U.S. Trust · Attribution taxation · German Foreign Tax Act
U.S. trust and Section 15 AStG: German attribution taxation
A U.S. trust can trigger more than German inheritance or gift tax. Section 15 AStG can attribute the assets and, in particular, the ongoing income of a foreign family foundation or comparable pool of assets to a German-resident settlor or beneficiary — even where the trust makes no distribution. Possible relief under Section 15(6) AStG must also be considered. Under Federal Fiscal Court (BFH) case law, being located outside the EU and EEA does not by itself exclude the exception. Applying those principles to a U.S. trust requires a review of its specific legal structure.
Section 15(1) AStG
Germany can attribute trust income even where nothing is distributed
Section 15 AStG contains a special attribution regime for foreign family foundations. The assets and income of a foreign family foundation are generally attributed to a founder who is subject to unlimited German tax liability. If the founder is not subject to unlimited German tax liability, attribution generally shifts to German-resident persons entitled to distributions or remainder interests in proportion to their respective interests.
In practice, this means that a settlor or beneficiary living in Germany can owe German income tax on income earned by a U.S. trust even though the income remains inside the trust and no cash is paid to Germany.
Attribution does not apply where the conditions of the exception in Section 15(6) AStG are met. The BFH judgment of December 3, 2024, IX R 32/22, on relief for structures in third countries must be taken into account.
The attribution under Section 15 AStG expressly does not apply for German inheritance tax purposes. Inheritance and gift tax consequences must therefore be analyzed separately.
Analysis
Applying Section 15 AStG to a U.S. trust requires several steps
Trust and family connection
Is the trust an independent foreign pool of assets treated as equivalent to a family foundation? First consider whether the assets and income are directly attributable to another person under general German tax rules.
Identify the taxpayer
Is the settlor subject to unlimited German tax liability? If not, which persons subject to unlimited German tax liability have rights to benefits or assets on termination?
Test for relief
Does Section 15(6) AStG apply in light of BFH IX R 32/22? The key requirements are removal of the relevant persons’ power to obtain the assets under governing private law and adequate exchange of information.
Calculate income
If attribution still applies, determine the income, any lower-tier company income and creditable foreign taxes under German tax rules.
Section 15(4) AStG
Section 15 AStG can also apply to U.S. trusts
Although Section 15 uses the term foreign family foundation, paragraph 4 extends the regime to other special-purpose assets, pools of assets and incorporated or unincorporated associations comparable to foundations.
A trust structure can therefore fall within the provision where, based on its legal and economic characteristics, it constitutes a sufficiently independent pool of assets.
The label “trust” alone is not enough. It must first be determined whether the assets are actually attributable to the trust rather than continuing to be attributable to the settlor.
Independent trust property
Section 15 AStG generally presupposes that the relevant property can actually be attributed to the foreign pool of assets.
Extensive retained control
If economic ownership remains with the settlor because of continuing powers of control, the analysis may stop before Section 15 AStG is reached.
The trust agreement is central
Revocation rights, powers of appointment, trustee replacement rights, withdrawal rights and other retained powers can affect classification.
Revocable trust and grantor trust are not separate German tax categories
A U.S. grantor trust can be attributed to the grantor for U.S. income tax purposes. A non-grantor trust can instead be treated as a separate U.S. taxpayer. Germany does not automatically adopt these U.S. categories.
For Section 15 AStG, Germany independently determines whether a foreign pool of assets exists, to whom its property is attributable and which persons are entitled to distributions or remainder interests.
Attribution recipient
Who must report the trust income in Germany?
The statutory order is important. If the founder is subject to unlimited German tax liability, the assets and income are generally attributed to the founder. Only if the founder is not subject to unlimited German tax liability do German-resident persons entitled to distributions or remainder interests become relevant.
For a U.S. trust with German beneficiaries, the settlor's position can therefore be just as important as the beneficiaries' rights.
- settlor subject to unlimited German tax liability generally comes first
- otherwise persons subject to unlimited German tax liability with rights to benefits or assets on termination
- separately test the exception under Section 15(6) AStG
- attribution according to the relevant interest
- residence and tax status of every relevant person must be reviewed
Family foundation
The family connection forms part of the statutory test
Under Section 15(2) AStG, a family foundation generally exists where the founder, family members and their descendants are entitled to more than half of the distributions or remainder interests.
