Austria is a state in the Central Europe. It borders the Czech Republic in the north, Slovakia in the north-east, Hungary in the east, Slovenia and Italy in the south, Lichtenstein and Switzerland in the west, Germany in the north-west.
The area of Austria is 83.871 sq.km, the population is 8.504.850 people (2014). The ethnic composition: 81.1% are the Austrians, 5.1% are former Yugoslavs, 2.7% are federal Germans, 2.2% are the Turks, 8.9% - others.
The area of Austria is Vienna.
The official language is German.
The national currency is Euro (EUR). USD 1 is equal to EUR 0.73.
The climate of Austria is moderate, continental, cloudy; cold winters with frequent rains and small snow; not hot summers with rare rainfalls; the average temperature in the mid-June is +14°С, +19°С; the average temperature in January is 2°С.
The time difference with Moscow is minus 2 hours.
The literacy rate is 98%.
The telephone code is +43.

The history of Austria covers the history of Austria and previous states, starting from farming settlements of the Stone Age till the present sovereign state. The name of Austria has been used since 996 when it was Mark of Bavaria and an independent Duchy of the Holy Roman Empire since 1156. This period is the era of the Gabsburgs rule (1273-1806) when the old empire no longer existed.
In the 19th century Austria was restored as the Austrian Empire – part of the German Union, up to the Austro-Prussian War of 1866 when it was excluded from the Union and Austria continued existing as Austria Hungary (1867-1918).
After the First World War Austria Hungary no longer existed. However, in 1938, Austria was added to the Nazi Germany. Participation in the Second World War resulted in temporary loss of independence. Its territory was divided into the four zones of occupation which belonged to the victorious countries: USSR, Great Britain, France and USA. Then negotiations about the independence recovery of Austria during decades, and only in 1955 it gained independence. In 1995, Austria joined the EU.

Austria is a federal republic.
The head of the Government is the President that is elected by nation-wide vote for a six years term.
The executive power is represented by the Federal Government and Bundeskanzler. The candidate of the Bundeskanzler shall be appointed by the Federal President based on the opinion of the majority of representatives from the National Council.
The legislative power is represented by the bicameral Parliament of Austria - Federal Assembly consisting of the National Council and Federal Assembly. The National Council - Nationalrat - represents the population that elects 183 deputes for a four years terms by direct voting. The National Council adopts laws which shall be approved by the Federal Assembly. The upper house of parliament - Bundesrat - is the authority of federal lands. 62 members of the upper house shall be elected by the lands parliaments (Landtags), each of the nine federal lands depending on the population number shall send three to twelve representatives to the Landstag. The Bundersrat has minor influence on the political life of the state, no Bundesrat approval for adoption of some laws.
The judicial power belongs to the 4 levels of courts: 1) district, 2) courts of lands, 3) four courts of appeal, 4) supreme court. Moreover, courts of public law are also available and include: supreme administrative court and constitutional court that is the oldest court in the world.

Austria is rated 12th in the world in the per capita GDP value, has a developed social market economy and is known for a high standard of living. Besides highly developed industry, international tourism plays a significant role in the national economy.
Germany was an important trade partner of Austria that made the state dependent on rapid changes in the German economy. Since Austria joined the EU and gained close relations with other economies of the EU, its economic dependence from Germany significantly reduced. Besides, the membership in the EU caused the flow of foreign investors interested in the access of Austria to the European market and its close position to ambitious economies of the EU.
After the fall of communism, the Austrian companies acted as active players and connectors in the Eastern Europe. Within the period from 1995 to 2010, 4,868 mergers and acquisitions with a total value of € 163 billion were announced involving Austrian companies. Tourism brings about 9% of the GDP in Austria. In 2007, Austria was rated 9th in the world in the number of tourists that brought USD 18.9 billion.

The Austrian system of law is based on the traditions of the civil law and comes from the Roman law.

The legislation of Austria provides for the opportunity to set up the following types of business forms:
a sole proprietorship;
a general partnership;
a limited partnership; a limited liability company, GmbH;
a joint-stock company, AG; a European company, SE;
a branch of foreign company;
and a private foundation.
A limited liability company (GmbH) is most popular and widely used form of business.

Each company in Austria shall have its name. The following requirements are set for the name of a GmbH:
the name of a company shall be different from the existing names;
it shall include mandatory reference to the form of business: "Aktiengesellschaft" or AG;
it shall not be insulting;
it shall not include the prohibited words or phrases, for example Austria, Austrian and etc.;
it shall not be confusing;
and it shall be pronounceable.

