Private Foundation (Privatnützige Stiftung)

A private foundation is established not for the benefit of the general public, but for the benefit of specific individuals or families – e.g., to support family members or to manage an estate. It does not pursue a charitable purpose and therefore does not enjoy the tax advantages of charitable foundations.

Legal Form:

Private foundations are usually legally independent foundations under civil law, which must be officially recognized by the state. Alternatively, they can also be managed as a trust foundation (Treuhandstiftung), where a trustee administers the assets.

Are there still tax advantages?

Partially – depending on the structure, the transfer of assets into a private foundation can be favored for inheritance or gift tax purposes, such as through tax-free allowances or lower tax rates for long-term asset lock-ups. However, unlike with charitable status, the special expense deduction (Sonderausgabenabzug) for donations does not apply.

Example:

A foundation that exclusively covers the education costs of the founder family's descendants is a private foundation. Its purpose does not serve the general public, but a narrowly defined group of people.