AUSTRIA Trends and Developments Contributed by: Raphael Holzinger, Matthias Jancura and Claudia Synek, Grant Thornton Austria
• Structured assessment replaces case-by-case rules: Austrian tax authorities will adopt the OECD’s new structured approach for determining permanent establishments starting in 2026, moving away from previous case-by-case evaluations. • Working time indicator: the introduction of a 50% working time threshold clarifies that less than half of the annual work conducted in the home office state generally excludes the existence of a per - manent establishment. Previously, Austrian guid - ance used similar but less definitive thresholds (25%/50%). • Economic reason requirement: a permanent estab - lishment now requires a genuine economic reason for the home office location, such as customer contacts or regional business needs. Personal motives, employee retention or mere cost savings do not qualify. • Expanded scope for work locations: the rules apply not only to private homes but also to secondary residences, vacation accommodation and other comparable workplaces. • Exclusion of employer mandate: whether home office work is required by the employer is no longer a determining factor for permanent establishment status in Austria. • Reduced risk for home office permanent establish - ments: the clearer 50% threshold and stricter eco - nomic criteria are expected to result in fewer home office permanent establishments under Austrian practice compared to previous guidelines. • Transition period: Austrian practice will have remained unchanged until the end of 2025, after which the new OECD rules will apply to all relevant double tax treaties. Corporate Tax on Foreign Companies: Higher Minimum Tax Rate Looking ahead for 2026, Austria is set to implement new tax rules for foreign companies with low tax rates. From 2026 onwards, a single, unified tax rate of 15%
will be applied to determine whether a foreign com - pany is “low-taxed”, replacing the previous system of multiple thresholds at 10% and 12.5% in various sec - tions in the Austrian Corporate Income Tax Act. This legislative change, introduced through BGBl I 2025/99 and incorporated into the Austrian Corporate Income Tax Act, aims to simplify compliance and eliminate ambiguity for internationally operating businesses. The reform is part of Austria’s broader commitment to aligning with international standards, closing tax loop - holes and ensuring a fairer corporate tax environment. Conclusion Austria is undergoing significant changes to its tax regime amidst ongoing economic and budgetary pressures. In response to rising inflation – projected at 2.4% for 2026 – and a budget deficit that led the EU to initiate an excessive deficit procedure, the govern - ment has enacted sweeping tax reforms to enhance fairness, modernise administration and boost reve- nues. These legislative updates will impact a broad range of stakeholders, including real estate investors, private foundations, entrepreneurs and international businesses. In summary, Austria’s 2025 tax reforms significantly extend real estate transfer tax to cover indirect share deals, lowering the ownership threshold from 95% to 75% and imposing a 3.5% tax on share transfers at full market value, with reduced rates for family-owned firms. Small businesses and the self-employed will benefit from higher fixed-rate expense deductions and increased VAT thresholds, while private founda - tions face higher entry and interim tax rates, bringing their treatment closer to corporate standards. Inter - nationally, Austria will introduce a unified 15% mini - mum tax rate for foreign subsidiaries and adopt the OECD’s new home office permanent establishment rules, aiming for greater clarity and consistency in tax compliance.
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