Across Central and Eastern Europe, the idea of a “trust” sits at a fascinating legal crossroads: while the trust is traditionally a common-law institution, the jurisdictions discussed in this article mostly approach it through civil-law, trust-like structures or other functionally comparable arrangements. In some jurisdictions, these structures have become familiar and flexible tools of wealth management; in others, the trust remains a foreign concept-recognized cautiously, if at all. Yet despite this diversity, trusts and trust-like structures have become increasingly relevant across CEE as an alternative mode of asset structuring and planning.
This article explores how selected CEE jurisdictions approach trusts and trust-like structures: where they embrace them, where they adapt them, and where they resist them altogether. The focus is on jurisdictions in which our law firm PETERKA PARTNERS has offices, namely the Czech Republic, Slovakia, Austria, Poland, Hungary, Romania, Bulgaria, Ukraine, Croatia and Slovenia. In doing so, it reveals not just the complexity of trusts and trust-like structures in CEE, but also what that complexity says about the broader evolution of private wealth planning in the region.
As almost all jurisdictions covered in this article, with the exception of Ukraine, are EU Member States, it should be noted at the outset that the European Union law does not regulate the concept of trust as a matter of substantive private law. Although certain pieces of EU legislation touch upon trusts and similar legal arrangements, notably in the areas of anti-money laundering, beneficial ownership transparency and sanctions, there is no comprehensive EU private-law framework for trusts. This creates both risk and opportunity. Accordingly, across all jurisdictions covered in this article, the treatment of trusts and trust-like arrangements is determined primarily by domestic law and, where applicable, by relevant international instruments; in Ukraine, this applies without even the said limited EU context applicable to Member States.
Given the multi-jurisdictional take of this article on trusts and trust-like structures and mainly the fact that trusts and trust-like structures may involve a combination of elements connected with different jurisdictions, such as the nationality, domicile or residence of the settlor, the location and nature of the assets, the place of administration, or the residence of the beneficiaries, it is worth outlining also the private international law questions that may arise. In the presence of a foreign element, two main questions typically come into play: applicable law and competent courts.
As regards applicable law, conflict-of-laws matters are primarily governed by EU legislation where the relevant matter falls within its scope and where the relevant EU instrument applies. In particular, the Rome I Regulation may be relevant to certain contractual aspects of trust-like arrangements. However, the Regulation expressly excludes from its scope the constitution of trusts and the relationship between settlors, trustees and beneficiaries. These core trust-related matters therefore need to be assessed under the relevant national conflict-of-laws rules, unless another applicable international instrument provides otherwise.
As to competent courts, the Brussels Ia Regulation is the obvious starting point for EU Member States. It contains specific rules for certain trust-related disputes, including a special jurisdiction rule for proceedings brought against a settlor, trustee or beneficiary of a trust before the courts of the Member State in which the trust is domiciled. The Regulation also recognises jurisdiction clauses contained in trust instruments, subject to the conditions and limits set out therein. As regards Ukraine, questions of jurisdiction and recognition must be assessed under the relevant national rules and any applicable international instruments.
None of the jurisdictions covered in this article is a Contracting Party to the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition, meaning that the recognition and legal treatment of foreign trusts is determined primarily under the relevant domestic private international law rules.
