Austria: The New Real Estate Income Tax - Yet Another Tax to Pay
→ Ayla Ilicali
→ Bernadette Zelger
The Austrian Stability Act 2012 (Stabilitätsgesetz 2012) made the private sale of real estate income tax dutiable as of 1 April 2012 irrespective of any speculation period (Spekulationsfrist). The tax system was thereby aligned with the new capital gains tax which equally became effective as of 1 April 2012. By paying 25% of special tax (capital gains tax respectively real estate income tax) both types of income are finally taxed (Endbesteuerung).
Up until the effective date of the new Austrian Stability Act 2012, the sale of non-business (private) real estate was only dutiable within a speculation period of 10 years from the acquisition of the property. But the then-triggered tax, colloquially called “speculation tax”, was no special tax. It was the “regular” progressive income tax to be paid on profits from speculative transactions. Exemptions were granted for properties continuously used as main residence for at least two years from the acquisition of the real estate and for self-built buildings (but not the subjacent property).
New tax rate for real estate acquired after 1 April 2002…
The new §§ 30 et seq. of the Austrian Income Tax Act foresee a final tax rate of 25% for all gains from private sales of real estate acquired after 1 April 2002 (so-called “New Assets”, Neuvermögen). Subject to the real estate income tax is the difference between the sale proceeds and the acquisition costs of the property. This profit on realisation does not add to other dutiable income; it is only taxed as real estate income tax. The gain may, however, be reduced by 2% per year for inflation starting with the 11th year after acquisition. A maximum reduction of 50% is permitted.
…and before 1 April 2002
Real estate acquired before 1 April 2002 (so-called “Old Assets”, Altvermögen) is subject to a reduced tax rate of 15% of the sale proceeds if the property was rededicated (Umwidmung) from grassland (Grünland) to constructible land (Bauland) after 31 December 1987. If there was no such rededication, or if the rededication took place before 31 December 1987, the applicable tax rate is further reduced to 3.5% of the sale proceeds. No compensation for inflation is granted for Old Assets.
Tax exemptions are still granted for properties continuously used as permanent residence by the seller for at least two years after acquisition, or for at least five years during the past 10 years if (in both cases) the property is no longer used as a permanent residence after the sale. The same is true for self-built buildings if they did not generate income during the past 10 years. Also, the sale of real estate because of, or for the avoidance of, a public intervention (eg, expropriation) is exempt from real estate income tax.
In summary, the new real estate transfer tax may bring advantages for private owners of New Assets as their profits from a sale were subject to the progressive income tax rate (of up to 50%) under the previous statutory provisions and are now taxable at a fixed rate of 25% of the capital gain. However, Old Asset owners who were entitled to a tax-free sale before the Austrian Stability Act 2012 have yet another tax to pay.