Direct purchase of real estate

This section shows the most important tax implications of the direct purchase of real estate. Initially, the impact for resident individuals and non-resident individuals are explained. Then the impact for resident companies and non-resident companies are described.

Resident Individuals

Transfer Taxes

Individuals that acquire Austrian real estate are subject to land transfer taxes. The market value of the immovable property (Grundstückswert as defined in the Real Estate Acquisition Tax Act) or the value of the consideration for the real estate (usually the purchase price of the real estate) is the assessment basis for the land transfer tax. The tax rate varies from 0.5% up to 3.5%, depending on the relationship between the involved parties and whether it was a gifted transfer or not.

Value-added tax

The supply of real estate is generally exempt from VAT. However, it is also allowed to opt for VAT taxation (20% VAT rate). In this case, there would be the possibility of input VAT deduction.

Deductibility of costs

Depreciation costs, interest costs, maintenance costs, and operating costs are deductible from rental income. The acquisition or building costs of real estate can be depreciated annually by up to 1.5% if used for residential purposes and up to 2.5% if used for business purposes if there is no evidence of the useful life. An accelerated depreciation could be applied to buildings that have been purchased or built after 30.06.2020: In the first depreciation year, the depreciation percentage is at the utmost three times the "normally" applicable rate. In the second year, it is at the utmost two times the usual rate (i.e. 7.5% for business purposes and 4.5% for residential purposes in the first year and 5% and 3% respectively in the second year). After that, the normal rates apply (as stated above).

Non-resident individuals

Non-resident individuals are treated in the same way as resident individuals (provided that the real estate is located in Austria).

Resident companies

Transfer Taxes

The acquisition of Austrian real estate is subject to transfer taxes. The tariff varies from 0.5% (e.g. contribution of real estate) up to 3.5%. The transfer tax is normally payable by the purchaser. The transfer tax is not directly deductible as business costs. However, it is part of the acquisition costs.

Value-added tax

The supply of real estate is generally exempt from VAT. However, it is possible to opt for VAT taxation (20% VAT rate) in certain circumstances. In this case, there would be the possibility of input VAT deduction.

Deductibility of costs

Depreciation costs, interest costs, maintenance costs and operating costs are deductible from rental income. The acquisition and building costs of real estate can be depreciated annually by up to 1.5% if used for residential purposes and up to 2.5% if used for business purposes if there is no evidence of the useful life. An accelerated depreciation could be applied to buildings that have been purchased or built after 30.06.2020: In the first depreciation year, the depreciation percentage is at the utmost three times the "normally" applicable rate. In the second year, it is at the utmost two times the usual rate (i.e. 7.5% for business purposes and 4.5% for residential purposes in the first year and 5% and 3% respectively in the second year). After that, the normal rates apply (as stated above).

Non-resident companies

Non-resident companies are treated in the same way as resident companies as income generated from immovable property is taxable in Austria. The non-resident company is, therefore, subject to tax in Austria with the income generated in Austria only.

Main advantages

In contrast to the indirect purchase of real estate, the surplus over the rental income can be returned to the investor’s home country without owing dividend withholding tax. It will, however, be subject to Austrian (corporate) income tax. Interest costs will usually be deductible from real estate income.

 

Indirect purchase of real estate

This section shows the most important tax implications of the indirect purchase of real estate (shares). Initially, the impact on resident individuals and non-resident individuals are illustrated. Then the impact for resident companies and non-resident companies are described.

Resident individuals

Transfer taxes

If at least 95% of the shares of a company that owns real estate are transferred to new shareholders, the acquisition is subject to transfer tax. The market value of the immovable property (Grundstückswert) is the assessment basis for the transfer tax. The tax rate for the transfer of shares of a company holding real estate is 0.5%.

Personal income tax

Individuals who hold shares in an Austrian company generate capital income that is subjected to a 27.5% capital gains tax rate.

Dividend withholding tax

Shareholders of an Austrian company are subject to a 27.5% dividend withholding tax in case of the distribution of dividend.

Deductibility of costs

As the distribution of dividends is qualified as capital income, no costs are deductible. Costs would only be deductible if the individual would renounce the special capital gains tax rate of 27.5% and instead opt for the standard income tax rates on their entire capital income.

Non-resident individuals

Non-resident individuals are treated in the same manner as resident individuals.

Resident companies

Transfer taxes

Usually, a share transfer is not subject to transfer taxes. However, if at least 95% of the shares of a company that owns real estate are transferred to new shareholders, the acquisition is subject to land transfer tax. The market value of the immovable property (Grundstückswert) is the assessment basis for the transfer tax at a rate of 0.5 %.

Corporate income tax

Rental income generated by a corporation is qualified as business income which is subject to corporate income tax at a rate of 25% (24% in 2023 and 23% as of 2024 onwards). Dividends paid to another Austrian company are generally exempt from withholding tax.

Losses

The unused losses of an Austrian real estate company can be carried forward for an offset against future profits of this Austrian real estate company. However, the carry forward may be denied in case of a shell company acquisition. The losses can be used in future years at an annual maximum of 75% of the profit per year without any other limitation.

Group relief

Under Austrian law, it is possible to form a fiscal unity if the holding company owns more than 50% of the shares in its subsidiaries. Furthermore, it is possible to become a group member if a group member holds more than 50% of the shares through its subsidiaries. A fiscal unity can only be formed in case the holding company is resident in Austria. Non-resident corporations can also be part of the fiscal unity; contributing only their proportional losses to the group result. The advantage of such group taxation is, that the results of all members are summed up for one final tax assessment basis. Losses from members can therefore be used immediately. However, used foreign losses must be considered in the subsequent taxation, if the foreign company generates profits in future years.

Non-resident companies

Non-resident companies are treated in the same manner as resident companies. However, a non-resident company cannot form a fiscal unity (= group) as the holding company but can be part of it.