In the absence of a harmonised trust regime under European Union law, the approaches across broader CEE region differ significantly, only several jurisdictions have developed trust-like legal structures used in private wealth management, based on the segregation of assets. We detail it in a comparative overview below:
Trust-like structures in CEE & Ukraine
Comparative overview of selected jurisdictions
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Jurisdiction |
Legal nature |
Participants & Governance |
Term |
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Czech Republic |
A “Svěřenský fond” (trust fund) is a statutory legal institution under Czech Law based on legal separation of assets and does not have legal personality The assets are separate, not owned by the trustee, the settlor, or the beneficiary, the trustee exercises ownership rights in relation to the trust assets in his or her own name and on the account of the trust fund A Czech trust fund may be established by contract or by disposition upon death |
A Czech trust fund usually has a three-party structure (settlor – trustee – beneficiary) Oversight is exercised, in particular, by the settlor and the beneficiary; the statute may confer oversight rights on additional persons. If the beneficiary does not yet exist or cannot be identified at the time of establishment of the fund, a person supervising the administration in the interest of the beneficiary must be appointed
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The beneficiary’s right to benefits must arise no later than 100 years after the creation of the trust fund if the trust fund is established for a private purpose, subject to statutory exceptions. |
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Hungary |
“Bizalmi vagyonkezelés” (trust management) is a statutory legal framework for a trust-like arrangement under Hungarian law based on the segregation and protection of assets and does not have legal personality
The transferred assets are legally separated from the asset manager’s own assets
It may be established by contract or by disposition upon death
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Hungarian trust management is a contractual arrangement, functioning as a three-party structure (settlor – asset manager – beneficiary)
The settlor transfers assets to the asset manager, who administers them for the benefit of the beneficiary Oversight can be exercised either by the settlor or the beneficiary, but specific instructions cannot be given as the asset manager acts within the constraints featured in the contractual arrangement
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Trust management may be established for a maximum period of 50 years |
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Poland |
A “Fundacja rodzinna” (family foundation) is a legal entity under Polish law based on the segregation and protection of assets, whereby a separate legal entity is established Assets contributed by the settlor are owned by the foundation, which manages them in the interest of the beneficiary and provides benefits to them It may be established by a founding deed or by disposition upon death
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A family foundation has a three-party structure (settlor – foundation – beneficiary) and governance exercised through corporate bodies within the foundation including a mandatory management board, a mandatory beneficiaries’ meeting, and an optional supervisory board |
A family foundation may be established for either a fixed or an indefinite period
Minimum contributed assets of not less than PLN 100,000 (approximately EUR 23,000) |
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Romania |
A “fiducia” (trust) is a statutory legal institution under Romanian law based on the segregation and protection of assets and does not have legal personality
The settlor transfers assets to a fiduciary, who administers them for a specified purpose in the interest of the beneficiary. The establishment of a fiducia creates an autonomous patrimony distinct from the general patrimonies of both the settlor and the fiduciary
It may be established by contract or by virtue of law in some specific cases
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A fiducia established by contract is a bilateral arrangement between the settlor and the fiduciary, functioning as a three-party structure (settlor – fiduciary – beneficiary). The fiducia agreement may also designate a protector or representative entrusted with supervising the fiduciary’s performance and protecting the interests of the settlor or the beneficiaries. |
The duration of a fiducia is limited to a maximum of 33 years
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Bulgaria |
Foundations established under Bulgarian law may serve as a structure functionally comparable to trust-like institutions in other EU jurisdictions and may be set up for either public or private benefit. A foundation is a non-profit legal entity with independent legal personality. Assets contributed by the settlor become the property of the foundation and are used to pursue the purposes defined in the founding act, including supporting designated individuals or groups in the case of private benefit foundations
Foundations may be established by a founding act inter vivos or upon death
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A foundation has a managing body, which may be either a sole body or a collective body |
No minimum capital requirement; however the assets contributed must be sufficient to achieve the purposes of the foundation |
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Austria |
A private foundation (Privatstiftung) is an ownerless legal entity established by one or more founders (Stifter) either during their lifetime or upon death by dedicating assets to the foundation.
A private foundation may be established for any lawful purpose, and the founder may also be designated as a beneficiary of the foundation. |
The private foundation is managed by a management board consisting of at least three members. The foundation board is responsible for administering the foundation in accordance with the purposes specified by the founder in the foundation deed and for making distributions of assets and/or income to the designated beneficiaries. |
The initial endowment must amount to at least EUR 70,000. Where the endowment is made in kind rather than in cash, the contributed assets are subject to a statutory formation audit. |
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Ukraine |
Fiduciary mechanism available under Ukrainian law like fiduciary ownership may serve as a security device or a property management agreement. It is a specific type of ownership right
Under fiduciary ownership agreement as a property management agreement, assets are transferred to a manager, who administers them in its own name for the benefit of the settlor or a designated beneficiary. The ownership title is not transferred to the manager. The manager is a fiduciary owner of the property with right to possess, use and dispose under the law and fiduciary ownership agreement
Fiduciary ownership may be established by contract or by virtue of law |
A property management arrangement is a three-party structure involving a settlor, a manager and, optionally, a beneficiary.
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Managed assets may include enterprises as single property complexes, immovable property, securities, proprietary rights and other property, while assets acquired during management become part of the managed estate. Funds may not be the subject of a property management agreement, except where expressly provided for by law. |
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Croatia |
No local trust-like structure available Reliance on foreign structuring |
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Slovakia |
No local trust-like structure available Reliance on foreign structuring |
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Slovenia |
No local trust-like structure available Reliance on foreign structuring |
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Czech Republic
A Czech trust fund comes into existence upon registration in the Register of Trust Funds, or upon the testator’s death in case of mortis causa establishment. The trust statute is a mandatory notarial deed and must comply with statutory requirements.
