Austrian Private Foundation Research Articles

Austria: Private foundations in Austria—between consolidation and reform

Abstract Austrian private foundation law, which was 30 years old in 2023, is currently going through a phase of consolidation. Private foundations are also a constant concern for the Austrian courts in conflict situations. In this article the authors take a closer look at the Austrian private foundation as an instrument of asset protection in case of divorce, the interpretation of foundation documents, and the composition of a possible council. They also make an assessment of the way ahead.

The liability of the foundation board under Austrian Private Foundation Law

Abstract The issue of liability is one of the most central in Austrian private foundation law. Experience has shown that the often close relationship between the generation of the first founders and the members of the foundation board is a reason for underestimating liability. Many foundation board members are unaware that the Austrian Private Foundation Act (Privatstiftungsgesetz) regulates the liability of the foundation board by analogy to the liability law provisions for corporations—and thus rather strictly. What often starts as a “friendship service” can have considerable consequences under liability law.

Change of generations in the Austrian private foundation

Abstract In the Austrian private foundation, the status of founder cannot be acquired after the establishment of the foundation. The founder's genuine rights, such as the right to amend the foundation deed and the right to revoke the private foundation, can neither be transferred inter vivos nor upon death. Therefore, founders must ensure during their lifetime that the foundation deed is also tailored to the needs of the subsequent generations.

An Argument for Treating Distributions by Austrian Private Foundations to Foreign Beneficiaries as Dividends under Tax Treaties Based on the OECD Model

This article presents an argument that distributions paid by Austrian private foundations to foreign beneficiaries should be treated as dividends rather than as other income under Austrian tax treaties that are based on the OECD Model.

Austrian Supreme Constitutional Court opens door for a better tax treatment of dissolutions of Austrian Private Foundations

Abstract In practice, Austrian Private Foundations are often simply not dissolved due to the fact that the whole amount of the assets (calculated upon their acquisition by the founder—and not on the basis of their value upon contribution to the foundation) are subject to a distribution tax to the amount of 27.5%. The Austrian Supreme Court has recently issued a decision which could put this issue at ease.

The liquidation of Austrian private foundations

Abstract This article deals with the dissolution and liquidation processes and their corporate and tax law effects on Austrian private foundations. Corporate and tax law aspects are briefly presented and discussed, and the consequences are outlined. The article serves to provide an overview and is intended as guidance for the course of a liquidation process in Austria. The authors also reflect on their personal experiences in practice and contribute these experiences to the article.

Discretionary powers in the Austrian Private Foundation Law

Abstract The fact that only an objective qualification of the foundation board is decisive with regard to its liability is sufficiently ruled by the Austrian Supreme Court. However, in the end the board member is left alone with the question of what is required in concrete terms. A recent decision of the Austrian Supreme Court granting the foundation’s executive board an extremely wide scope for decision-making where the foundation statute does not provide detailed guidelines came as a surprise. This article deals with the issues faced by foundation board members in avoiding liability when exercising their powers and the need to limit the wide discretionary powers of such board members by creating an adequate statutory framework.

The treatment of Austrian private foundations under the Ultimate Beneficial Ownership Act

Abstract As part of the implementation of the fourth Anti-Money Laundering Directive in Austria, the Wirtschaftliche Eigentümer Register Gesetz, (The Ultimate Beneficial Owner Register Act) was introduced. The main aim of this Act is to provide accurate and up-to-date information on the ultimate beneficial owner (UBO) of entities, trusts, and foundations. This information is seen as a key factor in combating money laundering and terrorist financing. Paragraph 2 of the Ultimate Beneficial Ownership Act defines the UBO, which corresponds to the definition in paragraph 3 subparagraph 6 of the Anti-Money Laundering Directive. In the case of corporate entities, ultimate ownership and control are relevant for determining the UBO. In the case of trusts and private foundations, it is not ownership and control that are relevant for determining the UBO, but the function the person has with respect to the trust/foundation. All definitions have in common that the UBO has to be a natural person. Obliged entities are required to identify and report their UBOs to the register, in the case of a breach of duty/law severe penalties apply.

