News / 01.04.2015

Decision handed down by the Austrian Administrative Court on the tax immunisation of the Liechtenstein foundation

In two decisions it has handed down, the Austrian Higher Administrative Court has made its stance on the issue of the tax treatment (transparency/non-transparency) of the Liechtenstein foundation clear and thereby established legal certainty to a certain extent. According to the Austrian Administrative Court, income allocation is determinted by economic aspects. This means that income from a foundation's capital assets is to be allocated to the person with the authority to make paid use of the assets in question or with the de facto possibility of doing so. Subject to a mandate contract that offers the person with an instruction entitlement the option of issuing instructions to the foundation council at any time having been concluded, the income from capital assets is pursuant to the Austrian Administrative Court allocable directly to the person with an instruction entitlement and not to the foundation. What counts here under the Higher Administrative Court's legal interpretation of the matter is solely whether the person has the option of issuing instructions and not whether instructions are acutally issued. The allocation of income to such persons as are named as beneficiaries purely in compliance with money laundering regulations was rejected by the court. The Austrian Higher Administrative Court further decided that participation in foundation council meetings, signing annual financial statements and the goal of support to the family do not constitute economic ownership and therefore do not automatically result in tax allocation.

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