Cross-border planning for real estate: Austria

Cross-border planning for real estate: Austria Abstract This article deals with the cross-border tax issues resulting from (i) the purchase of real estate, (ii) the holding of this real estate and its renting out to lessees, and (iii) a sale of the real estate at some point in time in the future, as well as (iv) gratuitous transfers through gifts or by way of death, and all of this under the tax law of Austria. The real estate may be purchased directly or indirectly through the acquisition of shares in a local company holding the real estate. The purchaser of the real estate may be a non-resident company or a non-resident individual. Introduction The four combinations mentioned in the Abstract may be depicted graphically as follows. View largeDownload slide View largeDownload slide Acquisition of real estate Direct acquisition Real estate transfer tax Pursuant to the Austrian Real Estate Transfer Tax Act (Grunderwerbsteuergesetz), the transfer of Austrian real estate is subject to Austrian real estate transfer tax at a tax rate of generally 3.5 per cent.1 The tax basis is the value of the consideration, but at least the fair market value (Grundstückswert).2 The term ‘consideration’ also comprises (i) any other services that the buyer grants to the seller in addition to the consideration agreed upon and (ii) any restrictions on the property reserved by the seller.3 Encumbrances on the land that are taken over by the buyer by virtue of law constitute part of the consideration.4 Real estate transfer tax is in practice borne by the buyer. Land register fee Pursuant to the Austrian Court Fees Act (Gerichtsgebührengesetz), the registration of ownership of real estate in the Austrian land register (Grundbuch) will—apart from nominal filing fees—trigger a 1.1 per cent land register fee (Eintragungsgebühr).5 Generally, the basis of this fee is the purchase price that would be attained in case of a disposal in the normal course of business.6 As long as there are no extraordinary circumstances that obviously had an impact on the consideration, the basis of the fee is the consideration, plus the other services that the buyer grants to the seller and any restrictions on the property reserved by the seller; encumbrances on the land that are taken over by the buyer by virtue of law constitute part of the consideration.7 Land register fees are also triggered in the case of the registration of a mortgage in the Austrian land register: here, a 1.2 per cent registration fee falls due, calculated on the basis of the mortgage.8 Land register fees (both types) are in practice borne by the buyer. Value-added tax The supply of goods and services in Austria by an entrepreneur (Unternehmer) against consideration is subject to Austrian value-added tax. The general tax rate is 20 per cent. The term ‘entrepreneur’ means any entity which carries out an economic activity in a sustainable manner in order to achieve revenues, even if it does not aim at achieving profits. An entrepreneur is generally entitled to claim value-added tax paid to a supplier as input tax (Vorsteuer), provided that the goods or services purchased relate to a taxable activity. If an entrepreneur sells real estate, such sale is in principle exempt from value-added tax.9 However, the seller may—and in practice normally will—opt for taxation,10 in which case the regular tax rate of 20 per cent applies. Stamp duty The Austrian Stamp Duty Act (Gebührengesetz) contains in section 33 an exhaustive catalogue of legal transactions which are subject to stamp duty (Rechtsgeschäftsgebühren) provided that (i) a written deed (Urkunde) is established and (ii) a certain nexus to Austria is given. Such legal transactions include, inter alia, mortgage agreements (subject to a rate of 1 per cent).11 Stamp duty would normally have to be borne by the mortgagor. Indirect acquisition Real estate transfer tax In case of indirect acquisitions, the acquisition of shares in an Austrian (or non-Austrian) company holding Austrian real estate is subject to Austrian real estate transfer tax at a tax rate of 0.5 per cent, assessed on the fair market value, provided that at least 95 per cent of the shares are unified in the hand of one single shareholder or in the hand of shareholders forming a tax group within the meaning of section 9 of the Austrian Corporate Income Tax Act (Körperschaftsteuergesetz).12 In this context it should be noted that shares held on trust by a nominee (Treuhänder) are to be attributed to the principal. Thus, taking this into account, real estate transfer tax could be avoided if, for example, two separate buyers (not being nominees or members of a tax group) acquire 90 per cent and 10 per cent, respectively, of the shares. Land register fee In case of indirect acquisitions, as the ownership of the real estate in the Austrian land register will not change, no land register fee is triggered here. Value-added tax In the context of indirect acquisitions of real estate