AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler and Mohamed Hemdan, Schindler Attorneys
Capital gains derived from the disposal of Austrian immovable property (real estate capital gains) are subject to a special tax rate of 30%. However, non- resident individuals also have the option of having the gain taxed at the standard progressive income tax rates via assessment. For non-resident corporations, rental income as well as real estate capital gains derived from Austrian immovable property are taxed at the standard corpo - rate income tax rate of 23%. 3.2 Business Profits Business profits are taxable in Austria, with a dis - tinction drawn between individuals (subject to the progressive income tax rates) and corporate entities (subject to the corporate income tax rate of 23%). Partnerships are treated as tax-transparent for income tax purposes. Therefore, profits are allocated to the partners and taxed at their level, either at progressive income tax rates (for individual partners) or at 23% corporate income tax rate (for corporate partners). Some distinctions can, however, be made between residents and non-residents, as follows. Residents Business profits derived by individuals are subject to the progressive income tax rates and are taxed together with the individual’s other taxable income in the annual income tax assessment. In general, profits for small businesses (with annual turnover up to EUR700,000) and certain freelance professionals (eg, lawyers, tax advisers, artists and medical doctors) are determined on a cash basis, whereas larger businesses calculate their profits using the accrual accounting method. Business profits derived by corporations are subject to the corporate income tax rate of 23% and are taxed as part of the annual corporate income tax assess - ment (regardless of whether profits are retained or distributed). Non-Residents With regard to business profits derived by non-resi - dent individuals, a sufficient nexus to Austria is gen - erally required. In principle, non-residents are taxed
on business/commercial income only if the activity is carried out through an Austrian PE, through a depend - ent agent in Austria or in connection with Austrian immovable property. Certain categories of income form exceptions and are taxable even without the mentioned nexuses, such as income from technical advisory services, cross-border hiring out of labour, and income derived by artists or sportspersons. Non-resident individuals are generally required to file an income tax return in respect of Austrian-source business profits if their taxable Austrian-source income exceeds EUR2,462, unless a withholding tax has been applied that constitutes a final settlement of the tax liability (see 2.4 Taxation of Non-Resident Individuals ). Non-resident corporations are subject to limited tax liability in Austria with respect to any Austrian-source business income (ie, unlike for individuals, there is no minimum income threshold), typically where the busi - ness is carried on through an Austrian PE. Such profits are subject to a corporate income tax rate of 23% and are generally collected via assessment, unless specific withholding rules apply (see 2.4 Taxation of Non-Resident Individuals ). 3.3 Passive Income Dividends The withholding tax (WHT) is principally levied on divi - dends at the applicable tax rate for individuals (27.5%) or corporations (23%). EU corporations that are subject to a limited tax liabil - ity benefit from the EU Parent-Subsidiary Directive, under which they may obtain a 100% tax exemption for dividends. There is no obligation to withhold and pay WHT in Austria (so-called relief at source) if: • a profit distribution is made by an Austrian corpo - ration; • the EU recipient corporation (parent company) has a form listed in the Directive; • the EU recipient corporation holds at least 10% of the share capital of the Austrian subsidiary; and • a minimum holding period of one year is observed.
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