The trustee exercises ownership rights in relation to the trust assets in its own name and on the account of the trust fund, acting under the principle of separate and independent asset ownership. The trust assets do not form part of the trustee’s own property. The trustee has full powers of administration, subject to the trust statute and general duties of proper administration. In public registers and other records, the trustee is entered as owner of the trust assets with the designation “svěřenský správce” (trustee).
Multiple trustees may be appointed for the administration of the trust fund.
The settlor or beneficiary may also act as trustee, provided that an additional independent trustee is appointed.
A distinction is made between private-purpose and public-benefit trust funds, depending on whether the structure serves specific beneficiaries or broader public-benefit objectives. A private-purpose trust fund may serve a specific person, be established in memory of a person, or be for investment purposes with the profit intended for distribution among specified persons.
The structure allows flexibility in asset contributions, including subsequent additions by third parties, without such persons becoming settlors.
Hungary
The Hungarian legal framework for trust management distinguishes between commercial and non-commercial trust management structures, with regulatory and licensing requirements applying in particular to commercial trust managers under the supervision of the Hungarian National Bank.
Within this framework, the settlor specifies the assets to be managed and designates the beneficiaries. The settlor retains a statutory right of control and may determine the terms and conditions of asset management, including the conditions under which beneficiary status arises or ceases. The settlor is further subject to an obligation not to provide instructions to the asset manager during the course of asset management.
The asset manager is required to act with a heightened standard of care, reflecting the confidential nature of the legal relationship, and must prioritize the interests of the beneficiary while ensuring the protection and prudent management of the assets in accordance with the principles of commercial rationality and risk mitigation.
Poland
A family foundation under Polish law obtains legal personality upon registration in the Register of Family Foundations maintained by the competent court. It may conduct only those activities expressly permitted by the statute, including, in particular, holding activities, lease and rental, trading in securities, and granting loans to related entities and beneficiaries. Any activities outside this permitted scope may result in tax consequences.
A family foundation may be established either by a will or by a founding deed executed in the form of a notarial deed, failing which it is null and void. The founder sets out the key principles governing the foundation’s operation in the statute, including rules on asset management and distribution policy, which are binding on its governing bodies.
The structure is available exclusively to natural persons, and contributions to the foundation are, as a rule, final and irrevocable.
Romania
Although a Romanian fiducia shares certain structural and functional similarities with a trust (most notably the separation of patrimony and the administration of assets for the benefit of third parties), it remains a distinct institution rooted in civil law principles and characterized by a more restrictive legal framework.
A fiducia may be established either by law or by contract; in the latter case, the contract must be concluded in an authenticated (notarial) form and must be expressly stipulated, failing which it is sanctioned with absolute nullity. A fiducia is subject to extensive publicity and registration requirements.
The settlor may be any natural person or legal entity who transfers assets into the fiduciary patrimony and determines the purpose of the fiducia. The fiduciary, however, may only be one of the entities expressly provided by law, namely credit institutions, investment and investment management companies, financial investment services companies, insurance and reinsurance companies, as well as notaries and lawyers.
Two principal functional categories may be identified in practice: a fiducia as a security mechanism, whereby assets are transferred to guarantee the performance of an obligation, and a fiducia as an asset management structure, under which the fiduciary administers assets in the interest of the beneficiary. The latter closely resembles a trust, as it is based on the transfer of assets by the settlor, their administration by the fiduciary, and the existence of beneficiaries.
Romanian law further subjects a fiducia to significant limitations. In particular, the use of a fiducia to achieve indirect gratuitous transfers is prohibited, in order to prevent the circumvention of mandatory rules governing donations and succession, including forced heirship.
Bulgaria
A Bulgarian non-profit foundation, may be established for either public or private benefit.
A private benefit foundation may serve the interests of specific individuals or a limited group of persons and may provide financial or other support in accordance with the founder’s will.
A foundation comes into existence upon its registration in the Register of Non-Profit Legal Entities.
In the case of inter vivos establishment, the founding act must bear notarized signatures, and the application for registration may be submitted by the founder or other authorized persons, including the executor of the will or an heir.
