Private Clients & Estate Planning

In recent years, international developments have brought foreign foundations and trusts to the attention of the Austrian tax authorities. A number of (supreme court) rulings, as well as the tax agreement between Austria and Liechtenstein, have now established guidelines for the classification of foreign foundations under Austrian tax law.

When establishing a trust or foundation, the tax consequences are highly complex and must be carefully considered (e.g., foundation entry tax, real estate transfer tax, exit tax, capital gains tax on securities transfers, ongoing taxation, gift tax, tax-neutral distribution of assets, etc.).

In the case of existing foreign foundations and trusts, the tax implications of donations to the founder or beneficiaries often pose serious problems.

We would be happy to analyze your foreign foundation or trust, help you resolve existing tax problems from the past, and optimize your foundation for the future!

The 2015 Nonprofit Act made the legal form of the nonprofit or charitable federal foundation under the BStFG more attractive. In addition, it is possible to establish nonprofit foundations in accordance with state law and the Private Foundation Act. There are significant differences between legal forms, particularly with regard to foundation supervision and transparency, which means that the founder/philanthropist should carefully consider which legal form best suits their ideas.

Closely linked to non-profit status is often the question of whether the transfer of assets to a non-profit (charitable or ecclesiastical) foundation is tax-deductible for the donor. However, this question must be answered separately from tax-deductibility and is regulated more restrictively by the legislator.

In addition, the legal entity offers charitable foundations organizational advantages over the legal form of an association, greater international acceptance, the advantage that a decision on the fulfillment of the requirements for charitable status is issued by the tax authorities at the time of establishment through the declaration of foundation, and an extension of the deductibility of donations.

We support you in tax matters relating to non-profit status and tax benefits for donations.

The purpose of the employee participation foundation is to transfer shares to employees (and their [marital] partners and children) free of charge or at a reduced price. Unlike an employee participation foundation, an employee share ownership foundation does not pass on the income generated from the allocated shares to the employees or their (spouse) partners and children (the “beneficiaries”), but rather the shares themselves are owned by the employees or their (spouse) partners and children. However, the shares are held in trust by the private foundation, which also exercises the voting rights.

KPMG Estate Planning will be happy to assist you in setting up an employee participation foundation and with any questions you may have in connection with employee participation foundations.

KPMG Estate Planning has been advising a large number of internationally renowned artists and athletes for many years.

Frequently requested topics in this area include the following:

• Taxation of athletes
• Relocation benefits for artists, athletes, scientists, and researchers
• Deductible taxation for performances
• Taxation of trademark and personality rights
• Artist limited liability companies
  

KPMG Estate Planning can provide particularly effective support in international contexts and complex situations.

Increasing global convergence has led to a rise in cross-border family relationships in recent decades. Relatives often wish to pass on assets within the family during their lifetime, or cross-border inheritances occur. From a tax perspective, such constellations pose a particular challenge, as inheritance and gift taxes—unlike income and corporation taxes—are not harmonized worldwide or across the EU, often resulting in double or multiple taxation. Even though Austria does not levy inheritance and gift taxes, the consequences under foreign tax law must still be taken into account. However, tax consequences – often not considered at first glance – can also arise in Austria (e.g., real estate transfer tax, capital gains tax, penalties for failure to report gifts).

Timely planning of cross-border gifts and inheritances is one of the fundamentals of estate planning. But even if a cross-border gift or inheritance has already taken place, we are happy to help you with the resulting tax consequences and assist you in optimizing them. Thanks to our international estate planning network, we can offer such services from a single source.

There are currently around 3,000 private foundations in Austria, many of which were established for inheritance tax reasons. However, with the abolition of inheritance tax at the end of July 2008, these considerations became obsolete. Founders often find themselves in a situation where they would like to have their assets back in their own hands instead of being dependent on the foundation's board of directors for their management. However, due to the so-called “mouse trap effect,” which generally only allows assets to be returned with a 27.5% tax burden, founders find themselves in a “tax trap.” In addition, the 2015/16 Tax Reform Act has made it more difficult to repatriate the interim tax account for beneficiaries residing abroad and to dissolve cross-border foundations.

Even in the case of long-established Liechtenstein foundations with Austrian founders or beneficiaries, the question of dissolving this structure often arises.

KPMG Estate Planning will be happy to help you optimize the tax implications of exiting the foundation.

KPMG Estate Planning has many years of experience with business transfers and can help you optimize your business transfer for tax purposes. The fact that Austria currently does not levy inheritance and gift tax does not mean that gratuitous business transfers are completely tax-neutral; rather, there may be significant income tax consequences (e.g., through inheritance and compulsory portion waivers, mixed gifts, estate divisions with compensation payments to departing co-heirs, etc.), as well as consequences in terms of sales tax and real estate transfer tax.

In addition, business succession also requires a sound foundation in civil, corporate, and inheritance law. We work together with competent law firms to offer you a comprehensive solution that is optimized from both a legal and business perspective. This will enable you to successfully master the challenge of business transfer or succession.

Europe continues to grow closer together, and the rest of the world is also moving closer. People often work abroad for years or move their residence abroad, for example, when they retire. Sometimes legal uncertainties in the country of origin are also decisive factors in a move. The impending Brexit also raises (tax) issues.

The tax implications of such a move should not be ignored in order to avoid unpleasant surprises later on. Tax (structural) advice is recommended in both the country of departure and the country of arrival, whereby we can cover the respective position from the Austrian perspective and refer you to competent contacts from the KPMG network in the other country. Through careful and timely relocation planning, solutions can be developed that are certainly on par with internationally renowned relocation centers (e.g., Great Britain or Switzerland).

In addition, Austria offers an attractive relocation program for scientists, researchers, artists, and athletes.

The international exchange of banking data is now in effect. More than 100 countries are already participating in the Common Reporting Standard for the 2018 calendar year. Financial institutions in these countries (list available on the BMF website) automatically report the income of persons resident in Austria to the Austrian tax authorities.

With regard to foreign customers of Austrian banks, the tax authorities have taken precautions through the Capital Outflow Reporting Act and the Account Register Act to ensure that even if foreign taxpayers withdraw their Austrian accounts, data is available for any foreign group inquiries (inquiries from foreign tax authorities). When transferring foreign assets to Austrian bank accounts, Austrian institutions must exercise greater care to ensure that the money is taxed in order to avoid exposing themselves to criminal liability under tax law.

If foreign income from bank assets of Austrian taxpayers has remained untaxed in the past, a comprehensive analysis of the facts is recommended to clarify further possible steps. We are also happy to assist with calculating the assessment bases for the Austrian tax return.

KPMG Estate Planning has highly specialized expertise and experience in this area and will be happy to support you in this process.