AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler, Schindler Attorneys
ing EUR100,000 are subject to a recurring annual substantiation requirement – ie, the taxpayer must demonstrate to the Austrian tax authorities that the assets concerned have not been sold or become subject to another realisation event (eg, by provid - ing a commercial register excerpt); non-compliance is treated as a disposal (realisation event). 1.5 Taxation of Real Estate Owned by Non- Residents and Non-Citizens In Austria, each municipality levies an annual property tax on Austrian real estate, which is deductible from rental income. Property tax is based on the unit value (which is generally significantly below market value) and is decided by the local authorities. Generally, the tax rate varies between 0.1% and 0.2% annually. Non-residents are subject to limited tax liability in Aus - tria on income from the sale of Austrian real estate, at a rate of 30%. In addition, RETT is typically levied at a flat rate of up to 3.5% of the property value, but generally 2% for a transfer between close relatives in the case of agricultural and forest land. For reorgani - sations, a reduced rate of 0.5% applies. A registration tax of 1.1% also applies. 1.6 Stability of Tax Laws Austrian tax provisions concerning estate and transfer tax laws have remained relatively stable over recent years, but the 2025 Budget Accompanying Act ( Budg- etbegleitgesetz 2025) introduced several significant changes in the area of RETT (see 1.3 Income Tax Planning ). Estate transfers involving real estate con - tinue to incur RETT rather than inheritance tax. There are concerns and discussions – albeit not confirmed – that inheritance tax might be reintroduced, but this is rather unlikely under the current government. Under the draft Budget Accompanying Act 2027–2028, a fur - ther increase in the effective real estate income tax burden on the disposal of “old” real estate assets is envisaged (from 4.2% to 6%). The top income tax rate of 55% has been extended to apply until the 2029 fiscal year, while the entry-level rate has been reduced from 25% to 20%, providing relief for lower incomes. However, part of the inflation adjustment mechanism (“cold progression”) will be suspended, slightly limiting automatic tax relief. For
2026, employers may continue to grant employees a tax-exempt employee bonus ( Mitarbeiterprämie ) for recognising special performance. However, the exemption has been significantly reduced to a maxi - mum amount of EUR500 (compared to EUR1,000 in 2025 and EUR3,000 in 2024). The bonus must be granted between July and December 2026. Where a tax-exempt profit participation is also granted in 2026, the combined benefits must not exceed the annual EUR3,000 cap. Overall, the current legislative cycle is dominated by budget consolidation, with the majority of recent and forthcoming measures aimed at increasing revenue rather than granting relief. For instance, the draft Budget Accompanying Act 2027–2028 envisages further measures, including: • a withholding-taxable deemed distribution for open shareholder current accounts that are not settled or converted into an arm’s length loan by the balance sheet date (envisaged to apply to fiscal years end - ing in calendar year 2027); • an increase in the effective real estate income tax burden on the disposal of “old” real estate assets (envisaged to apply to disposals after 31 Decem - ber 2026); and • a new rule allowing the fair market value of shares to be derived from a single comparable sale, which is of particular relevance for contributions of share - holdings to private foundations. 1.7 Transparency and Increased Global Reporting Preventing Abuse/Loopholes in Tax Law Under Austrian tax law, a distinction has to be made between legal structures (accepted for tax purposes) and illegal structures (not accepted for tax purposes). A transaction is not accepted for Austrian tax pur - poses if it either: • violates special provisions of Austrian tax law; or • infringes the Austrian general anti-avoidance rules. Austrian tax law contains two provisions with general anti-avoidance rules.
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