AUSTRIA Trends and Developments Contributed by: Raphael Holzinger, Matthias Jancura and Claudia Synek, Grant Thornton Austria
• procedural clarifications are included for apply - ing, making changes post-application, or partial determinations; • the FoPR 2025 should replace prior guidance in the income tax guidelines and should primarily apply to premium applications from calendar year 2026 onwards, but can also apply to audits of previous periods and unresolved cases, unless older rules are more favourable; and • companies are encouraged to familiarise them - selves with the FoPR 2025 to maximise their fund - ing potential and ensure correct premium calcula - tion. Changes in Value-Added Tax (VAT) Restricted input VAT deduction on luxury properties Austria implemented a new restriction on input VAT deductions for luxury rental properties. If properties acquired for more than EUR2 million within the past five years are rented out, deductions for input VAT are no longer permitted due to a “restricted tax exemp - tion”. This provision specifically targets high-value real estate transactions and is intended to close existing loopholes in the tax system. Consequently, owners of luxury rental properties are likely to experience an increase in their overall tax liability. Austria raises small business VAT exemption threshold and simplifies rules in 2025 tax reform Austria’s 2025 tax reform introduces significant improvements for small businesses and self-employed individuals, especially through changes to the Klein- unternehmerregelung (small business VAT exemption). Notably, these updates were introduced and stated taking effect in 2025, aiming to make tax compliance easier and more flexible through a higher turnover threshold and simplified calculation rules. Addition - ally, the reform enhances the cross-border applicabil - ity of the exemption within the EU, providing greater opportunities for Austrian entrepreneurs operating in other member states. The following adaptations were introduced. • The annual turnover threshold for small businesses will increase from EUR35,000 to EUR55,000 start - ing in 2025. This means that businesses whose total gross annual sales remain below EUR55,000
will continue to benefit from the VAT exemption, making it easier for more entrepreneurs and small firms to qualify for simplified tax treatment. • Only turnover from the current and previous year is now considered for the exemption calculation. Under the revised rules, the VAT exemption eligi - bility is determined solely by adding up the sales figures from the ongoing year and the year before. This streamlines the process compared to previ - ous, more complex calculations. • The VAT exemption applies only to the portion of turnover below the threshold; any excess is subject to VAT. If a business’s sales exceed the EUR55,000 threshold, VAT will only be charged on the por - tion that goes beyond the limit. The turnover up to EUR55,000 remains exempt, preventing retroactive taxation on earlier sales within the year. • If the threshold is exceeded by up to 10%, the exemption continues until the end of the year; if exceeded by more than 10%, VAT applies immedi - ately to the excess. For minor threshold breaches (up to EUR5,500 above the EUR55,000 limit), the VAT exemption remains valid for the rest of the year, with VAT liability starting only in the following year. If the excess is greater than 10%, VAT must be paid immediately, but only on the amount above the threshold. Additionally, the VAT exemption is now recognised EU- wide, with a union-wide turnover cap of EUR100,000 for cross-border activities, expanding opportuni - ties for Austrian entrepreneurs operating in other EU member states. In this regard, a special registration has to be carried out in the Austrian online tax portal (FinanzOnline). Austria Adopts the OECD’s New Home Office Permanent Establishment Rules From 2026 The November 2025 update to the OECD Commen - tary on Article 5 introduces important new guidance on defining permanent establishments in the context of home office arrangements. As cross-border tele - work becomes more prevalent, these changes aim to provide greater clarity and certainty for both employ - ers and tax authorities, with Austria set to adopt the revised standards starting in 2026. Austrian tax authorities aim to revise the adaption as follows.
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