Full text: Taxation of foundations in Europe

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may either use the income to maintain the beneficiary or retain the income generated in the 
trust. 
Taxation 
During the period in which the income is retained in the trust (accumulation period), both the 
trustee and the beneficiaries are subject to taxation (as in the case of a discretionary trust). 
 
If the oldest beneficiary is over a certain age – usually 25 – and the accumulation period is 
not over yet, the trust is treated like a mixed trust for tax purposes. 
 
When the accumulation phase has ended, the applicable tax rules depend on what is going 
to happen with the trust. If the trust is to be dissolved and the trust assets are to be transfer-
red to the beneficiaries, the trustees may have to pay capital gains tax on the profits earned 
as of that date.  
 
When the accumulation phase has ended, the applicable tax rules depend on what is going 
to happen with the trust. If the trust is to be dissolved and the trust assets are to be transfer-
red to the beneficiaries, the trustees may have to pay capital gains tax on the profits earned 
as of that date.  
 
10.6. Tax Pool 
The managers or trustees of discretionary trusts or accumulation and maintenance trusts 
must make sure that the taxes have been paid before they distribute income to the beneficia-
ries.  
The tax pool is composed of taxes that have been paid by the trustee at the rate required 
(trust or dividend-trust rate) and of taxes paid at the standard rate applicable to the first 
GBP 500 of income. The tax credits, such as for dividends, are not included in the tax pool. 
When the trustees distribute income to the beneficiaries, the tax pool is reduced by the 
amount of the tax credit on this portion of income. 
 
If the taxes in the pool do not completely cover the tax credit for the beneficiaries, the trustee 
must come up with the remainder himself. 
10.7. Mixed Trust 
Most trust forms may also be combined, such as, for example, an interest in possession trust 
with a discretionary trust or an accumulation and maintenance trust. These trusts are then 
called mixed trusts.
        

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