To register a company in Austria, the following procedure shall be observed:
the confirmation from the Economic Chamber stating that a new company is really considered to be new – 1 day: the form (Neufö 1 or NeuFö 3) shall be filled in, the form is available at the main page of the web-site of the Ministry of Finance of Austria and the confirmation shall be obtained from the Economic Chamber. This procedure is not mandatory; however, due to this procedure, a company may be exempt from some state charges and taxes. When a number of requirements is met, a company may be exempt from paying the following taxes and fees: a stamp fee and some administrative charges; real estate transfer tax; duty of registration with the Trade Register and Cadastral Register; capital tax (1% from the nominal capital); additional expenses on salaries (except for contributions made to the social insurance) during 1 year.
The Articles of Association (Charter) or the Incorporation Certificate shall be certified by a notary – 4 days: The Articles of Association (Charter) that shall be concluded and witnessed by the notary, shall include the name, address of the registered office, the type of business activities, the amount of capital and the amount of each shareholder interest.
The minimum capital shall be deposited in the bank – 1 day.
The company shall be registered with the local register and a note shall be published in Wiener Zeitung – 7 days: an application for a GmbH registration shall be supported by the following documents: a certified incorporation declaration; the Articles of Association (Charter); declaration (along with the bank certificate) about the required capital payment; certificate about free alienability of the directors initial contributions not restricted by counter actions; samples of directors` signatures; as well as confirmation from the tax inspectorate about payment or guarantee of the capital tax payment. In case of any Register`s doubts concerning the name of a company, it can request the opinion of the Trade Chamber. The GmbH shall get its legal status upon registration with the Trade Register.
It takes 12 days to register with the tax inspectorate (to get a VAT number): the Trade Register shall automatically inform the tax inspectorate about a new company registration. The tax inspectorate in its turn shall file a request about the company registration with the tax authority. Form 15 or 24 shall be submitted to the tax inspectorate (available at web-site www.bmf.gv.at/), the Articles of Association (Charter), the first balance sheet, the abstract from the company register, ID of the director, a form including the samples of representatives signatures. The Inspectorate shall issue the tax number within 10-12 days. The VAT number shall be issued simultaneously with the tax number.
It takes 1 day to register with the Trade Department (simultaneously with the previous procedure)
It takes 1 day to register of employees with the social service (simultaneously with the previous procedure)
It takes 1 day to register with the municipality (simultaneously with the previous procedure)

The following information is available in the Trade Register:
the trade name; the registered office and its address; names and dates of birth of the company representatives and shareholders; the nominal capital.

A GmbH can perform almost all the types of legal business activities, including commerce and trade, industry and wholesale business and services.
However, this form of business cannot be used for such types of activities as pharmacy, pension foundations, employees support foundation, real estate financing, funds of direct investments, political activities and insurance activities. At the same time, a GmbH may be used for trading as an insurance broker.

All the Austrian companies shall have a registered office. A registered office is required for receiving formal documents. It shall be a physical address in Austria.
Documents of the company shall be kept at the address of the registered office.

No mandatory requirements are set for the stamp for Austrian companies.

Redomiciliation of companies to Austria and from Austria is allowed.
Redomiciliation is allowed within the European Union and European Economic Area. As per the Austrian legislation, transfer of a company domicile from the European Economic Area to Austria is possible provided that a company changes its legal form to an Austrian company which meets all the terms and conditions of the Articles of Association (Charter), Charter capital and legal representatives as per the Austrian legislation, the company transfers the domicile as per the Articles of Association (Charter) to Austria, transfer of the domicile is allowed as per the laws of the country where the company is initially registered, and the company meets the conditions of the previous country. Concerning the conditions of the domicile transfer from Austria, the conditions are not still clear; however, it is also possible. Resolution of the shareholder certified by the notary is also required since it is considered to be the amendment to the Austrian legislation.
Concerning countries that are not members of the EU and European Economic Area, redomiciliation is not allowed.

A GmbH shall have at least one director. Only an individual can be a director. A director shall be of age and shall have legal capacity. No requirements for the director`s residence are set. However, appointment of a local director or authorized person with the right of signature is recommended.
Directors are usually appointed by the certified resolution of shareholders. Shareholders may be directors.