A classic U.S. family trust for children, grandchildren or other family members can therefore fall squarely within the scope of the regime.
The actual rights under the trust agreement remain decisive. With discretionary trusts in particular, it must be determined who is truly entitled to distributions or remainder property for German tax purposes.
For entitlement to assets on termination, the BFH does not require an already enforceable payment claim. An objectively established prospect of receiving a share of the assets on termination can be sufficient. A discretionary-trust label therefore does not automatically exclude Section 15 AStG. This question is distinct from the removal of powers over the assets required for relief under paragraph 6.
Section 15(7) and (8) AStG
The attributed income is calculated under German tax law
The German attribution amount is not simply the U.S. taxable income reported on Form 1041. The income of the foreign structure must be determined under German income and corporate tax rules.
This can create substantial differences from the U.S. calculation. Investment portfolios, company interests, real estate and different realization rules can all produce different German income amounts.
Interest, dividends & gains
An investment trust can show a different taxable result under German law than under U.S. trust tax rules.
Real estate income
Rental income, depreciation and disposals must be recalculated under German tax principles.
Company interests
If the trust holds foreign companies, the special rules of Section 15(9) AStG can also become relevant.
Tax treatment of the attribution recipient
Attributed trust income can be taxable annually in Germany
For individuals, income attributed under Section 15(1) AStG is generally treated within the framework of Section 20(1) No. 9 EStG, subject to the special rules of Section 15 AStG.
The original U.S. character of the income at trust level does not necessarily carry over unchanged. Section 15 creates its own German attribution mechanism.
Section 15(6) AStG · BFH IX R 32/22
Relief may also be available for structures in third countries
By its wording, Section 15(6) AStG applies to family foundations with their place of management or registered office in the EU or EEA. However, in its judgment of December 3, 2024, IX R 32/22, the German Federal Fiscal Court (BFH) held that the exception must also apply to family foundations in third countries because of the free movement of capital. The geographical restriction in the statutory wording therefore cannot, by itself, exclude relief.
The judgment concerned a Swiss family foundation, not a U.S. trust. The principles may be applicable to a U.S. trust if it is treated as equivalent to a family foundation under Section 15(4) AStG. That equivalence and the conditions for the exception must be established for the particular trust.
Examine rights under governing private law
The assets must be legally and actually beyond the power of disposal of all relevant persons referred to in Section 15(2) and (3) AStG. According to the BFH, this is determined solely by their rights under the applicable private law: those persons must be unable to bring about the transfer of the foundation’s assets to themselves under that law.
The information needed for taxation must be obtainable
Adequate exchange of information must also be available under a comparable bilateral or multilateral agreement (Section 15(6), no. 2 AStG). For the United States, Article 26 of the Germany–U.S. income tax treaty should be examined in particular, taking account of the relevant period and the information required.
The labels irrevocable and discretionary are not sufficient on their own. The analysis requires the trust deed, amendments, the governing law of the relevant U.S. state and the legal powers of the settlor, beneficiaries, trustees and any protector.
Legal sources: BFH judgment of December 3, 2024 – IX R 32/22 (German); Section 15(4) and (6) AStG (German).
The BFH principles already matter when applying current law
Possible relief for a comparable U.S. trust does not depend on a future statutory reform. It must be examined under the existing Section 15(6) AStG in light of the free movement of capital and the BFH’s reasoning. This does not create a blanket exemption for all U.S. trusts.
The exception concerns attribution under Section 15(1) AStG. If the assets remain attributable to another person under general German tax principles, the income may be taxed directly to that person. Actual distributions and German inheritance and gift tax consequences must also be examined separately.
Foreign tax credit
U.S. income taxes paid by the trust can be creditable
If attribution remains applicable after testing for relief, Section 15(5) AStG provides that income taxes imposed on the foreign foundation in respect of attributed income can, subject to the statutory conditions, be credited against the German income or corporate tax of the attribution recipient.
The credit does not necessarily eliminate every difference in tax burden. It must also be shown which foreign taxes actually relate to the income attributed under German law.
U.S. Tax Paid by Trust
U.S. income tax actually borne by the trust can be relevant under the foreign-tax-credit rules.
German Limitation
The credit remains subject to the German statutory mechanics and applicable limitation rules.
