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Austrian private clients, the Privatstiftung and the Vienna–Zurich axis

The Austrian private foundation

Austria answered the question of how to hold family wealth across generations with an instrument of its own. The Privatstiftungsgesetz (PSG), published as BGBl. Nr. 694/1993, entered into force on 1 September 1993 and created a foundation that could serve private purposes, including the maintenance of a family and the holding of a business group. Under § 1 PSG, a private foundation is a legal entity to which the founder has dedicated assets so that their use, management and exploitation serve a lawful purpose determined by the founder. The foundation must have its seat in Austria. Its initial capital must amount to at least 70,000 euros under § 4 PSG. It may not carry on commercial activity beyond a mere ancillary activity, assume the management of a commercial partnership or act as a partner with unlimited liability.1

The legislature’s motive in 1993 was openly competitive. Austrian entrepreneurs had for decades used the Liechtenstein foundation to hold their shareholdings and family assets, so the PSG was designed to bring these structures home by offering a domestic alternative with attractive tax treatment. The response was considerable. The Austrian foundation association reports that about 3,000 private foundations exist today, of which some 2,400 hold business interests, and that foundation-owned companies secure more than 350,000 jobs. According to the same source, the majority of the hundred largest Austrian family businesses and more than half of the companies in the ATX index are connected to private foundations, while only about 200 foundations pursue exclusively charitable purposes.2

The tax advantages that made the Privatstiftung attractive in the 1990s have since been reduced by successive reforms, including the introduction of a foundation entry tax and changes to the taxation of distributions and interim taxation.3 For Zurich, this development has two consequences. Austrian families whose foundations have outlived their original purpose, or whose beneficiaries now live in Switzerland, seek advice on restructuring, and Swiss banks and trustees are frequently asked to hold or manage the portfolio assets of Austrian foundations. The legal analysis in these cases combines Austrian foundation law with Swiss tax law and, where the family has moved to Zurich, with the questions of residence, lump-sum taxation and inheritance planning that Part G has discussed.

A comparison with the Swiss family foundation illustrates why the Austrian instrument had to be created in the first place. Article 335 of the Swiss Civil Code permits family foundations only for limited purposes such as education, endowment and support of family members, while the Federal Supreme Court has long refused to recognise the so-called maintenance foundation that simply provides for the general upkeep of the family. Switzerland therefore never offered its own clients a flexible domestic vehicle of the Austrian or Liechtenstein type. The question of whether the prohibition should be relaxed has been debated in the Swiss Parliament repeatedly, and Part G of this book considers the current state of that debate together with the proposals for a Swiss trust. For DACH clients, the practical consequence is that Zurich advisers regularly work with foreign vehicles, above all the Liechtenstein foundation, while the bank accounts and the portfolio management remain in Zurich.

Austrian banks in Switzerland and Swiss banks in Austria

The banking relationship between the two countries is asymmetric. Austrian banks have a modest presence in Switzerland, concentrated in the east of the country, while Swiss and Liechtenstein banks have built private banking operations in Salzburg and Vienna. The clearest example of the first type is the Hypo Vorarlberg Bank, the regional bank of the Land Vorarlberg, which has operated a branch in St. Gallen since 1997. The branch concentrates on real estate financing for income-producing properties, banking for small and medium-sized enterprises and private banking. It presents itself as a combination of Swiss banking tradition and Austrian service quality.4 The choice of St. Gallen over Zurich reflects the logic of the Lake Constance region discussed in Section X: the branch serves a regional clientele on both sides of the Rhine and relies on the proximity of its head office in Bregenz.