No requirements for the secretary availability are set.

Both individuals and legal entities can be shareholders of a GmbH. No requirements for residence are set. The minimum number of shareholders shall be 1. The only shareholder may also act as a sole director of the company.
If a GmbH is set up by foreign legal entities, they shall be obliged to provide evidence of their legal operation by confirmation from the competent register and trade chamber; if such confirmation is issued in a language other than German, the certified translation shall be submitted.
The basic authority of a GmbH is the Shareholders General Meeting. Shareholders may take resolution both at the General Meeting and by the written consent. Moreover, it is allowed to take resolutions orally and even secretly.
General Meetings shall be held at least once per the financial year within the first 8 months of such year.

Despite the fact that the question of establishing an open register of beneficiaries is discussed in many jurisdictions, no such register is available, including Austria. That means that there is no open access to the information about a beneficiary owner. Information about a beneficiary owner is considered to be strictly confidential and is addressed only through due diligence to the service provider, namely to the company, firm, registering company, trust manager, lawyer, accountant, as well as auditor. The mentioned persons shall be entitled to disclose the information about the beneficiary only in cases stipulated by law provided that the specific procedure is observed.

Since July, 2013 the minimum amount of a GmbH shall be €10,000. The capital may be contributed in cash or in the material form. The minimum amount of the paid-up capital shall be 50% of cash contributions or at least €5,000.
Cash funds shall be deposited to the corporate account of an Austrian bank.
Bearer shares are not allowed.

Any company in Austria shall pay the income tax, municipal tax, and real estate tax, value added tax (VAT), social insurance contribution, customs and excise fees. No taxes on branches (affiliates) income, excess profit taxes and alternative minimum taxes are set in Austria.
Due to the reduction in the income tax rate during the recent time Austria became more attractive in terms of investments and more competitive.
EU Directives about parent and subsidiaries companies, interests and royalties, mergers and savings are completely introduced in Austria.
Individuals pay tax on profit, tax at source for passive tax, social insurance contribution and real estate tax.

An individual that lives or stays within Austria during more than 6 months can be considered to be the tax resident.
Residents shall pay the income tax on the worldwide income and non-residents shall pay taxes on the income obtained in Austria.
The taxable income shall include the income from employment (including additional preferences), income from trade or business, investment income and most of the capital gains. Most of the passive income shall be charged with taxes that, as a rule, is withheld at source.
The first Euro 620 on special payments, such as 13-th and 14-th salary shall not be charged with taxes. The amount exceeding Euro 620 shall be subject to taxation at the rate of 6%, except for cases when the bonus exceeds standard two-month salary. In such cases, any surplus shall be subject to taxation as part of annual salary unless other special tax incentives are applicable.
For individuals, the tax year coincides with the calendar year. Taxpayers that gain income only from employment subject to withholding payroll tax shall not be obliged to provide annual tax return. Other income shall be calculated independently. The tax return shall be filed before April 30 (before June 30 in case of e-format) upon the relevant calendar year completion. Taxpayers that are represented by tax consultants may file their tax return before April 30 of the second year following the tax year, unless the tax inspectorate requires earlier submission of documents.

A company shall be deemed a resident of Austria if the place of its effective management is located inside Austria or if it was established in Austria.
Resident companies shall pay taxes on their worldwide income, however, tax liabilities can be limited or reduced as per tax agreements. Non-resident companies (affiliates) shall pay taxes only on income gained inside Austria.
The rate of the income tax in Austria amounts to 25%. Even if a company gains no income, the minimum tax in the amount of Euro 1750 is applicable to limited liability companies or Euro 3500– for joint-stock companies. These rates shall be applicable starting from the second year of a company operation; the minimum tax for the first year shall be Euro 1092.
Income gains tax
Income gains shall be charged as part of the income tax base at the standard rate of 25%. Pursuant to the rules for tax exemption due to international participation, gains from shares sales for a non-resident company in which an Austrian parent company owns more than 10% of shares during at least one year shall be exempt from taxation, unless there are provisions to combat illegal behavior for companies from tax havens.

Income gains shall be charged as part of the income tax base at the standard rate of 25%. Pursuant to the rules for tax exemption due to international participation, gains from shares sales for a non-resident company in which an Austrian parent company owns more than 10% of shares during at least one year shall be exempt from taxation, unless there are provisions to combat illegal behavior for companies from tax havens.

