The concept of trusts is not provided under Austrian private or corporate law. Whether a foreign trust is recognised as a separate entity depends on whether the income of the trust can be directly attributed to the beneficiaries according to the general principles of Austrian income tax law.

The income derived from an income source is generally attributed to the person, who has the right to influence the generation of income by taking part in business life and shaping the use of the source of income according to his own intentions. This includes, for example, making investment decisions, taking advantage of rights to draw upon existing income, or renouncing future income. Income is thus attributable only to the party which is able to exploit opportunities offered by the market, deciding either to take a specific action, such as distributing funds to the trust’s beneficiaries, or abstain from doing so.

If a trust is recognised, the income of the trust itself is not taxed. In such case only distributions of the trust to Austrian resident beneficiaries would be taxed at the applicable income tax rate. In general the Austrian Supreme Court supports the challenging of trusts for purposes of succession and forced heirship rules, in particular if the trust had received its assets from the settlor within a two-year period prior to his/her death. This two-year  period could be prolonged to an indefinite period if the beneficiaries of the trust are themselves forced heirs of the settlor.

Foundations can be established under Austrian corporate law and are certainly recognised for Austrian legal and tax purposes. However, the Austrian Supreme Court allows the challenging of foundation for purposes of enforcing creditors’ claims, in particular claims resulting from forced heirship or divorce law.

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