AUSTRIA Trends and Developments Contributed by: Raphael Holzinger, Matthias Jancura and Claudia Synek, Grant Thornton Austria
tion, raising the initial tax burden on founders when establishing or adding to a foundation. • Interim taxation on income within foundations: Austrian private foundations must pay interim tax on income such as interest and capital gains that are earned within the foundation, even before any distributions are made to beneficiaries. This sys - tem ensures that investment income is subject to taxation annually, rather than being deferred until payouts occur. • Higher interim tax rate from 2026: the rate for interim tax, which was previously set at Austria’s general corporate tax rate (23% since 2024), will increase to 27.5% for the 2026 assessment period and onwards. This means that foundations will face a higher annual tax on retained investment income, making it more costly to accumulate profits within the structure. • Policy objective: by raising the interim tax rate, the Austrian government aims to discourage the long-term retention of untaxed profits within private foundations. The measure is intended to promote more frequent taxation of foundation income, align - ing foundation taxation more closely with corporate standards and encouraging timely tax payments. Simplified Business Expense Deductions: Higher Limits and Rates Austria has introduced measures to simplify the pro - cess for small businesses and self-employed individu - als to claim business expenses. Effective from 2025, entities with annual sales below EUR320,000 – rising to EUR420,000 in 2026 – may utilise a streamlined method for expense deductions. The permissible per - centage of sales that can be claimed as expenses will have increased to 13.5% in 2025 and 15% in 2026. Additionally, both the maximum deductible amount and the recoverable VAT will be raised annually. These adjustments are intended to reduce administrative burdens and enhance tax savings for eligible busi - nesses. Austria Temporarily Doubles Investment Tax Allowance to Boost Economy The temporary increase of the investment allowance ( investitionsbedingter Freibetrag or IFB) under Sec - tion 11 ITA in conjunction with Section 124b Z 480 ITA, as enacted by BGBl I 2025/79, aims to stimu -
late new investments and boost economic activity in Austria. This measure specifically raises the eligible percentage for investments made between 1 Novem - ber 2025 and 31 December 2026. Special provisions apply to investments in ecological assets, and there are detailed rules for allocating acquisition or produc - tion costs across fiscal periods. The adaptation is as follows: • the IFB is temporarily increased from 10% to 20% for qualifying investments made after 31 October 2025 and before 1 January 2027; • for assets related to ecological improvements, the allowance rises from 15% to 22% within the same timeframe; • a careful distinction must be made in practice to identify which acquisition or production costs are eligible for the increased allowance; and • if the investment is completed after 31 December 2026, the increased allowance applies only if the IFB was already claimed for portions activated dur - ing the eligible period. Update to Research Premium On 18 August 2025, Austria’s Federal Ministry of Finance released the draft of the 2025 Research Pre - mium Guidelines (FoPR 2025), aiming to clarify and expand current practices for research premium eligi - bility. The consultation period ended on 26 September 2025, with official publication expected in 2026. Below is a summary of the key features and clarifications outlined in the FoPR 2025 draft, highlighting the most relevant updates for businesses engaged in research and development (R&D): • the FoPR 2025 offer clear guidance on distinguish - ing eligible R&D activities, especially in industrial engineering, patent work, pilot plants, prototypes and software development. • they provide precise rules for in-house R&D, domestic and foreign research activities, and auxil - iary/supporting services; • special provisions address research collaborations and the specifics of pharmaceutical research; • they clarify how to calculate the research premium base, including personnel expenses, financing costs, overhead, and notional entrepreneurial sal - ary;
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