A foundation is established by means of a unilateral founding act, either inter vivos or upon death, through which assets are granted free of charge for the pursuit of a non-profit purpose. The assets contributed under the founding act become the property of the foundation upon its establishment, either as of the date of execution of the founding act (in the case of inter vivos establishment) or upon the opening of the estate (in the case of establishment upon death).
Austria
Austrian private foundations (Privatstiftungen) are ownerless legal entities established by one or more founders through the dedication of assets of at least EUR 70,000. They come into existence only upon registration with the Austrian Companies Register (Firmenbuch). The foundation may pursue any lawful purpose, including benefiting the founder, and the contributed assets are managed independently by the foundation.
The foundation is governed by a management board consisting of at least three natural persons, which is responsible for administering the foundation and its assets in accordance with the foundation’s purpose and the founder’s intentions. Additional governance mechanisms, such as a supervisory board or advisory board, may be established.
The foundation is created by a notarised foundation deed, which must specify, among other things, the foundation’s purpose, initial endowment, beneficiaries (or the method for determining them), name, seat, and duration. Further details may be regulated in a supplementary foundation deed (Stiftungszusatzurkunde), which is not publicly disclosed.
The founder may contribute additional assets after the foundation has been established, but generally loses direct control over the endowed assets. A private foundation may not actively conduct a commercial business (except to a limited extent).
The foundation may be dissolved upon expiry of its term, insolvency, revocation by the founder where permitted, or by court order. Ongoing costs typically include foundation governance, auditing, and compliance expenses.
Ukraine
A property management agreement may certify the emergence of the manager’s fiduciary ownership right to the property received for management.
Fiduciary ownership of immovable property, an unfinished construction object, or a future real estate object received for management arises from the moment of its state registration in Ukrainian State Register of Proprietary Rights to Immovable Property.
In property management agreement, the agreement defines the manager’s powers and limits. The manager generally manages the property personally, but may delegate management functions in limited circumstances while remaining fully liable for the delegate’s actions.
The manager is entitled to remuneration and reimbursement of necessary expenses.
The economic benefits from the managed property belong either to the settlor or to a beneficiary designated by the settlor in the property management agreement.
Any assets acquired in the course of execution of a property management agreement are added to the managed estate.
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TAX ASPECTS[1]
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Czech Republic |
A Czech trust fund is treated as a corporate income tax payer. Its profits are subject to standard corporate income tax rate of 21%. Profit distributions are subject to taxation depending on the status and tax residency of the parties involved. Contributions of assets into the trust structure may be treated as contribution to a corporation, or may trigger tax consequences depending on the nature of the assets and the parties involved.
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Hungary |
The taxation framework for Hungarian trust management is complex. As a general rule, personal income taxation may arise at the moment of transferring assets to the beneficiary (“exit taxation”), in particular, where such transfer occurs within five years from the establishment of the structure and an increase in value has been realized. . Assets managed within the trust structure may also be subject to corporate income tax, although certain exemptions may apply, particularly in cases involving natural persons and certain type of assets In addition, local business tax may be levied. As a general principle, transfer tax considerations also follow the concept of exit taxation, meaning that taxation is typically triggered upon the transfer of assets to the beneficiary (regarded as gift)
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Poland |
A foundation benefits from a preferential tax treatment in relation to its permitted activities, which are generally exempt from corporate income tax. However, distributions of benefits to the founder and their immediate family members are subject to a 15% corporate income tax, with no personal income tax applying, as a general rule, at the level of the recipient. In the event that the foundation carries out activities that fall outside its statutorily permitted scope, such activities are subject to a 25% corporate income tax. Deferral of taxation applies until the moment the benefit is actually distributed to the beneficiary.
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Romania |
A fiducia is not subject to a distinct or autonomous tax regime under Romanian law. Taxation is governed by the general tax rules applicable, depending on the nature of the assets transferred and the income generated within the fiduciary patrimony. In this context, any taxes arising in connection with the transfer of assets or the income derived therefrom are, as a rule, declared and paid by the fiduciary, who exercises the rights and obligations relating to the fiduciary patrimony in relation to third parties.
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Bulgaria |
A foundation is exempt from corporate income tax with respect to donations and grants.
