Foundations with no legal capacity are not subject to Substitutional Inheritance Tax (§ 2 para. 1 no. 2 Inheritance and Gift Tax Act [IGTA]) since they do not come under the term “foundation set up in the interest of a family” within the meaning of § 1 para. 1 no. 4 IGTA: In contrast to “foundations set up in the interest of a family” or assocations vested with legal capcity, foundations with no legal capacity cannot hold any assets.
A foundation with no legal capacity is not regulated by law. Carrier of its assets which are dedicated to the statute’s purpose is a trustee (natural or juridical person). The founder transfers the assets via contract or last will to the trustee who/which manages the assets according to the foundation’s statute and the founder’s instructions.
For more details regarding the Substitutional Inheritance Tax and foundations see Koeniger, The German Inheritance and Gift Tax, 2017, p. 12 et seqq.