Losses can be offset against 75% of the profits of the current year with the remainder carried forward to offset against 75% of profits in future years. Tax losses carryforwards shall not be applied if the information about the company is changed due to the owner change, changes made to the structural and commercial form of the company, except for cases when the purpose of such changes was the financial reorganization aimed to preserve the significant number of jobs.
Losses carrybacks are not allowed.

The tax year for legal entities shall not exceed 12 months.

Dividends paid by a non-resident company shall be subject to taxation at the rate of 25% (as a rule, the final rate), except for cases when the rate is reduced based on the tax agreement. As per Austrian regulations generated as per EU Directive about parent and subsidiary companies, dividends paid to the parent company inside EU that owns at least 10% of the taxpayer during at least one year, shall not be subject to taxation.
Percentage paid to the non-resident company shall not be subject to taxation in Austria, except for cases when the income is ensured by real estate in Austria. For such income, the taxpayer shall be obliged to file a tax return. In cases when the paid percentage are not subject to income tax, tax at source shall be reimbursed. In cases when the tax rate is reduced as per the tax agreement, the tax at source may not be charged.
Royalty paid to the non-resident company shall be subject to taxation at the rate of 20%. As per Austrian regulations generated as per EU Directive about interests and royalties, the tax at source from payment of royalties gained inside Austria and paid to the associated company (parent or subsidiary company), resident in a different country that is member of the EU or Switzerland shall not be charged in Austria. For other countries, reduced rates as per tax agreement can be applicable.

VAT shall be charged at every step of manufacture and distribution from goods supply and services rendering inside Austria that are manufactured by an entrepreneur including VAT< as well as purchases and import of goods inside EU. All the goods and services are subject to VAT in Austria except for some cases including air and marine transportation, business with annual taxable turnover of more than Euro 30.000, bank transactions and export. The tax base - cost of goods or services (or cost related to their consumption) or customs cost of goods.
The standard rate of VAT is 20%. The reduced rate is 10%; it is applicable for food, pharmaceuticals, agricultural goods, lease, tourism services, public services (except for electric services) and recreation and entertainment. Professional services (lawyers and architects) shall be charged with taxes at the rate of 20%. Some deliveries can be charged with taxes at the rate of 0%, while some of them may be exempt from any taxes.

Austrian entrepreneurs with the annual turnover exceeding Euro 30.000 shall be obliged to VAT register their company. Only those entrepreneurs that have a turnover of less than Euro 30.000 per year may be exempt. Non-residents that perform taxable deliveries of goods or services inside Austria shall also register irrespective of the amount of their sales.

VAT declaration shall be filed on a monthly basis, the final declaration shall be filed before June 30 of the following year (the term may be extended for taxpayers represented by a tax consultant). Entrepreneurs with the turnover of less than Euro 100.000 for the previous year may file declarations on a quarterly basis.

Stamp duty shall be charged for some transactions in Austria (assignment of receivables, lease and lease agreements and etc.). Stamp duty for loans and credits was withdrawn.

No annual fee is due in Austria.

Transfer pricing: transactions between related parties shall be made on equal footing. Payments made to a foreign affiliate shall be deducted. However, tax authorities shall carefully study such payments and evaluate them based on principles of Austrian instructions on transfer pricing 2010 which is generated as OECD instructions.
Thin capitalization: no official rules for thin capitalization are established in Austria.
Controlled foreign companies: in case common property amounts to more than 10%, a foreign subsidiary company shall be obliged to pay income tax of less than 15% and mainly gain its passive income. If the passive income amounts to more than 62.5% of the total income of a subsidiary company, the threshold for the effective income tax shall be 18.75%. In case of portfolio dividends (common property of less than 10%), a foreign subsidiary company shall not be obliged to pay income taxes in the country of residence, it can enjoy tax preferences or pay income tax at the rate of less than 15%.
General countermeasures for tax avoidance: the general rule established on the basis of content priority over form is applicable in Austria. Concerning tax issues, the actual economic content of a transaction shall prevail over the form. Tax obligations cannot be avoided or reduced by violating civil law instruments. In case of violations, the tax authorities shall be entitled to charge taxes in such a manner as if a transaction was made in line with actual economic circumstances.

