful company.
Holding structures make sense for almost all entrepreneurially active individuals from the first relevant acquisition of a participation. Foundations are justified from five to ten million euros, especially with business assets and long-term succession planning. Trusts remain reserved for specific international situations and very substantial wealth.