Section 15(9) AStG
Foreign companies held by the trust can bring CFC rules into the calculation
If a foreign family foundation holds an interest in a foreign company, income of that company can, under the conditions of Section 15(9), be included in the foundation's income through corresponding application of Sections 7 through 13 AStG.
A U.S. trust can therefore be affected not only by its directly earned investment or real estate income. Controlled corporations and other downstream entities can also enter the German attribution calculation.
- trust holds a foreign corporation
- corresponding application of German CFC rules
- control and type of income must be tested
- later distributions require coordination
- multi-tier structures must be reviewed as a whole
Multi-tier structures
Trust-under-trust and similar structures can also be captured
Section 15(10) AStG contains a special rule for cases in which a foreign family foundation is itself entitled to distributions or remainder interests from another foreign foundation or comparable structure.
In multi-tier trust or foundation arrangements, income can therefore be attributed through an upper layer before ultimately being attributed to the German taxpayer under Section 15(1).
Trust holding another trust
Layered family-trust structures require the distribution and remainder rights to be analyzed at each level.
Trust + foundation
Combinations of trusts, foundations and companies can create several layers of attribution.
Section 15(11) AStG
Later distributions should not re-tax income already attributed
Section 15(11) AStG provides important protection against economic double taxation. Distributions from the foreign structure are not again subject to German income or corporate tax to the extent that the underlying income can be shown to have already been attributed under Section 15(1).
Where earlier attribution did not occur because Section 15(6) AStG applied, that relief does not itself exempt a later distribution under Section 15(11). The distribution’s tax treatment must be assessed separately.
A person who pays German tax today on attributed trust income but receives the cash only years later therefore needs careful long-term documentation of the prior attribution.
Income-tax relief does not automatically mean gift-tax exemption
Section 15(11) concerns the renewed income or corporate taxation of income already attributed. Separately, a distribution from a U.S. trust may still constitute a taxable acquisition under Section 7(1) No. 9 ErbStG.
Trust distributions therefore require coordinated analysis of German income tax, Section 15 AStG and German inheritance/gift tax.
BMF draft of November 18, 2025
The proposed reform would change the system substantially
In November 2025, the German Federal Ministry of Finance published a draft for a comprehensive revision of the attribution-taxation rules for foreign family foundations. The proposal would align the regime more closely with the general German CFC system under Sections 7 et seq. AStG.
The draft would expressly include third countries and revise the substantive conditions for relief. This must be distinguished from BFH IX R 32/22: application of the existing exception to third countries already follows from the primacy of EU law and the free movement of capital. It does not depend on enactment of the reform.
Revised statutory relief
The draft would expressly include third countries and revise the substantive requirements. The BFH principles on third-country relief must already be considered when applying current law.
Relevant beneficiary group
The relevant persons and indirect distribution or remainder interests would be restructured more systematically.
Attribution amount
The calculation and treatment would be brought more closely into line with the general German CFC framework.
Downstream companies
Controlled foreign companies would be integrated more systematically with Sections 7 through 10 AStG.
Correction mechanism
A specific foundation-related attribution-correction volume would be used to prevent double taxation of later distributions.
Foreign-tax credits
The foreign-tax-credit mechanism would be aligned more closely with the framework of Section 12 AStG.
Distinguish statutory wording, BFH case law and proposed reform
The current statutory wording still refers to the EU and EEA. However, the BFH judgment of December 3, 2024 must be taken into account when applying that wording: relief cannot be denied solely because a structure is located in a third country.
The BMF draft of November 18, 2025 is a separate reform proposal. Its proposed new conditions can apply only if enacted and in accordance with the resulting effective-date rules. There is no need to await that reform before examining the existing exception under the BFH principles.
Example
U.S. irrevocable trust with a German beneficiary
A U.S. grandmother creates an irrevocable discretionary trust for her children and grandchildren. Years later, one grandchild lives in Germany. The trust holds a securities portfolio and a U.S. corporation.
Trust and beneficiaries
Are the assets separate for German tax purposes, and is the trust equivalent to a family foundation? Does the German-resident grandchild have relevant rights to benefits or assets on termination?
Test for relief
Can the relevant persons bring about the transfer of the assets to themselves under governing private law? Is adequate exchange of information available?
Any remaining attribution
If the exception does not apply, calculate investment income and any relevant income of the lower-tier corporation under German rules.