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Austria |
An Austrian private foundation is generally taxed at three levels. Contributions of assets are usually subject to a 3.5% foundation entry tax. During its existence, the foundation in general is subject to corporate income tax at 23%, although qualifying dividend income is generally tax-exempt and certain investment income is subject to an interim tax of 27.5% that may later be credited. Distributions to beneficiaries are generally subject to 27.5% withholding tax (KESt). Additional taxation may result if the founder revokes the foundation and receives the contributed assets back. |
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Ukraine |
In a property management arrangement, transfers of property to and from the manager under such arrangement are not subject to VAT. However, 20% VAT applies to the property management service if its place of supply is in Ukraine.
Property manager shall maintain separate VAT records for business transactions related to the use of property received for management under property management agreements. For VAT purposes, business relations between the property manager in connection with their own business activities and their property management activities are treated as relations based on separate civil law contracts.
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Trusts and trust-like structures can be useful tools for succession planning, asset protection and private wealth management. At the same time, their legal treatment across CEE remains far from uniform.
To summarize, across the jurisdictions covered, the Czech Republic, Hungary and Poland appear to offer the most structured and developed domestic options for private wealth planning, albeit through different legal models. The Czech and Hungarian regimes are closest to trust-like asset-segregation structures, while the Polish family foundation may be particularly attractive for succession planning and tax deferral if used within its statutory limits. The Austrian private foundation is a well-established legal structure commonly used in private wealth planning. It is an ownerless legal entity and provides a foundation-based alternative that is similar in function, but not identical, to trust-like arrangements in other jurisdictions. Romania and Ukraine also provide fiduciary mechanisms that are structurally close to trust-like arrangements in several respects, particularly as regards asset segregation, fiduciary administration and the involvement of beneficiaries. Their practical use, however, may be less straightforward and requires closer assessment of the applicable statutory conditions, formal requirements and asset-related restrictions. Bulgaria, by contrast, offers a foundation-based solution that may be functionally comparable in certain cases, but is less trust-like in the narrower sense. In Slovakia, Croatia and Slovenia, the absence of a domestic trust-like structure means that foreign-law solutions may need to be considered, with particular attention to recognition, taxation, succession law and reporting obligations.
Before choosing a particular structure, it is therefore important to consider not only the law of the jurisdiction in which the structure is to be established, but also the location of the relevant assets, the residence of the settlor or founder, and the position of the intended beneficiaries.
Where local law does not offer a suitable trust-like structure, foreign-law solutions may also be considered, including structures available in other CEE jurisdictions. In practice, such solutions require careful coordination, in particular with regard to local recognition, tax treatment, succession rules, AML, beneficial ownership and reporting obligations.
Beyond the trust-like structures described above, CEE countries also provide for traditional foundation structures, such as Polish foundations established for social, economic or public purposes, Czech “nadační fond” (a separate legal entity with a socially or economically beneficial purpose, governed by civil law and not trust-like in nature), and Croatian “zaklada”, a foundation intended for permanent use of assets for general or charitable purposes.
With offices across the Czech Republic, Slovakia, Poland, Hungary, Romania, Bulgaria, Ukraine, Croatia Slovenia and Austria, PETERKA PARTNERS can assist clients in assessing and coordinating trust-like or functionally comparable asset-planning structures across the region.
Authors:
Agata Jaczyńska
jaczynska@peterkapartners.pl tel: +48500222979
Agata Jaczyńska is an attorney-at-law and Leader of the Family and Inheritance Law practice. She has experience in advising business owners on succession planning and handling family and inheritance disputes. She also supports corporate clients on contract law, compliance, and ongoing business matters.
Markéta Hanzlíková
hanzlikova@peterkapartners.cz , tel. +420 776130863
Markéta Hanzlíková is a senior associate and Leader of the Family and Inheritance Law practice and French Desk in PETERKA PARTNERS with experience of more than 15 years of practice. She focuses mainly on civil, commercial law, and litigation. Her core area of expertise is family law and cross-border litigation.
Péter János Darák
Péter Darák is a senior associate at PETERKA PARTNERS Hungary which he joined in 2020. While supporting clients in general matters such as commercial and corporate law, Peter also has extensive experience in special areas including in particular dispute resolution, pharma law, tax law and family law.
Prepared in cooperation with, and with input from, lawyers specialising in Family and Inheritance Law across all PETERKA PARTNERS offices in CEE.
About the law firm:
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[1] The tax comments provide only a high-level overview. The tax treatment of contributions, income generated within the structure and distributions to beneficiaries may vary depending on the tax residency of the parties, the type of assets, the relationship between the settlor/founder and beneficiaries, and applicable anti-avoidance rules.
