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 11^th 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.

Due to the abrogation of the speculation period the tax free sale of real estate by private sellers is a thing of the past. All sales are now subject to the new real estate income tax. Tax exemptions are granted for principal residences and self-built homes.