AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler and Mohamed Hemdan, Schindler Attorneys
2.7 Capital Gains Capital gains (and losses) realised on the assets of an Austrian corporation are considered normal business income that is taxable at the statutory tax rate (23% corporate income tax), unless it concerns a capital gain on a shareholding that meets the requirements for the participation exemption to be applied. Under the international participation exemption, capi - tal gains and dividend income from qualified share - holdings are fully exempt from the Austrian corporate income tax base (a participation amount of at least 10% and an uninterrupted holding period of at least one year are required). Under the domestic participation exemption, profit distributions of domestic corporations are exempt from taxation, and this exemption applies without any minimum holding requirements or holding periods. However, capital gains realised on the alienation of shares in domestic corporations are subject to regular taxation. 2.8 Other Taxes on Transactions Enterprises, whether transparent or opaque, may become subject to VAT when providing services or selling goods in Austria. Real estate transfer tax (RETT) applies to an exhaus - tive list of domestic real estate transactions. The main rule covers purchase contracts or similar trans - fer agreements. RETT also applies where the right to dispose of 75% (until 1 July 2025: 95%) or more of the shares or the accumulation of 75% (until 1 July 2025: 95%) or more of the shares of a corporation or a partnership holding immovable property in Austria is transferred to one acquirer or a group of acquirers. 2.9 Other Notable Taxes Incorporated businesses are generally subject to VAT. However, they are usually able to claim input VAT as well. The general VAT rate is 20%, but a reduction to 10% or 13% is available for some products and ser - vices (a reduction to 5% for certain staple food applies from mid-2026). Depending on their business activi - ties, incorporated businesses may also be subject to various other taxes (environmental taxes, excise duties, motor vehicle tax, insurance tax, etc).
introduced a new interest limitation rule ( Zins- schranke ) that caps the deduction of borrowing costs (net interest expenses) at 30% of the taxable result (the tax-relevant EBITDA). This interest limi - tation rule covers all borrowing costs, irrespective of whether they are incurred in relation to unrelated third parties or within a group. This interest limita - tion rule does not apply to standalone entities. 2.6 Consolidated Tax Grouping Austrian tax law recognises consolidated tax grouping for corporate income tax purposes by enabling groups of corporations to offset the losses and profits within a group of subsidiaries at the parent company level. Group taxation requires a group parent. Regarding group members, a share in the statutory capital and the voting rights of that group member of more than 50% is necessary. The participation may be held either directly or indirectly through another group member or a partnership. All Austrian corporations may qualify as a group member, as may comparable foreign corpora - tions that are resident in the EU or in a state that has concluded an agreement for the exchange of informa - tion and mutual assistance in the collection of taxes with Austria. An application for group taxation must be submitted to the group parent’s competent tax author - ity, and the tax group needs to exist for a period of at least three full years. As a consequence of group taxation, the total profits or losses of the domestic group members are fully attributed to the group parent; the degree of partici - pation is not relevant ‒ ie, the total profits or losses of a domestic group subsidiary are fully attributed to the group parent even if the participation is less than 100%. For foreign members, losses are attributed on a pro rata basis, depending on the percentage of the participation in the foreign subsidiary, calculated under Austrian law but capped at the amount recog - nised under foreign law. Foreign losses can only offset up to 75% of domestic members’ total profit; any sur - plus can be carried forward by the parent company. No foreign profits are attributed to the group parent. With effect from the 2024 assessment year, an option is available to exclude losses of foreign group mem - bers that are not subject to unlimited taxation.
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