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Associations whose purpose is the promotion of science and research often engage in basic research while also carrying out research projects for third parties (contract research). These activities can create a tension with the requirements of tax-exempt non-profit status, particularly the promotion of the general public and the prohibition on profit-making as an end in itself. A new response issued by the Austrian Federal Ministry of Finance (BMF) on 28 May 2026 addresses several questions in this regard.

EU state aid law often requires economic activities to be charged at full cost, including profit margins, in order to avoid state-funded cross-subsidization. The BMF states that profits generated in connection with contract research do not adversely affect non-profit status, provided they are not generated as an end in themselves but are used for permitted reserve formation (e.g. as a “contingency reserve” in accordance with margin no. 424 of the Austrian Guidelines for Associations).

Regarding the tax treatment of activities and income, the BMF states that an indispensable auxiliary activity can in any case be assumed for an organization’s own research. Contract research, however, requires a distinction:

• Indispensable auxiliary activity: Where no exclusive rights or confidentiality obligations have been agreed, the results are published promptly and the research serves to support the organization’s own basic research.
• Dispensable auxiliary activity: Where exclusive rights or confidentiality obligations have been agreed, provided that the research is conducted without the intention of making a profit.
• Commercial activity: Where the research primarily serves the private interests of the client or where there is a genuine intention to make a profit.

To provide lasting legal certainty, the BMF intends to officially incorporate these principles into the Austrian Guidelines for Associations (VereinsR 2001) as part of their next update.

Practical tip: Non-profit research institutions may generate profits in compliance with state aid rules, provided that these profits can demonstrably be allocated to permitted reserves and are properly documented. However, a tax-exempt indispensable auxiliary activity exists only where no exclusive rights or confidentiality obligations have been agreed, so that the research results are made available to the general public in a timely manner.

According to a recent ruling by Austria’s Supreme Administrative Court, assets distributed to a beneficiary (in this case, units in an investment fund acquired in 2007) are deemed to have been acquired by the beneficiary at the amount that would have had to be paid for the respective asset at the time of the distribution (deemed acquisition costs).

For income tax purposes, the distribution by the private foundation is treated as a transaction for consideration at the level of the beneficiary. As a result, the distributed assets lose their status as grandfathered assets. If the beneficiary subsequently sells the distributed assets, the sale is therefore treated as a disposal of newly acquired assets and is subject to tax under the revised taxation regime for investment income (VwGH 27 January 2026, Ro 2024/15/0023).