it should be noted that the purchase of shares in a company is exempt from value-added tax.13 Holding of real estate Direct holding (Corporate) income tax Regarding the tax consequences of non-residents holding Austrian real estate, it has to be distinguished between individuals and corporations: Individuals subject to limited income tax liability in Austria are, inter alia, taxable on rental income from Austrian real estate.14 This is subject to the progressive Austrian income tax, with the following rate bands applying: (i) up to and including EUR 11,000: 0 per cent; (ii) over EUR 11,000 up to and including EUR 18,000: 25 per cent; (iii) over EUR 18,000 up to and including EUR 31,000: 35 per cent; (iv) over EUR 31,000 up to and including EUR 60,000: 42 per cent; (v) over EUR 60,000 up to and including EUR 90,000: 48 per cent; and (vi) over EUR 90,000: 50 per cent.15 Additionally, for the years 2016–2020 a new maximum tax rate of 55 per cent shall become applicable to income exceeding an amount of EUR 1 million. Please note that only the net income is taxable, meaning that expenses in relation to the real estate (eg depreciation of buildings, maintenance expenses, and interest payable) are generally deductible from the revenues for Austrian tax purposes. The general depreciation rate for buildings held as non-business assets (Privatvermögen) amounts to 1.5 per cent of the acquisition or manufacturing costs.16 Corporations subject to limited corporate income tax liability in Austria are, inter alia, taxable on rental income from Austrian real estate.17 This is subject to the flat tax rate of 25 per cent.18 Again, only the net income will be taxable, meaning that expenses in relation to the real estate are deductible from the revenues. The general depreciation rate for buildings held as business assets (Betriebsvermögen) is 2.5 per cent of the acquisition or manufacturing costs.19 In addition to domestic tax law, also the provisions of a double taxation treaty concluded between Austria and the state of residence of the investor have to be analysed. Pursuant thereto, the taxation right for rental income earned by a treaty resident (whether individual or corporation) from immovable property located in Austria is always allocated to the state in which the immovable property is situated, thus Austria.20 Such Austrian source income is to be exempted from tax in the other state, or the Austrian tax is to be credited against tax in the other state.21 Real estate tax Pursuant to the Austrian Real Estate Tax Act (Grundsteuergesetz), municipalities levy a recurrent real estate tax (Grundsteuer) on real estate situated in Austria. The tax basis is the tax value (Einheitswert) of the real estate. The tax value is in no relation to the fair market value, since it is in general artificially low (in most cases somewhere between 0.1 per cent and 10 per cent of the fair market value). The tax rate is calculated by multiplying the general rate (Steuermesszahl) with a multiplier (Hebesatz) determined by the respective municipality. The general rate depends on the type of real estate and is between 0.05 per cent and 0.2 per cent. The multiplier may not exceed 500 per cent. Thus, the tax rate is 1 per cent in the worst case. Value-added tax The lease of real estate for residential purposes is subject to a reduced tax rate of 10 per cent.22 The lease of real estate for other purposes (eg leases of office premises) is in principle exempt from value-added tax.23 However, the lessor may opt for taxation,24 in which case the regular tax rate of 20 per cent applies. This could make sense in order not to lose the right to claim a refund of input tax, if any, in connection with the acquisition of real estate. While value-added tax is paid by the lessee in addition to the net rent, the lessor will have to remit it to its competent tax office, so that it does not constitute a burden for the lessor. Stamp duty In connection with the conclusion of a rental agreement in written form, generally Austrian stamp duty at a rate of 1 per cent falls due.25 The tax base is (i) three times the annual consideration in case of a rental contract with unlimited duration; and (ii) the value of the annual consideration times the duration of the rental contract (but at most 18) in case of a rental contract with limited duration). Stamp duty is typically to be borne by the lessee. Indirect holding (Corporate) income tax In the case of an indirect acquisition (ie acquisition of Austrian company holding Austrian real estate), the following applies: Corporations subject to unlimited corporate income tax liability in Austria are taxable (at a rate of 25 per cent) on their worldwide income. A corporation’s tax basis is the profit as shown in its financial statements.26 In addition, where mandatory tax provisions deviate from financial accounting rules, adjustments have to be made. As a general rule, expenses incurred in acquiring, securing, and maintaining taxable income are tax-deductible. Thus, in the