What is an Austrian Private Foundation?
Think of an Austrian Private Foundation not as a company, but as a separate legal person created with one primary goal: to hold and manage assets on behalf of beneficiaries designated by you, the founder. Unlike a company, it has no shares or shareholders. You establish it by endowing it with assets (a minimum of €70,000) and defining its purpose and rules in a foundational charter.
Its core purpose is to shield your assets from business risks, creditors, or frivolous lawsuits. Because the foundation legally owns the assets, they are separated from you personally and from your active businesses. This structure is internationally recognized and, crucially, is not subject to the same state supervision as other types of foundations, offering greater autonomy.
Key Characteristics & Benefits for the Location-Independent Entrepreneur
The Austrian Foundation is engineered with features that are highly attractive to a global citizen. Here’s a breakdown of what makes it so powerful:
1. Ironclad Asset Protection & Estate Planning
Once you transfer assets—like cash, shares in your operating companies, real estate, or options—to the foundation via a notarial deed, they are legally owned by the foundation. This creates a powerful protective barrier. Furthermore, it allows you to bypass complex inheritance laws in various countries, ensuring your wealth is distributed exactly as you wish.
Revocable vs. Irrevocable: You can set up the foundation on a revocable basis, giving you (the founder, as an individual) the right to dissolve it. This flexibility is a significant advantage.
2. Superior Privacy and Control
Privacy is paramount for many global entrepreneurs. The Austrian Foundation masterfully balances public registration with private details.
The Charter (Public): This document contains general information like the foundation's name and seat. It's publicly accessible.
The By-laws (Non-Public): This is where the crucial details are kept confidential. The names of beneficiaries, the specific assets endowed, and the rules for distribution are all outlined here, away from public view.
Worried about losing control? While founders who are also beneficiaries cannot sit on the Board of Directors, you can implement an Advisory Board. This body, which you and your family can be part of, provides binding guidelines to the directors, allowing you to maintain significant influence over the management of your assets.
3. A Hub for Your Global Investments (Not a Business)
A critical distinction: an Austrian Foundation cannot directly engage in trade or business. This is a feature, not a bug, as it insulates the foundation from the risks of commercial operations. However, it is perfectly designed to act as a holding entity.
It can hold shares in any domestic or foreign company (like your US LLC or Dubai FZCO).
It can be a limited partner in a limited partnership.
This allows you to centralize your global investments under one stable, reputable EU structure, which simplifies management and oversight.
The Tax Implications: A Strategic Overview
Austria has created a supportive tax regime to complement the foundation structure. While not a zero-tax haven, it offers significant advantages for tax-deferred growth.
1. Establishment Tax
When you endow the foundation with assets, there is a one-time establishment tax of 2.5% on the net asset value. This is a modest entry cost for the long-term protection and benefits it provides.
2. Income Tax Inside the Foundation
The foundation is subject to a 25% corporate income tax, but this is where the strategy comes in. The law includes powerful exemptions that can make the foundation highly tax-efficient for holding investments:
Domestic & EU/EEA Dividends: Dividend income from Austrian companies or companies based anywhere in the EU/EEA is completely tax-exempt.
Foreign Dividends (Non-EU): Dividend income from a non-EU/EEA corporation (e.g., your US LLC taxed as a C-Corp) is also tax-exempt if the foundation holds at least 10% of the shares for more than one year.
This means you can have your various operating companies distribute profits as dividends to your Austrian Foundation, where the wealth can accumulate and be reinvested, largely free from tax drag.
3. Tax on Distributions to Beneficiaries
Tax is primarily levied when the foundation distributes funds to you or other beneficiaries. A withholding tax of up to 27.5% (often referred to as 25% plus solidarity surcharge) applies. However, the final rate can be significantly lower, potentially as low as 0%, depending on the beneficiary's country of tax residence and the Double Taxation Avoidance Agreement (DTAA) in place between Austria and that country. This makes your choice of personal tax residency a key part of the overall strategy.