The larger Austrian banking groups, whose strategic focus since the 1990s has been Central and Eastern Europe, have built no private banking presence in Zurich comparable to their weight in that region. The more interesting movement ran in the opposite direction. Swiss and Liechtenstein banks used subsidiaries in Austria as a gateway to the European Union, because a bank licensed in Austria benefits from the European passport. The Zürcher Kantonalbank maintained such a subsidiary, ZKB Österreich, with locations in Salzburg and Vienna, until it announced its sale to the Liechtensteinische Landesbank on 2 July 2024 as part of a strategic review. The subsidiary, which managed about 3.1 billion euros and employed some 120 staff, was to be merged with LLB (Österreich) after the transaction.5

The ZKB transaction captures a structural shift. For a Zurich bank, an Austrian subsidiary was attractive when it provided access to German and Austrian clients under EU rules. When the subsidiary remained too small to earn its cost of capital, the logic of consolidation prevailed. The natural buyer was a Liechtenstein bank that already combined EEA market access with Swiss franc expertise. The LLB has since presented itself as a leading provider of private banking in Austria and, through its fund management business, as a significant player in the Austrian fund market.6 The Austrian market for Swiss franc wealth management is thus served today mainly through three channels: cross-border services from Zurich and St. Gallen, the Austrian subsidiaries of Liechtenstein banks, and the Austrian private banks themselves.

Vienna and Zurich

Vienna and Zurich have been compared since the nineteenth century, when both cities developed their stock exchanges and their great banks within a few decades of each other. The comparison has rarely favoured Vienna for long. The collapse of the Creditanstalt in May 1931, the loss of the Habsburg hinterland after 1918, the annexation of 1938 and the Soviet occupation of eastern Austria until 1955 interrupted the development of the Viennese financial centre at precisely the moments when Zurich was consolidating its position. After 1989, Vienna reinvented itself as the financial gateway to Central and Eastern Europe, where its banks became among the largest lenders. That strategy, which produced substantial profits in the 2000s and substantial losses after 2008, gave Vienna a profile quite different from Zurich’s.

The division of labour that emerged is visible in the respective strengths. Vienna specialises in corporate and retail banking in Central and Eastern Europe, in the capital market for Austrian and regional issuers and in a large insurance sector with a similar regional orientation. Zurich specialises in cross-border wealth management, global asset management, reinsurance and commodities trade finance while hosting the largest Swiss exchange. For wealthy Austrian families, the practical consequence is a division of their own: the operating companies and often a Privatstiftung remain in Austria, while a significant portion of the liquid wealth is managed in Switzerland or Liechtenstein. This pattern has survived the end of banking secrecy because it now rests on diversification of jurisdictional risk and currency, which remains a legitimate and openly declared objective.

Geneva offers a useful point of comparison. The Geneva banks cultivated French, Italian and Spanish clients in a manner similar to Zurich’s German and Austrian clientele before facing a comparable transition after 2009. The difference lies in the absence of a Geneva counterpart to Liechtenstein. Zurich’s relationship with the German-speaking market has always included this third party, which offered structures that Swiss law did not provide and which, since 1995, has offered market access that Swiss institutions do not enjoy. The following sections therefore turn to the principality on the upper Rhine.

Notes

  1. Privatstiftungsgesetz (PSG), BGBl. Nr. 694/1993, consolidated version in the Rechtsinformationssystem des Bundes (RIS), https://www.ris.bka.gv.at/GeltendeFassung.wxe?Abfrage=Bundesnormen&Gesetzesnummer=10003154. ↩
  2. Österreichischer Stiftungsverband, website, https://www.stiftungsverband.at/. The association was founded in 1996 as the Verband österreichischer Privatstiftungen. ↩
  3. The Stiftungseingangssteuergesetz (StiftEG) was enacted by Article 8 of the Schenkungsmeldegesetz 2008 and applies to contributions after 31 July 2008: government bill 549 d.B. (XXIII. GP), https://www.parlament.gv.at/dokument/XXIII/I/549/fname_108765.pdf. ↩
  4. Hypo Vorarlberg St. Gallen, website, https://www.hypobank.ch/. The branch is located at Bankgasse 1, 9004 St. Gallen. ↩
  5. swissinfo.ch, “ZKB verkauft österreichische Tochtergesellschaft an LLB”, 2 July 2024, https://www.swissinfo.ch/ger/zkb-verkauft-%C3%B6sterreichische-tochtergesellschaft-an-llb/82446740. The purchase price was not disclosed. ↩
  6. Liechtensteinische Landesbank, “Geschichte”, https://llb.li/de/die-llb/ueber-uns/unsere-werte/geschichte. The page describes the Austrian acquisitions and the opening of German offices in Munich, Frankfurt and Düsseldorf from 2024. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.

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