Full text: Taxation of foundations in Europe

4.1.2. Foundation Purpose 
The foundation purpose is a centrepiece of a foundation. Neither the foundation’s executive 
bodies nor the founder may act in opposition to the foundation’s purpose. The respective 
supervisory authority examines whether the foundation purpose is observed. Therefore, the 
foundation purpose as laid down in the statutes must be described as precisely as possible. 
In order to benefit from tax advantages granted to public utility foundations (but not to other 
types of foundations), foundations must meet particular requirements as to the foundation 
purpose. These advantages are described further below. 
Private Utility Foundation 
According to the German Civil Code, foundations may be established for any purpose that 
does not endanger public welfare. 
The foundation purpose must be defined on a permanent basis, which does not mean that it 
has to apply forever. For example, a private utility foundation may be transformed into a pub-
lic utility foundation at a later date. 
The foundation statutes may also include a range of purposes which are not related to each 
Public Utility Foundation 
The public utility purpose of a foundation must be precisely worded in the statutes. Other-
wise, the requirements for public utility foundations are not met and the foundation is not eli-
gible for tax advantages. Moreover, the statutes have to describe how the purpose of the 
foundation is to be fulfilled. The tax exemptions only apply if the foundation meets the re-
quirements concerning the purpose, as set forth in the German Fiscal Code (Abgabenord-
nung, AO). 
4.1.3. Governing Bodies of the Foundation 
The board of directors is the executive body of the foundation and is responsible for its man-
agement and representation. The founder can establish other bodies in addition to the board. 
These other bodies may also have rights and obligations which must be defined in detail to 
ensure that the founder’s will is consistently pursued. The founder himself may be a member 
of one of the foundation’s bodies and act in this capacity. The room for manoeuvre of the 
different bodies is however limited by the foundation purpose. 
4.1.4. Supervision 
The public supervisory authorities are responsible for protecting the foundation from itself 
and its executive bodies. The supervisory authority may not be the same as the recognising 
authority. It sees that the board of directors and the other foundation bodies comply with ap-
plicable law and observe the provisions set forth in the foundation statutes.

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