Full text: Taxation of foundations in Europe

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trustee is a financial institution, a securities company, an investment company, a pension 
fund or an insurance enterprise. In Luxembourgian legal practice, however, the law also ap-
plies trustees that are natural persons. 
 
Transfers of trust property without consideration are subject to gift tax; the applicable tax rate 
depends on the degree of relationship. No additional special regulations exist. If the founder 
of a trust or the trustor himself is the economic beneficiary of the trust/fiduciary contract, the 
profit is taxed at his level in accordance with fiscal transparency. In the case of a third-party 
beneficiary, taxations depends on the respective structure of the trust or fiduciary contract; 
here, the profit may be considered as an “independent legal estate” pursuant to Section 159 
Income Tax Act and is then accordingly treated for tax purposes. 40 
7.5. Dissolution 
If a foundation is no longer in a position to perform its purpose, its dissolution may be de-
cided and a liquidator can be appointed. The liquidation proceeds are exempt from corporate 
tax. Dissolution profit from the foundation business activity is to be taxed pursuant to Article 
55 et seq. 
7.6. International context 
Luxembourgian legislation applies, on the basis of French and Belgian law, the so-called 
company seat theory: Abroad-based foundations with legal capacity are recognised as legal 
persons also in Luxemburg. It is permissible to move a foundation’s seat from Luxemburg 
into another country. 
                                                
40 Cf. Beissel/Gabriel (2007), p. 1159.
        

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