AIFMG und Stiftungen

The following article deals with the question if and under which circumstances the AIFMG (Alternative Investmentfonds Manager-Gesetz) applies to Austrian private foundations (osterreichische Privatstiftungen) under the Private Foundation Act 1993 (Privatstiftungsgesetz) as alternative investment funds. The topic will be discussed from different angles and especially possible exemptions will be examined by means of the methodology of the AIFMD (Alternative Investment Fund Managers Directive) respectively the AIFMG.

Austria: Recent developments concerning the Austrian private foundation: tax reform and major court cases of 2014

Austria: Recent developments concerning the Austrian private foundation: tax reform and major court cases of 2014

Austria: The Austrian Private Foundation

Last year the Austrian Private Foundation celebrated its 20th anniversary. When it was introduced in 1993, it had been subject to various tax benefits compared with the taxation of natural or legal persons. Meanwhile, the tax benefits have mostly vanished. Yet, Austrian Private Foundations still remain important vehicles for Austrian family enterprises. The focus in this regard is on asset protection and the possibility to keep the family wealth together for a longer period of time. This article intends to provide an overview about the key characteristics of an APS in regards to civil and tax law.

Canada: Sommerer v The Queen--the Canadian common law and tax treatment of an Austrian private foundation

Canada: Sommerer v The Queen--the Canadian common law and tax treatment of an Austrian private foundation

The Austrian private foundation as a holding structure for global family wealth

This article is based on the text of Friedrich Schwank’s article presented at the TIAETL meeting in Shanghai in May 2013.

Tax Treaty Case Law News

In this Tax Treaty Case Law News, Brian Arnold reviews three recent tax cases involving decisions regarding hybrid entities and relief for international double taxation, the use of an Austrian private foundation as a Canadian treaty shopping vehicle, and the tax problems of a well-known professional golfer.

The Austrian private foundation as a property holding structure

The Austrian private foundation as a property holding structure

The Austrian Private Foundation in times of crisis

The present economic crisis and, in particular, the uncertainties within the Eurozone provide an opportunity to review the use of the Austrian Private Foundation, its exposure to national tax policies in view of its accumulated wealth and tax privileges, inherent risks emanating from structural and management shortcomings, threats from founders, creditors, spouses and heirs, as well as the opportunity provided by the foundation for wealth planning, asset protection, and additional tax benefits applicable from 2012 onwards.

Austria: stress tests for Austrian Private Foundations

Austria: stress tests for Austrian Private Foundations

The Austrian Private Foundation: between transparency and bank secrecy

The Austrian Private Foundation is organized like a company, but operates like a trust. It is a preferred for-profit vehicle, suitable for wealth preservation and management, as well as an alternate holding structure for companies. The Austrian Private Foundation is discreet about its assets and income but transparent in respect to its management. The far reaching erosion of Austrian bank secrecy through international pressure on Austria and Switzerland has had little effect on the operation of the Austrian foundation. On the contrary, offshore funds are being increasingly relocated into Austrian foundations.

Austria: private foundation--tax-planning strategies for international family offices

In 2009, the Austrian private foundation is more attractive than ever as a means of international wealth and succession planning. The Austrian low entry tax of 2.5 per cent of the endowment, no gift or inheritance tax, and treaty protection for distributions to non-resident beneficiaries, gives the Austrian private foundation a lead amongst other structures aiming at making a profit. Its legal qualification as a corporate structure enables the Austrian private foundation to act as an ultimate holding vehicle, claim tax treaty protection and benefit from the international participation exemption for foreign dividends and capital gains.

The Austrian Donations Tax Act 2008 for Foundations and Comparable Entities

This article considers the recent tax amendments for Austrian private foundations and foreign foundations and trusts. After the abolition of the gifts and inheritance tax the Austrian legislature adhered to the taxation of donations to private foundations and comparable foreign foundations and entities. The transfer of assets to foundations or trusts in countries whose tax regimes facilitate tax evasion will be subject to surtax. The impact of this new law on domestic tax law and European law principles is discussed in detail.