Private Foundation (Privatstiftung)

What a Privatstiftung actually is

A Privatstiftung (Austrian private foundation) is an ownerless legal entity under the Private Foundation Act (PSG) 1993 that manages assets endowed by the founder for the benefit of a class of beneficiaries defined in the foundation's purpose. Unlike a German family foundation, the Austrian Privatstiftung is a separate legal person owned by neither the founder nor the beneficiaries — formal control sits exclusively with the foundation board (Stiftungsvorstand), which must comprise at least three individuals.

The minimum endowment has stood unchanged at €70,000 since 1993. In practice, though, Privatstiftungen are typically set up with initial assets ranging from one to several hundred million euros — they are the classic vehicle used by Austrian family businesses such as Porsche, Red Bull, Spar and Swarovski to pool wealth across generations and lock in succession arrangements.

The 2008 and 2014 tax reforms gradually eroded the original low intermediate-tax privilege, so today the Privatstiftung is mainly relevant as a structuring and succession tool rather than as a tax-saving construct.

A real-world example

A Tyrolean founder sets up a Privatstiftung in 2025 with an initial endowment of €1.5 million, consisting of 100% of the shares in her operating GmbH (€1.2 million) and a €300,000 securities portfolio. On formation, foundation entrance tax of 2.5% on €1.5 million applies — €37,500. Dividends from the GmbH then flow tax-free into the foundation, while interest income from the portfolio is subject to the 23% intermediate tax. If the foundation distributes €80,000 to the founder's daughter ten years later, it withholds 27.5% KESt and remits €58,000 net.

Tax treatment

Privatstiftungen sit under their own tax regime, built around three pillars:

• Foundation entrance tax: 2.5% on assets endowed at formation or in later top-ups (Stiftungseingangssteuergesetz, StiftEG).
• Intermediate tax: 23% on certain capital income of the foundation (interest on bank deposits or bonds, for example), credited back when the income is later distributed to beneficiaries.
• KESt on distributions: 27.5% capital gains tax on pay-outs to beneficiaries, withheld by the foundation.

Participation income from Austrian corporates (dividends) is tax-free at the foundation level under the participation exemption — economically comparable to a holding structure.

Formation and governance

The foundation is set up by notarised deed and registered in the commercial register. The foundation board (Stiftungsvorstand) carries operational responsibility and is bound by strict fiduciary duties to the foundation's purpose — it is not directly subject to instructions from either the founder or the beneficiaries. Larger foundations typically also have a voluntary supervisory board.

In a supplementary deed (Stiftungszusatzurkunde) the founder can reserve broad rights of involvement and amendment for himself, including a right of revocation. Those reserved rights are strictly personal, however, and do not pass on by inheritance — one generation after the death of the last founder, the foundation effectively becomes self-governing.

Related terms

Anyone digging deeper into this topic will keep meeting the same vocabulary: founder rights, beneficiaries, the participation exemption, intermediate tax, foundation entrance tax — and the Austrian Corporate Tax Act (KStG), which governs how corporates are taxed.

Common questions

Can the founder dissolve the foundation later? Only if a right of revocation was expressly reserved in the foundation deed. On revocation, the residual assets flow back to the founder and are taxed at 27.5% KESt, reduced by the foundation entrance tax paid at formation.

Why is the Privatstiftung less attractive today than it used to be? The 2008 reform (lower KESt rate on distributions) and the 2014 reform (higher intermediate tax and the end of the "mausoleum" privilege) have largely eroded the original tax advantages. Today, structuring and succession considerations weigh more heavily than the pure tax motive.