Private foundations in Austria are set to experience significant changes from 2026, as the government introduces higher taxes and enhanced regulatory requirements to increase their contribution to the national budget. According to recent assessments, the Ministry of Finance expects to generate an additional 33 million euros annually from these reforms.

Currently, there are approximately 3,000 private foundations in Austria, collectively managing assets estimated at around 70 billion euros. Private foundations can be established for a variety of lawful purposes, including both charitable and self-serving objectives. To form a foundation, a minimum capital contribution of 70,000 euros is required. These entities commonly generate income from sources such as dividends and rental proceeds. One of the primary motivations for establishing a foundation is to prevent the fragmentation of family-owned businesses that may occur during inheritance succession.

Tax Rate Increases for Foundations

From January 2026, the entry tax rate for foundations will rise from 2.5% to 3.5%. This adjustment also applies to the equivalent tax rate within the Real Estate Transfer Tax Act for property acquisitions by private foundations, which will similarly increase to 3.5%. Additionally, the ongoing taxation of foundations will be affected by a substantial hike in the interim tax rate, increasing from 23% to 27.5% for fiscal years commencing in 2026. All of these measures are intended to support the government's fiscal consolidation efforts by increasing the tax burden on foundation-held assets and income.

Expansion of Tax Liability

The upcoming regulations will broaden the scope of tax liability. In the future, donations made by foreign foundations that are comparable in structure to Austrian private law foundations will also be subject to Austrian taxation. However, foundations dedicated solely to charitable purposes will continue to be exempt from these tax increases.

Rationale for Reform

The Ministry of Finance has emphasized the importance of ensuring that all segments of society, including those with substantial wealth, contribute fairly to the country's fiscal stability. Stricter taxation of private foundations is described as a step toward greater fairness in the tax system, particularly targeting high-income groups.

Enhanced Oversight and Compliance

In addition to increased taxes, private foundations will be monitored more closely by the Ministry of Finance, which serves as the supervisory authority. The ministry employs a risk-based selection process to review foundations, focusing on verifying the accuracy of reported ownership information. In 2024, 113 foundations underwent such checks, representing nearly 4% of all private foundations. The results indicated relatively high compliance with reporting obligations, suggesting that the oversight measures are effective.

New Reporting Obligations and Penalties

Since December, private foundations have been required to adhere to additional reporting obligations. These new rules are complemented by a range of financial penalties for non-compliance. Depending on the nature and severity of the violation, fines can range from 25,000 to 200,000 euros. The introduction of these stricter requirements is intended to improve transparency and ensure that foundations operate within the framework of the law.

Overall, the government's reforms signal a clear intent to increase the financial contribution of private foundations to the national budget while enhancing oversight and ensuring greater accountability in the sector.