AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler and Mohamed Hemdan, Schindler Attorneys
2.6 Definition of Permanent Establishment An Austrian permanent establishment (PE) is defined under domestic tax law as a fixed place where a busi - ness is carried out. In particular, this includes: • the place where the management is carried out (ie, a place of management); • branches, warehouses, purchasing and sales offic - es, and other establishments used by the entrepre - neur or a permanent representative to carry on the business; or • construction or installation sites that last, or are expected to last, more than six months. Austrian tax authorities generally follow the OECD Model Tax Convention and its Commentary when interpreting the PE concept. Most recently, follow - ing the 2025 update to the OECD Commentary, the Austrian MoF confirmed that the new Commentary is applicable in Austria, which is particularly relevant for home-office PE cases. However, deviations in the PE definition may arise under certain DTTs (eg, few DTTs include provisions regarding the establishment of a service PE). Addi - tionally, the domestic PE concept may be consid - ered broader than the PE as defined under the OECD Model Tax Convention, since auxiliary or preparatory establishments ( Hilfsbetriebsstätten ) are not generally excluded under Austrian law. This means that a PE under the OECD Model Tax Convention will always constitute a PE under the Austrian definition, but not vice versa. 3. Taxation of Cross-Border Income 3.1 Income From Immovable Property In Austria, income from immovable property (rental income and capital gains derived from the sale of immovable property) is taxable for both residents and non-residents, as follows. Residents Rental income is taxed as part of the individual’s annu - al taxable income, which is subject to the progressive income tax rates. Expenses incurred in generating the rental income are generally deductible, whereas spe -
cific rules may apply, in particular to depreciation of buildings as well as to renovation and maintenance costs. The net rental result is taxed together with the individual’s other taxable income in the annual income tax assessment. Technically, adhering to the worldwide taxation prin - ciple, rental income from non-Austrian immovable property is also subject to tax in Austria for resident individuals (and corporations). However, where a DTT is applicable, the right to tax such rental income is typically assigned to the state in which the immovable property is located. Capital gains derived from the disposal of immov - able property (real estate capital gains) are generally subject to a special tax rate of 30%; in this case, the gain is taxed separately and does not form part of the individual’s regular income tax assessment. However, the individual may opt to have the gain taxed at the standard progressive income tax rates instead. For resident corporations, rental income from immov - able property is subject to the standard corporate income tax rate of 23%. The same applies to real estate capital gains, which are likewise taxed at the corporate income tax rate of 23%. For corporations, income from immovable property is assessed exclusively via assessment within the cor - porate income tax return (unlike in the case of individ - uals, where a self-calculation mechanism may apply for real estate capital gains). Non-Residents Non-resident individuals are generally required to file an income tax return if their taxable Austrian-source income exceeds EUR2,462, unless a withholding tax has been applied that represents the final settlement of the tax liability. In the case of rental income from immovable property, no withholding tax is typically levied (unlike, for example, royalties and fees for the use of know-how). Consequently, any tax due on such rental income from immovable property that is located in Austria is generally collected via the regular assess - ment procedure.
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