Change in the tax-concept of private foundations

According to current legislation, the input tax of a private foundation is 2.5 % under § 2 para 1 Stiftungseigenagssteuergesetz, the current taxation of a private foundation provides certain benefits (such as an interim reduction of the company’s tax to 12.5 %, transfer of hidden reserves at the sale of shares, tax-free sale of property after the speculation period), while grants from the foundation's assets to natural persons are subject to income tax, unless a tax-neutral substance is granted pursuant to § 27 para 1 No 8 Income Tax Act

The Budget Act Bylaws for the 2011-2014 shall now provide for an intervention in the overall taxation concept of private foundations by increase the tax rate for the current taxation of a private foundation to 25 % and then be adjusted to the new concept of taxation of capital.
A further essential change is that the exemption from real estate disposals by the end of the speculation period shall be limited. If one of the founders or co-founders under § 3 Private Foundation Act is a body as defined in § 7 para 3 Corporate Tax Act (in particular a capital company), the sale of real estate shall become always speculation income. It should be noted that these new rules not only do apply for national bodies under § 7 para 3 Corporate Tax Act, but also for similar foreign entities.
In order to avoid the taxation of property already free of taxation, only those properties are covered by the new rules under § 26c Z 23 lit c, first TS KStG, which sale would be taxable for the founders or co-founders at the time of the grant to the private foundation.
It should be noted that any approach in which the private foundation transfers the property to a Substiftung in order to avoid the speculation of their income the principles will apply to the Substiftung as same as to the main foundation. If the main foundation may not sell property tax-free, this is essentially true for the Substiftung.