Austria: Recent developments regarding private foundations

The tax amendment law 2011 has brought a change for the worse for private foundations established according to Austrian law.
The beneficial 12,5% tax rate on capital gains from interest earnings related to bank deposits and securities was abolished on 1 January 2011. Now the standard corporate income tax rate of 25% is applied. Taxpayers have therefore to ask themselves if a foundation is still an advantage taking into consideration the costs of up to 20.000 euro which have to be incurred for auditing, administration and legal advice.
In view of this situation some taxpayers have resorted to the establishment of foundations in Liechtenstein, where conditions are more favourable. However, Austrian law imposes a punitive tax at the rate of 25% in such a case and many Austrian residents, who have established a foundation in Liechtenstein, are often subject to tax audits by the Austrian tax administration.
In order to comply with the rules of the anti-money laundering regime, the tax amendment law 2011 has adopted a request by FATF (Financial Action Task Force on Money Laundering). Therefore, starting from 1 April, the members of the board of directors have to inform the tax administration of the names of all persons who received donations from the foundation until 31 March 2011.
To this category belong all beneficiaries irrespective of having been named in the founding act or not. It is also necessary to name all beneficiaries identified by the founder, an institution, the foundation’s board of directors or by any other body.
Reporting of the beneficiary by giving his full identity has to be made by 30 June. It is also necessary to report the beginning and the end of a person’s position as beneficiary, while it is not necessary to indicate the amount of the donation made to this person. Finally also beneficiaries who join after 1 April have to be reported by changing the foundation act.
Members of the boards of directors who do not comply with this obligation are fined with amounts of up to 20.000 euro.

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