Trusts & Company Formations in Austria
Here we explore how to establish a trust (Private Foundation) or a Company in Austria. We start by exploring trusts.
Two decades ago, the Austrian government wanted to provide an excellent instrument which could support the preservation and the accumulation of wealth for the benefit of a family. Subsequently, the Austrian Private Foundation Act was enacted on the first of September 1993 and made it possible to establish a foundation in Austria for private purposes only.
The Private Foundation Act creates excellent investment opportunities for high-net-worth individuals from both Austria and abroad. An Austrian private foundation is an excellent instrument to structure large family estates and is internationally recognised. An additional benefit is that the Austrian private foundation is not subject to any kind of state supervision, as opposed to foundations established under the Federal Foundations Act or the Investment Fund Act.
The Austrian private foundation is a separate legal person but has no shares and no shareholders (as opposed to a company for example). An Austrian private foundation comes into existence when the founder endows assets to the foundation and when he has drafts the charter of the foundation. The legal basis of transferring assets to a foundation is the notarial deed and this kind of transfer is considered to be a gift. The minimum amount to be endowed to the foundation is EUR 70,000, either in cash or in kind (shares, options or real estate for example).
The founder can establish an Austrian private foundation on an irrevocable or revocable basis. However, the right to revoke an Austrian private foundation in the future is exclusively granted to individuals and not to other types of founders such as a company or trust.
The charter of the Austrian private foundation is a public document and addresses general topics such as the name of the foundation, its seat, whether it is a revocable or irrevocable foundation, and whether the founder has foreseen the possibility to amend the charter of the foundation in the future or not.
The non-public by-laws include important details such as the names of the beneficiaries, specification of the amounts to be paid to the beneficiaries, an overview of the total amount of assets endowed to the foundation, etc.
The founder can remove a beneficiary and if such a provision was made in the charter of the foundation, he can nominate additional or new beneficiaries whenever he likes to do so. The founder has to include the details of the ultimate beneficiary(ies) in the non-public by-laws. If such an ultimate beneficiary is not included by the founder then the Austrian State will benefit from the proceeds and assets held by the foundation.
An Austrian private foundation has to be managed by a board of directors. This board of directors has to consist of at least three individuals. Two of them have to be a resident in the EU/EEA and their nationality does not matter.
The Austrian foundation’s annual accounts have to be audited by a Certified Public Accountant every year.
The founder and the members of his family are excluded from being members of the board of directors when they want to be beneficiaries of the foundation. That’s why the founder can decide to implement an advisory board. As such, the founder and his family can give guidelines to the directors and have influence on the daily management of the foundation.
The main purpose of an Austrian private foundation is to preserve and create wealth for the benefit of a family or any other individual or legal person. Therefore the Austrian private foundation may not engage in a business or trade directly in order to reduce the risk of going bankrupt. The Austrian private foundation can only be shareholder of a domestic or foreign company with limited liability or can be limited partner in a domestic or foreign limited partnership.
The Austrian private foundation is accompanied by supporting tax legislation and tax benefits serving the needs of a modern family.
Establishment of the Austrian private foundation
A minimum of EUR 70,000 has to be endowed to the foundation, either in cash or in kind. The net asset value received by the foundation is exposed to a one-time tax of 2.5%.
Income of the Austrian private foundation
A standard income tax rate of 25% applies but many tax exemptions are available. For example, domestic dividend income is completely tax exempt in the hands of the foundation. Foreign source dividend income is also not taxed in the hands of the Austrian foundation provided that the foundation holds at least 10 % of the shares of the foreign corporation for a period of at least one year. Dividends originating from EU/EEA countries tax exempt irrespective of the percentage of shareholding and holding period.
Distributions paid to beneficiaries
Depending on the country of residence of the beneficiaries and the applicable double taxation avoidance agreement between Austria and that country, a withholding tax between 0 and 25% will be levied.
Do not hesitate to contact us if you would like to receive more information about the Austrian Foundation.
Incorporating in Austria
1) Select the company name for your GmbH
First select a name for your corporation.
- The name of the company must end with GmbH to denote limited liability
- A company name check can be carried out free of charge to see if a required name has already been registered.
- We can then reserve your GmbH name for up to ten days.
- You are not allowed to use a name which is either identical or deceptively similar to one that is already used by another corporation.
2) Share Capital
Select the number of shares each shareholder will have.
- The minimum share capital of a GmbH is €35,000
- Only €17,500 of the total share capital must be paid up before registration.
- There are no share certificates in an Austrian company.
- Valid transfer of the ownership of shares is only possible by means of an assignment before a notary.
3) Select Directors
Decide who will be the directors of your company.
- Directors may be of any nationality and may reside anywhere.
- Only one director is required. Although there may be several.
- Directors can be residents or non-resident.
4) Select Shareholders
Select who will be the shareholders of your company.
- Shareholders may be of any nationality and may reside anywhere
- Only one shareholder is required. This can be the same person as the director.
- Shareholders can be residents or non-resident
- Corporate shareholders are allowed.
5) Select a Registered Office
A Austrian registered office address is required for your company.
Features of a Austrian GmbH
- An Austrian company is legally exempt from dividends tax received from a foreign subsidiary. Austria levies no withholding tax on dividends paid to the foreign parent.
- As a member of the European Union (EU), Austria is governed by the provisions of the EU's Parent-Subsidiary directive. Thus, an Austrian holding company which holds at least 25% of the shares of an EU subsidiary can receive dividends from the subsidiary free of withholding tax.
- An Austrian company can access a large network of double taxation treaties Austria has signed with major trading nations around the world.
- A minimum of one director and one shareholder is required for Austria company formation. The shareholder and director can be the same person, and need not be resident in Austria. Corporate shareholders are permitted with Austria company formation.
- It is easy to open global corporate bank accounts to support your Austrian company formation.
- Austria is regarded as one the world’s most competitive economy. It has excellent business advantages including its economic performance, government efficiency, business efficiency and infrastructure.
- A GmbH pays corporate profits tax of 25% on all income. In addition financial statements must be submitted to the Austrian Chamber of Commerce.
- A Austrian company formation requires a minimum share capital of €35,000, of which at least half, €17,500, must be paid up in cash.
- A register containing directors and shareholders details is available for public viewing.