Austria have entered into double taxation agreements and tax information exchange agreements with 97 jurisdictions;
91 DTS: Australia, Azerbaijan, Albania, Algeria, Armenia, Barbados, Bahrein, Belarus, Belize, Belgium, Bulgaria, Bosnia and Herzegowina, Brazil, Great Britain, Venezuela, Hungary, Vietnam, Germany, Greece, Hong Kong, Georgia, Denmark, Egypt, Israel, India, Indonesia, Iran, Ireland, Iceland, Spain, Italy, Kazakhstan, Canada, Qatar, Cyprus, China, China Taipei, Korea, Cuba, Kuwait, Kyrgyzstan, Latvia, Lithuania, Lichtenstein, Luxemburg, Mauritius, Macedonia, Malaysia, Malta, Morocco, Mexico, Moldova, Mongolia, Nepal, Netherlands, New Zealand, Norway, UAE, Pakistan, Poland, Portugal, Russian Federation, Romania, San Marino, Saudi Arabia, Serbia, Singapore, Syria, Slovakia, Slovenia, USA, Tajikistan, Thailand, Tunisia, Turkmenistan, Turkey, Uzbekistan, Ukraine, Philippines, Finland, France, Croatia, Montenegro, Czech Republic, Chile, Sweden, Switzerland, Estonia, RSA, Japan.
6 TIEA: Andorra, Guernsey, Gibraltar, Gansey, Monaco, Saint-Vincent and Grenadine.

No currency exchange regulations are applicable in Austria.

Every Austrian GmbH shall be obliged to maintain all the accounting records and prepare financial reports. Directors of companies shall be liable for reports maintenance. Directors shall be obliged to submit financial reports and directors reports within 5 months upon the financial year completion.
If a GmbH is a parent company, it shall prepare the consolidated financial reports and consolidated directors reports.
Financial reports and directors reports (along with the directors proposal on profits distribution) shall be submitted to the Trade Register not later than 9 months upon the financial year completion. The submitted documents shall be publically available. Submission shall be carried out in the electronic format. Small and medium size companies have some privileges on annual financial reports submission; small GmbHs shall file only the final balance sheet and explanatory notes.

If GmbH exceeds certain size and is classified as a medium size or large company or shall auditors for some other reasons, a licensed accountant shall perform audits of the company financial reports.
A company shall be deemed as small if it does not exceed two of the following criteria during two years:
50 employees,
Assets– Euro 4.84 mln.,
Turnover of Euro 9.68 mln.

Since the concept of the Annual Return is not applicable for the Russian law, we consider it to be necessary to clarify this concept. Annual Return is a brief statement of the current company structure that shall be prepared annually by the company secretary. As a rule, it includes: the startup data (date of registration, legal address); details about directors and their dismissals; details about secretaries and their dismissals; details about the incorporation capital, nominal prices of shares, the number of issued shares; details about shareholders and shares transfer.
Austrian companies shall be obliged to annually submit Annual Return. The Annual Return shall be publically available.

An independent system of taxes charging is applicable in Austria. The income tax shall be paid by four portions based on the tax paid in the previous year. These payments shall be made on February 15, May 15, August 15 and November 15, including payment (or deduction) of the balance after the Tax Return is processed. If the tax is accrued by tax authorities after September 30 of the following calendar year, penalty shall be accrued for the overpayment. Interests payment can be avoided if additional payment in the amount of the future balance is made.
The minimum tax shall be paid quarterly on the day when the advance payment shall be made, however, no compensation is provided for the overpayment (a credit is possible in future, if sufficient income is gained).
The tax return shall be filed in the electronic format before June 30 of the following year. Taxpayers that are represented by tax consultants may submit their tax returns before April 30 of the second year after the tax year unless the tax authorities have requirements for earlier terms of documents submission.

Austrian private foundations shall be governed as per Private Foundations Act ("Privatstiftungsgesetz", PSG, 1993).
Privatstiftung (a private foundation) is a legal entity established as per the Civil Law regulations that has not owners or members. The foundation shall use the property given to it as a gift by the principal to achieve the task. The purpose of the private foundation is to implement the intentions of the principal in accordance with the memorandum of association.
The structure of the private foundation is similar to the limited liability company but the foundation has beneficiaries instead of owners. The private foundation shall be located in Austria and shall be registered with the Trade Register.
The private foundation may be set up for any purpose, for example, for family provision ("family foundation"), support of one or more enterprises or art support. However, according to the Private Foundations Act, a foundation may not perform any business activities except for cases of sporadic character;
to act as solely responsible partner of a general partnership or limited liability partnership;
to have functions of a commercial company management.