Later distribution
Assess the payment separately. Section 15(11) protects only to the extent that the underlying income was demonstrably attributed previously. German gift tax requires a separate review.
The irrevocable and discretionary labels alone do not determine whether annual attribution is avoided. The BFH principles may support relief, but they do not replace examination of the trust deed and governing law.
Moving to Germany
An existing U.S. trust should be reviewed before German residence begins
Section 15 AStG becomes particularly important where a settlor or beneficiary of an existing U.S. trust moves to Germany. Once unlimited German tax liability begins, a structure previously administered solely under U.S. law can become subject to the German attribution regime.
Ideally, the trust agreement, beneficiary rights, assets, downstream entities and historical distributions should be reviewed before the move. This can reduce unexpected attribution issues and documentation problems.
Before the move
Document the trust structure, legal rights, assets and U.S. tax classification. Also examine the conditions of Section 15(6) AStG in light of the BFH principles.
After German residence begins
Document the conditions for relief for each year. Where attribution remains applicable, maintain German income calculations and foreign-tax-credit records. Continue to record the full distribution history.
Documentation
Documents needed for a Section 15 AStG analysis
Trust Agreement
Complete trust agreement including amendments, restatements and side arrangements.
Beneficiary Schedule
All current and potential beneficiaries, their residence and their respective rights.
Powers of all relevant persons
Revocation rights, powers of appointment, amendment, withdrawal and direction rights, and powers to appoint or remove trustees and protectors. For Section 15(6), no. 1, the question is whether these powers enable the relevant persons to obtain the assets under governing private law.
Annual Accounts
Trust statements, brokerage statements, real estate records and other annual financial information.
U.S. Tax Returns
Form 1041, grantor statements, Schedule K-1 and other U.S. tax records.
Legal separation under governing law
A documented assessment of whether the relevant persons can obtain the assets under the applicable U.S. law, supported by a legal opinion where appropriate. Record changes for each attribution period.
Exchange of information
Review the legal basis, time periods and scope of information exchange between Germany and the United States for Section 15(6), no. 2 AStG.
Underlying Entities
Cap tables, tax returns and financial statements for corporations, LLCs or other entities held by the trust.
Common mistakes
Issues frequently overlooked with U.S. trusts and Section 15 AStG
Taxing only actual distributions
Section 15 AStG can trigger annual attribution even where no cash is paid.
Adopting U.S. grantor-trust status
The U.S. classification does not replace the German analysis.
Using Form 1041 as the German tax calculation
The attributed income must be determined under German law.
Rejecting relief solely because the trust is in the United States
Under BFH IX R 32/22, a third-country location does not itself exclude the exception. For a comparable U.S. trust, the required legal separation of the assets and adequate information exchange must be established.
Ignoring underlying companies
Section 15(9) can pull income of downstream foreign companies into the attribution calculation.
Failing to document earlier attribution
Evidence of previously taxed income is crucial when later distributions are analyzed under Section 15(11).
Separate tax layers
Section 15 AStG is only one part of German trust taxation
Ongoing attribution
Section 15 AStG can attribute trust income annually to German taxpayers.
Distributions
An actual payment can independently trigger German gift tax under Section 7(1) No. 9 ErbStG.
Transfers of property
Funding, termination and remainder interests can constitute separate inheritance or gift tax events.
Further guidance
Related topics
Frequently asked questions
U.S. trusts and Section 15 AStG
Can Section 15 AStG apply to a U.S. trust?
Does the trust have to make a distribution before Section 15 applies?
Who is taxed on the attributed income?
Is the income from Form 1041 used directly?
Can an independent U.S. irrevocable trust qualify for the statutory relief rule?
Did the BFH decide a case involving a U.S. trust?
What does the legal separation requirement mean?
What happens if the trust owns a U.S. corporation?
What happens when the trust later makes a distribution?
Can U.S. income taxes be credited?
Is the proposed reform of Section 15 AStG already current law?
What should be reviewed before moving to Germany?
Germany–U.S. tax advice
Are you a settlor or beneficiary of a U.S. trust and living in Germany?
We review the German classification of the trust, potential attribution and relief under Section 15(6) AStG in light of BFH case law, German computation of trust income, downstream entities, foreign-tax credits and the taxation of later trust distributions.
Schedule an initial consultation