As part of the 2025 Budget Consolidation Act, the Austrian Private Foundations will be subject to significantly higher taxation from 2026 onwards. With effect from 1 January 2026, the following adjustments will be made to the initial taxation and ongoing taxation of Austrian private foundations:
The foundation entry tax, which is levied on gratuitous contributions to private foundations, will be increased from 2.5% to 3.5%, thus a hike of 40%. Correspondingly, the equivalent tax on gratuitous transfers of real estate will also be increased from 2.5% to 3.5%.
In addition, the so-called ‘interim tax’ will be increased from 23% to 27.5%, a hike of approx. 20%. The interim tax is a special form of corporation tax applicable to Austrian private foundations. The interim tax is levied as advance taxation on certain capital gains of the private foundation, in particular on interest, dividends, profits from the sale of securities and income from derivatives.
The interim tax is levied independently of distributions and may only be credited back in case a distribution of income to beneficiaries is also taxed at a rate of at least 27.5%. This makes the accumulation of foundation profits unattractive.
In contrast, Liechtenstein foundations continue to be taxed at a moderate rate compared to Austrian private foundations.
Although gratuitous donations to Liechtenstein foundations are also subject to a 3.5% dedication tax, this tax however is only levied on donations from taxpayers resident in Liechtenstein and on assets subject to wealth tax in Liechtenstein.
In addition, Liechtenstein foundations are only subject to a flat tax of 12.5% on their income. Furthermore, dividend income and unrealised and realised capital gains are generally tax-free at the foundation level. Contributions to the beneficiaries of the foundation are also not taxed in Liechtenstein, but are subject to possible taxation at the level of the beneficiary, which promotes the long-term accumulation of profits and capital gains and gives beneficiaries substantial flexibility in the planning of residency and living.
Apart from such tax considerations, the governance and asset structure of Liechtenstein foundations can be tailored to the individual wishes of the founder due to the significantly more liberal foundation law compared to other jurisdictions. In particular, unlike in Austria, beneficiaries of the foundation, their spouses and close relatives are by no means excluded from membership of the foundation council or other governing bodies.
Especially in times when many jurisdictions are increasingly targeting foundations or other structures for succession planning to close budget gaps and thus are continuing to lose attractivity, Liechtenstein foundations remain unaffected and are becoming increasingly attractive for succession planning and asset structuring of foreign clients.
The Private Client Team of Niedermüller Attorneys at Law, together with experienced tax advisors, regularly advises international entrepreneurs and private clients on succession planning and asset structuring, in particular on the establishment of Liechtenstein foundations, trusts or corporate holding structures.
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