Concept
The personal foundation is Russia's answer to Western trusts and private foundations. Since March 1, 2022, a founder may during their lifetime transfer property to a unitary non-profit organization they have created, which manages this capital according to approved articles of association and management terms in the interests of beneficiaries.
The hereditary foundation (Art. 123.20-1 of the Civil Code of the Russian Federation) is the posthumous variant of the same structure: it is created by a notary after the death of a citizen based on a will that contains a pre-recorded decision to establish the foundation, its articles of association, and management terms.
Both institutions solve the same problem—separating legal ownership of capital from beneficial enjoyment and establishing succession rules without fragmenting the business among heirs or leaving it in limbo for the six months of probate proceedings.
Russian civil law never adopted the Anglo-American trust, whose split between legal title and beneficial interest has no native category in a civil-law system. A resident who wanted that effect had to go offshore. The hereditary foundation, available from 2018, and the personal foundation, from 2022, close the gap from inside Russian law: a separate legal owner holds the capital for named beneficiaries under fixed rules, with no foreign element required.
🍓 A personal foundation is a lifetime "Russian trust" with a preferential profit tax rate of 15%. A hereditary foundation is its posthumous version, which a notary is obliged to create within one year after the opening of succession.
Personal vs. Hereditary
A personal foundation is created during the founder's lifetime and at their will; the founder may themselves be one of the beneficiaries and see how the structure works during their lifetime. The law requires that the value of transferred property be at least 100 million rubles—this is an instrument for large capital.
A hereditary foundation is created only after death and only pursuant to a notarially certified will. There is no ₽100 million threshold for it, but it is no longer possible to revise its terms after the opening of succession: everything must be designed in advance.
⚙️ The notary conducting the probate case is obliged to submit an application for registration of the hereditary foundation within three business days. It is impossible to register the foundation after one year from the date of opening of succession—delay means that the testator's will has not been executed.
Tax Regime
Foundation Profit Tax
A personal foundation pays profit tax at 15% instead of the standard corporate rate, a benefit written into Article 284.12 of the Tax Code. The rate is conditional: at least 90% of annual income must be passive, meaning dividends, interest, proceeds from the sale of securities and real estate, and rent. Fail the 90% test in a given year and the foundation pays the ordinary corporate rate, which rose to 25% in 2025, wiping out the advantage. That condition is what keeps a foundation a holding vehicle for income-producing assets rather than a vehicle for running a business.
Personal Income Tax for Beneficiaries
After the founder's death, distributions to any beneficiary who is a Russian tax resident are free of personal income tax, whatever the family relationship. During the founder's lifetime the exemption is narrower: it covers the founder and a defined circle of close relatives, namely spouse, children, parents, grandparents and siblings, and again only while they are Russian tax residents. A beneficiary who is a non-resident pays personal income tax at 30% on what the foundation distributes. Contributions into the foundation and distributions out of it both fall outside VAT.
Why Families Need This
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The real value is succession without chaos. A business or family holding keeps running under professional management from day one, instead of being frozen for the six months it takes heirs to formalize their rights. The management terms fix in advance who receives what and on what conditions, which heads off both the break-up of a shareholding and the disputes that tend to follow an open inheritance. For an operating company that means continuity of control; for an investment portfolio, an orderly handover.
💡 A family holding packaged in a personal foundation survives generational transitions without shares entering the open market—the same logic as Western private foundations.
Foundation or Foreign Trust
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For a Russian resident, a personal foundation strips out much of the friction of an offshore structure. Russian banks and courts recognize it, and it raises no controlled foreign company or foreign-beneficial-ownership reporting, the very obligations that make a foreign trust costly to hold from Russia. The price is the youth of the institution: case law is thin, and the articles and management terms have to be drafted without the decades of precedent a Liechtenstein Stiftung or an established offshore trust can rely on. A foreign trust still wins on flexibility and track record; the personal foundation wins on being domestic and sitting outside the CFC perimeter.
⚠️ A personal foundation is an instrument for capital from ₽100 million; below the threshold it is unavailable. The management terms of a hereditary foundation cannot be changed after the founder's death, so a design error cannot be corrected—its cost falls on the heirs.
Regulation and Outlook
The 15% rate and the beneficiary exemptions are set in the Tax Code rather than left to case-by-case administrative discretion, which gives founders a fairly stable basis to plan on. The 2025 increase in the standard corporate rate to 25% widened the spread a foundation captures, and that is part of why the regime now draws interest from holders of large dividend and rental income.
That same spread makes the rate a natural target. In December 2025 a group of State Duma deputies introduced a bill to raise the foundation rate from 15% to 25%; as of mid-2026 it remains in coordination with the government and has not been enacted (to be verified). In parallel, the Ministry of Finance has been closing gaps by letter: a November 2025 clarification, for example, dealt with VAT and personal income tax when a foundation returns to a founder-beneficiary the company shares it had been holding. Anyone drafting today should stress-test the structure against the 25% scenario, not only the 15% one.
Take-up has been cautious. In the first three years after the hereditary foundation entered Article 123.20-1 of the Civil Code, fewer than 800 Russians had used it, according to the Federal Notary Chamber, a reminder that the 100 million rouble entry point and the need for exact drafting keep this a tool for sizeable estates. Personal foundations, which are cheaper to set up while the founder is alive, have spread faster, but the court practice that would test more aggressive designs barely exists yet.
🧭 The foundation's edge is the 15% rate plus a domestic, CFC-free wrapper. Draft the articles so the structure still makes sense if profit tax climbs to 25%, and keep at least 90% of each year's income passive to hold the rate.
This material is for reference purposes and does not constitute individual legal advice.