Unlike more familiar legal forms such as a joint-stock company (AG) or a limited liability company (GmbH), a foundation has no shareholders or members, but it does have beneficiaries. A foundation is created by a special declaration of the founder (Declaration of Establishment) that must specify the following:
The Declaration usually consists of two parts:
Foundation Deed (“Stiftungsurkunde”) and
an appendix (“Stiftungszusatzurkunde”).
Only the Foundation Deed is submitted for registration to the Chamber of Commerce, while the appendix is not. This is why the beneficiaries of the foundation are usually stated in the appendix, as this document does not appear in the public domain after the foundation is established.
The Private Foundation Act does not list the purposes for which a private foundation may be established, but private foundations are expressly prohibited from engaging in commercial activities on a regular basis or from being a partner with unlimited liability in a partnership.
The foundation is managed by a Board of Directors consisting of at least three members. The composition of the Board is determined by the founder.
At present, two of the three members of the Board of the foundation are required to be EU residents. Beneficiaries of the foundation, or their close relatives, as well as any legal entities cannot be appointed to the Board.
If the founder so wishes, the foundation can have an Advisory Board which may include beneficiaries, but beneficiaries cannot constitute the majority in such a Board.
The role of the Advisory Board is to check whether the foundation’s directors act effectively. To perform this role, the Board is authorized to issue special instructions to the directors regarding the foundation’s operation. The function of the Advisory Board may also be performed by just one advisor.
When establishing a foundation, the founder may determine whether he wants to be able to revoke the assets transferred to the foundation at the time of its establishment – this possibility is provided for by the Private Foundation Act.
However, if the founder retains the right to the assets, they may be claimed by the founder’s creditors. Therefore, in order to protect the assets transferred to the foundation, it is advisable to state in the Foundation Deed that the founder cannot take the assets of the foundation back.
However, this does not prevent the founder from becoming one of the beneficiaries of the foundation or from being entitled to the income from the asset management.
The foundation, in turn, is not liable with its assets for the founder’s debts.
Since Austria is not an offshore or low-tax jurisdiction, tax mattes must also be considered when establishing a private foundation.
First, there is a one-time tax on cash or assets transferred to the foundation for management – the tax rate is 2.5% of the sum or value of the assets so transferred.
Second, interest income from loans or bank deposits or proceeds from the sale of securities are taxed at a rate of 12.5%. However, taxes paid at this rate are subject to refund after the foundation distributes the profit to its beneficiaries.
Proceeds received by the foundation from the sale of shares (provided that the foundation holds less than 1% of all shares in another entity) are exempt from tax. Dividend income is also tax exempt, subject to the following conditions:
Income received by the foundation from other operations is taxed at the standard corporate income tax rate of 23%.
Third, when paying income to its beneficiaries, a foundation is required to withhold a tax of 23% from such payments.
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Services
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Fees
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Total cost of establishment of the foundation with standard constitutive documents (including preparation and provision of original constitutive documents of the foundation, but not including payment of the capital)
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EUR 15 000
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Three local directors of the foundation
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EUR 15 000 per year
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Drafting the Regulations, creating an individual structure of the foundation
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USD 300 / hour
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Preparation and submission of financial statements
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auditor’s fees charged at USD 100-400 / hour
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Compliance fee
Payable in the cases of: - incorporation of a company / foundation, - renewal of a company / foundation, - liquidation of a company / foundation, - transfer out of a company / foundation, - issue of a power of attorney to a new attorney, - change of director / shareholder / beneficial owner, except the change to a nominee director / shareholder, - signing of documents. |
USD 350 (standard rate, includes the check of 1 individual)
+ USD 150 for each additional individual (director, shareholder, or beneficial owner) or legal entity (director or shareholder) if such legal entity is administered by GSL + USD 200 for each additional legal entity (director or shareholder) if such legal entity is not administered by GSL USD 450 (rate for high-risk companies, includes the check of 1 individual) USD 100 (signing of documents) |
[1] The fees are valid as of October 2024