AUSTRIA Law and Practice Contributed by: Christoph Urbanek, Irena Gogl-Hassanin and Mario Schiavon, Urbanek Law
estate, VAT may be due on the sale price unless a tax-exempt intra-Community supply or a VAT option (ie, voluntary taxation of the sale) is exer - cised. As a rule, the seller collects the VAT and pays it to the tax office; the buyer can deduct it as input tax if entitled to do so (eg, in the case of a commercial purchase). However, there are exceptions to this, such as the sale of developed land, which may be exempt from VAT under cer - tain conditions, or private sales, which are also not subject to VAT. 8.2 Mitigation of Tax Liability Various structuring strategies are often used to minimise the tax burden when transferring large real estate portfolios. One common method is the share deal, in which the shares in a real estate company (eg, a GmbH or AG) are sold instead of the direct transfer of real estate shares. This means that land transfer tax is only levied on the shares and not directly on the properties them - selves, which in many cases results in a lower tax burden. Another strategy is to carry out real estate restructurings or mergers and acquisi - tions (M&A) in which existing companies with real estate assets are integrated to minimise tax liabilities. The use of holding structures and the avoidance of direct transfers of title to properties can also help to reduce stamp duty and registra - tion fees. 8.3 Municipal Taxes The use of business premises is subject to local business tax, which is levied on the total remu - neration of employees in the business and must be paid by the employer. This tax is a wage tax and is not applied directly to the use of the business premises themselves. Additionally, depending on the municipality, a traffic area levy or property tax may be due for commercially used real estate. There is no specific trade tax (such as the British business rates), but a prop -
erty tax is payable on the value of the land and the buildings on it. Exemptions from the munici - pal tax usually exist for non-profit organisations or public institutions that do not make a profit. 8.4 Income Tax Withholding for Foreign Investors Foreign investors are subject to income tax (for individuals) or corporation tax (for legal entities) at a rate of 25% for corporations and up to 55% for individuals, depending on the income, for rental income from real estate. If the investor has no permanent establishment, the tax is withheld at source – ie, the landlord must pay the tax on the rental income. However, there are exceptions and reliefs – eg, through double taxation agree - ments (DTAs), which allow for a reduction or exemption from tax. Disposals of real estate are subject to income tax or corporate income tax on the profit (ie, the difference between the pur - chase and sale price) and may also be subject to speculation tax of up to 30% under certain conditions if the property is sold within ten years. Private individuals may be exempt from specula - tion tax if the property is used by the owner or if a construction project is realised within certain time limits. 8.5 Tax Benefits There are tax advantages for property owners, particularly in the area of depreciation and oper - ating expenses. Real estate can be depreciated over a period of 40 years with an annual straight- line depreciation of 2.5% of the acquisition val - ue, which reduces taxable income and thus the tax burden. For renovated or converted proper - ties, the depreciation period may also be shorter. Furthermore, operating expenses such as main - tenance costs, interest on loans or management costs can be deducted for tax purposes if the property is rented out. These tax advantages can be particularly important for real estate compa -
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