There are state funds, private foundations and commercial funds.
State funds are exempt from income taxes to the uttermost. They only have to pay taxes on the investment income. Rental income or income from participation are not charged with taxes. Distribution of profits gained from the state fund are not charged with taxes as investment income for the beneficiary.
Private foundations shall be obliged to disclose information to the extended scope to the tax authorities (deed of incorporation, additional regulations). In case this requirement is violated, their preferential tax conditions become void and the tax authorities shall inform the Austrian Anti-Money Laundering Division thereof (Geldwäschemeldestelle).
Commercial funds enjoy special tax treatment – they are also exempt from income taxes to uttermost. Such funds are set up in accordance with the private law that serves to achieve the targets and goals of the founder. Funds of commercial purpose (Unternehmenszweckförderungsstiftung), employees development funds (Arbeitnehmerförderungsstiftung) and employee shareholding funds (Belegschaftsbeteiligungsstiftung) refer to commercial funds.

The first and major reason for establishing a private foundation is the intention of the principal to protect and preserve the property in order to support the members of the family and other persons close to the principal.
The other reason can be the risk of breaking up and division of the family wealth due to inheritance or intention to make somebody`s name associated to charity or scientific research or public organization.
The basic advantage of the Austrian private foundation is flexibility of the legal form within the framework of the civil law. A foundation can be adapted for some specific requirements of the principal.

One or several individuals or legal entities can act as a principal of a private foundation. This entity or entities gain the status of a principal only when they set up a private foundation but not through a legal act. A principal under age may establish a private foundation with the approval of the guardian appointed by the court, and, if a parent is a co-principal, the request shall be filed to the court to appoint the collision guardian.
The Principal may set up a private foundation inter vivos or mortis causa. If a foundation is established mortis causa, such foundation can have only one principal.
A principal establishes a foundation when he/she files the constituent declaration where he/she may specify the provision entitling him/her to influence the foundation. In practice, the provision of significant importance is the right to correct the constituent declaration after it is registered with the Trade Register as well as the right to withdraw a foundation. In case of withdrawal, the foundation shall be dissolved. The right of the principal to set up a foundation may be transferred, and it cannot be transferred to legal heirs. Only individuals may withdraw a foundation.

A private foundation can be set up by the constituent declaration. The constituent declaration shall include the deed of incorporation ("Stiftungsurkunde") and appendicles ("Stiftungszusatzurkunde").
The principal shall state his/her intention of specific property conveyance, transfer of this property to the private foundation as legally independent entity and assigning special purpose to it in the constituent declaration. The constituent declaration shall identify the purpose of the foundation in general and in some specific type. By specific identification of the foundation purpose, the principal may determine the property for a long period after his/her death.
The minimum capital of the foundation shall be at least Euro 70.000. Besides cash, contributions to the foundation can be made in securities, interests, collections of art items and etc. Upon a foundation establishment, additional contributions may be required.
As practice shows, a private foundation is usually set up with the assets in the amount of Euro 3 mln. and more.

Beneficiaries can be specified in the deed of incorporation (and can be described in more details in the appendix) or can be described in general. If a group of beneficiaries is described in general to such extent that in some particular cases their names shall be specified, the principal shall appoint the authority for this particular purpose (for example, the principal itself or an advisory council). IF such authority is not appointed, this responsibility shall be borne by the Board of Directors, although, relevant provisions are stated in the constituent declaration, the Board of Directors may be liable for the fulfilment of proposals made by other authorities (for example, family advisory council).
A private foundation shall be obliged to inform the tax inspectorate of the beneficiaries specified by the Board of Directors.
As per the Austrian Law about banking, banks shall be obliged to identify the beneficiary owners of a private foundation. In such cases, the beneficiary owner is a beneficiary on assets distribution of the private foundation and/or individuals that control 25% and more of the private foundation property. If individuals that are beneficiaries of the private foundation are not named, the concept of a beneficiary shall refer to a group of persons for whose interests the foundation was established or is acting.

