AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler, Schindler Attorneys
to its legal personality, the private foundation has full ownership of its assets. Private foundations are often used for the purposes of succession planning and the preservation of family assets. The private foundation is established by a foundation deed ( Stiftungsurkunde ) and may be complemented by a supplementary foun - dation deed ( Stiftungszusatzurkunde ). The latter is not filed with the Commercial Register Court; therefore, certain supplementary provisions – which are not required to be included in the foundation deed – are often included in the supplementary foundation deed, for reasons of discretion. The private foundation is endowed with assets, which are managed by a foundation board ( Stiftungsvor- stand ) consisting of at least three members. This management is supervised by a foundation auditor ( Stiftungsprüfer ). Both the foundation board and the foundation auditor are mandatory bodies of the pri - vate foundation. Additional bodies may also be imple - mented, such as a supervisory board. Depending on the settlor’s will, an Austrian private foundation may serve personal purposes, such as estate planning and the preservation of family wealth, and it may also be established to serve charitable pur - poses. An Austrian private foundation may be imple - mented to avoid succession disputes that might lead to the breaking up or division of a family business or estate. Furthermore, the preservation of art collections or historical buildings may be obtained by establishing a private foundation. 3.2 Recognition of Trusts Neither the Austrian Individual Income Tax Act nor the Austrian Corporate Income Tax Act contain explicit provisions dealing with trusts. Austrian civil and tax law is not familiar with the concept of a trust. Very few court cases exist and not a lot of guidance has yet been provided by the Austrian tax authorities concern - ing the qualification of (foreign) trusts or the tax con - sequences in Austria for beneficiaries of foreign trusts. Therefore, trusts are not used as an estate planning vehicle in Austria. In this context, it should be noted that Austria is not part of the Hague Trust Convention and that there are currently no known plans for this to change in the future.
However, in many cases, foreign trusts may have a nexus to the Austrian tax jurisdiction – eg, when an Austrian tax resident is the settlor and/or the benefi - ciary of a trust, or when a foreign trust manages Aus - trian assets. 3.3 Taxation of Trusts, Foundations and Similar Entities Located in Other Jurisdictions From an Austrian tax law perspective, a trust is basi - cally an agreement between a settlor and a fiduciary regarding certain assets. Whether foreign trusts are recognised as a separate legal entity or not depends on whether the income of the trust may be directly attributed to a person according to the general prin - ciples of Austrian income tax law. If the income can be attributed to a person, the trust may not be qualified as a separate taxable entity; in other words, the trust is transparent for tax purposes. If the income cannot be attributed to a person, the trust qualifies as a separate, taxable, non-transparent entity for Austrian tax purposes. According to Austrian tax law, the following qualifica - tions may be distinguished. • Allocation of income to the settlor (transparency of the trust) – the settlor transfers assets to the fiduci - ary and determines the purpose in the course of the establishment of the trust. Thereby, the settlor loses legal ownership, while the fiduciary becomes the legal owner. In order to determine whether the income from the trust assets is to be attributed to the settlor, the trust documents and the factual practice have to be examined. In general, it will be the fiduciary who disposes of the source of income. However, this will be different if the settlor has far-reaching instruction (directive) rights vis-à- vis the fiduciary regarding the administration of the assets. An attribution to the settlor would definitely occur if the settlor, in addition to instruction rights, has the option to determine amounts to be distrib - uted and could revoke the trust; this would also be the case with comprehensive amendment rights of the settlor or if the settlor factually managed the trust assets. • Allocation of income to the beneficiaries (transpar - ency of the trust) – the income from the trust can
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