AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler, Schindler Attorneys
disregarded for Austrian tax purposes, with income potentially attributed directly to a resident settlor or beneficiary where the separation of assets is not gen - uinely respected. Recently, further requirements have been introduced in the context of exit taxation; since 1 July 2026, deferred (non-assessed) exit tax based on unrealised gains exceeding EUR100,000 are subject to an annual substantiation requirement. 1.4 Pre-Immigration and Exit Planning Austria levies neither a wealth tax nor inheritance or gift tax. The principal exposures to be managed are therefore income tax, in particular the flat 27.5% rate on investment income and capital gains, and, where foundations are used, the foundation entry tax ( Stif- tungseingangssteuer ). On immigration, Austria applies a step-up to fair mar - ket value – ie, where an asset comes within the Aus - trian taxing jurisdiction upon an individual becoming subject to Austrian unlimited tax liability, the asset’s cost base is generally reset to its market value at that time. Latent gains that accrued before immigration are thus, as a rule, not captured by Austrian tax, so that a pre-arrival realisation of such gains is usually unnec - essary from an Austrian tax perspective (exceptions may concern assets already within the Austrian taxing jurisdiction, such as Austrian real estate). In comparison with other neighbouring European countries, Austrian tax law does not provide for a comprehensive competitive or flat-tax regime aimed at high net worth individuals. Nonetheless, a dedicated relief (so-called immigration privilege, or Zuzugsbegünstigung ) under Section 103 of the Aus - trian Income Tax Act, together with the immigration allowance ( Zuzugsfreibetrag ), may be granted by the Federal Ministry of Finance to individuals whose relo - cation promotes science, research, the arts or sport and lies in the public interest, mitigating additional Austrian tax burden on foreign-source income for a defined period. Before planning a move to Austria, a migrating individual should therefore consider whether they may fall within the scope of this rule. It is also generally advisable to plan the implementation of any restructuring involving Austrian companies before establishing residence (particularly where an Austrian corporation is to be used as a holding company, at
the level of which certain passive income, such as dividends, may be exempt from taxation subject to specific requirements). On emigration, Austria imposes an exit tax; a depar - ture that ends Austria’s right to tax an individual’s capital assets triggers a deemed realisation of the unrealised gains. On a move to an EU/EEA state, however, the resulting tax may, upon application, be non-assessed and thereby deferred. The tax debt then falls due in Austria only once the capital assets are actually disposed of, at which point the portion of the appreciation attributable to the period of Austrian residence is subject to taxation in Austria. A move to a third country, by contrast, triggers immediate taxation. Therefore, careful planning of the relocation – includ - ing the sequencing of the move, the use of the defer - ral (non-assessment) regime and, where applicable, the roll-over relief available under the share-exchange provisions of the Austrian Reorganisation Tax Act – may provide opportunities to mitigate the tax expo - sure associated with ceasing Austrian tax residency. Moreover, where the individual has flexibility in select - ing the new country of tax residence, the choice of jurisdiction can have relevant tax implications. In par - ticular, relocating to a country that has concluded a double tax treaty with Austria – and where the rel - evant treaty provisions are favourable to the individual – may reduce the overall tax burden. For example, under some of Austria’s double tax treaties, distribu - tions from Austrian private foundations are treated as dividends, whereas under others they are classified as “other income”, resulting in a restriction of Austria’s taxing rights. The following two points should also be noted. • First, Austrian-situs assets (notably Austrian real estate) usually remain taxable in Austria irrespec - tive of residence, particularly where a double taxation treaty exists that follows the OECD Model Convention. • Second, following the Budget Measures Act 2026 ( Budgetmaßnahmengesetz 2026), in force since 1 July 2026, deferred (non-assessed) exit taxes based on non-assessed income exceed -
70 CHAMBERS.COM
Powered by FlippingBook