The Board of Directors shall consist of at least three directors, two of them shall be citizens of the European Economic Area (EU countries including Iceland, Lichtenstein and Norway). The Board of Directors shall manage and represent the private foundation thus ensuring implementation of its purpose. The activities of the Board of Directors are determined by the intentions of the principal specified in the constituent declaration.
The first Board of Directors is appointed by the principal or under certain circumstances the principal (in case the foundation is established mortis causa). New members of the Board of Directors are appointed by the competent court unless otherwise specified in the constituent declaration. The declaration may also include provision on directors appointment (for example, directors can be appointed by the principal, advisory council or by co-optation).
Beneficiaries, their spouse or partners, close relatives of beneficiaries and distant relatives, as well as legal entities cannot be members of the Board of Directors.
The principal may be member of the Board of Directors if he/she is beneficiary.

The principal may set up the Advisory Council which members may be beneficiaries granted with supervisory functions and other rights.
Appointment of the Advisory Council may be required for a particular number of persons employed by the private foundation and companies where it owns interests. While the constituent declaration may contain the provision on assigning supervisory and advisory functions to other bodies and authorities. Such functions are usually appointed to the Advisory Council.

Pursuant to the law, every foundation shall have a certified auditor for annual audits performance. The auditor shall be appointed by the court or by the Supervisory Council.
Moreover, any member of the Austrian private foundation can file a request to the court for unscheduled audit intended to implement the purpose of the foundation.
The beneficiary shall be entitled to request and obtain information from the private foundation concerning the measures taken to implement its purpose as well as may review the annual reports, accounting records and constituent declaration.

The Austrian private foundation may be withdrawn by the principal, if it is an individual, and if the right for withdrawal is specified in the constituent declaration. To make amendments to the deed of incorporation and appendices, the special provision shall be mentioned in the constituent declaration. The principal that is a legal entity may be entitled to introduce amendments but shall not be entitled to withdraw the foundation.

The constituent declaration may specify the terms of the foundation duration upon which expiration the foundation shall be withdrawn. It does not have to be a calendar day; the terms may depend on implementation of certain conditions. The foundation may be set up for an indefinite period of time.
The foundation which serves to the state interest shall be automatically withdrawn in 100 years except for cases when the ultimate beneficiary or all the beneficiaries decide to extend the term (maximum, by 100 years).

A private foundation shall be withdrawn:
upon its term expiration;
in case of bankruptcy;
upon unanimous resolution of the Board of Directors;
by the decision that bankruptcy is cancelled due to the lack of assets;
by the court decision.
Withdrawal shall become valid upon registration with the Trade Register. In case of withdrawal, the principal shall be the ultimate beneficiary unless otherwise specified in the constituent declaration.

Taxation of a private foundation shall be carried out on the three levels:
contributions taxation (entrance tax)
standard taxation;
exit taxation
Contributions to the fund shall be subject to entrance taxation (Stiftungseingangssteuer). The tax shall be paid by the principal (resident of Austria) and the foundation (registered office inside Austria) at the rate of 2.5%. If the private foundation does not fulfill its obligations on information disclosure, the entrance tax shall amount to 25%. If real estate is used as contribution, the entrance tax shall be calculated by special standard tax cost multiplied by three and the tax rate of 6% (estate transfer tax).
Intermediate taxation (Zwischenbesteuerung) is a specific feature of the standard taxation of foundations. This is an advance taxation of future distributions to the beneficiaries which shall be attributed after future distributions. Intermediate taxation shall apply with respect to the following types of the investment income gained by the foundation:

• domestic and foreign investment income from contributions and securities of financial companies
• income from realized increase in investment value
• income from derivative instruments

The rate of the intermediate tax amounts to 25%.
The foundations have special tax incentives for conveying equity investments. Hidden reserves to be disclosed upon investments conveyance can be transferred within 12 months at the cost of purchase if the new investment is the participation exceeding 10%. Hidden reserves that are transferred by other means during the calendar year may be exempt from taxation.
Distribution of private foundations to the beneficiaries that are individuals shall be subject to taxation on investment income (exit tax). Distributions to legal entities with unlimited tax obligations have not tax incentives for income taxation based on participation that is why they are charged with investment income. On the other hand, distributions of the foundation assets to the beneficiaries are exempt from taxation that is why cancellation of inheritance and gift tax shall mean that the gift giver may give its property as a gift without tax obligations. This incentive shall apply to the amount of distributions that exceeds the amount of net retained earnings at the beginning of the fiscal year, reserves generated from the income and taxable hidden reserves of the donated property of the foundation. Distributions of the foundation are capital distributions exempt from taxation as long as the limit cost is not exceeded.