case of rental income, for example, operating costs, interest expenses, depreciation, royalties, and other costs may be deducted. Interest paid may normally be deducted except if paid to a related party corporation subject to a low rate of tax.27 Depreciation is to be calculated on a linear basis, the rate is 2.5 per cent in general and 1.5 per cent in case of buildings rented out for residential purposes.28 Further, irrespective of its income, a corporation is subject to a minimum corporate income tax amounting to (i) EUR 500 per annum for the first five years after they have become subject to unlimited corporate income tax liability; (ii) EUR 1000 per annum for the next five years; and (iii) EUR 1750 per annum, thereafter. Any minimum corporate income tax is creditable against the final amount of corporate income tax assessed for future tax years. Other taxes Regarding real estate tax, value-added tax and stamp duty, please see sections ‘Real estate tax’, ‘Value-added tax’, and ‘Stamp duty’ above. Sale of real estate Direct sale (Corporate) income tax Non-residents of Austria are, inter alia, taxable on capital gains from Austrian real estate.29 In case of individuals, these are subject to a flat rate of 30 per cent;30 an option exists for taxation at the progressive income tax rate.31 In case of corporations, they are subject to a flat rate of 25 per cent.32 The taxable income is calculated as the difference between the sales price and the acquisition cost.33 Expenses associated with the sale are in general not deductible in case of individuals.34 Pursuant to Article 13(1) of the OECD Model Convention (MC), gains from the alienation of immovable property which is situated in Austria may be taxed in Austria. Such Austrian income is to be either exempted from tax in the state of residence of the seller, or the Austrian tax is to be credited against the tax in the state of residence of the seller. Real estate transfer tax As already mentioned above in section ‘Real estate transfer tax’, the sale of real estate will trigger real estate transfer tax. Land register fee As already mentioned above in section ‘Land register fee’, the direct sale of real estate will trigger land register fee. Value-added tax As already mentioned above in section ‘Value-added tax’, the sale of real estate will in principle be exempt from value-added tax, with the seller having an option for taxability at 20 per cent. Indirect sale (Corporate) income tax In case of non-residents selling shares in an Austrian corporation, capital gains are subject to 27.5 per cent income tax (in case of individuals) or 25 per cent Austrian corporate income tax (in case of corporations), provided that the seller has at any point in time in the last five years held a stake in such subsidiary of at least 1 per cent.35 The taxable capital gains are in general calculated as the difference between the sales price and the (initial as well as any later) acquisition costs. Pursuant to Article 13(5) of the OECD MC, gains realized by a resident of one state from the alienation of shares in a company resident in the other state (ie Austria) may only be taxed in the first state. However, many Austrian double taxation treaties contain a provision corresponding to Article 13(4) of the OECD MC, which would allow source taxation in Austria. Real estate transfer tax The sale of shares in a company holding Austrian real estate might—depending on the circumstances—trigger real estate transfer tax (see section ‘Real estate transfer tax’). Land register fee The sale of shares in a company holding Austrian real estate will not trigger land register fee. Value-added tax The sale of shares in a company holding Austrian real estate will not trigger value-added tax. Gratuitous transfer of real estate Direct transfer Austria does not anymore levy a comprehensive inheritance and gift tax. However, the gratuitous transfer of Austrian real estate triggers real estate transfer tax,36 with the following tax rate bands applying:37 (i) up to and including EUR 250,000: 0.5 per cent; (ii) over EUR 250,000 up to and including EUR 400,000: 2 per cent; and (iii) over EUR 400,000: 3.5 per cent of the fair market value. In addition, the re-registration of ownership in the Austrian land register will—apart from nominal filing fees—again trigger a 1.1 per cent land register fee. Indirect transfer As a side remark please note that if—by way of inheritance or gift—at least 95 per cent of the shares in a company holding Austrian real estate are acquired, then Austrian real estate transfer tax at a tax rate of 0.5 per cent, assessed on the fair market value, will fall due as already stated above in section ‘Real estate transfer tax’. Niklas J.R.M. Schmidt, is a Partner at Wolf Theiss in Vienna, Austria. Footnotes 1. cf s 1(1)(1) in connection with s 7(1)(3) of the Austrian Real Estate Transfer Tax Act. 2. cf s 4(1) of the Austrian Real Estate Transfer Tax Act. 3. cf s 5(1)(1) of the Austrian Real Estate Transfer Tax Act. 4. cf s 5(2)(2) of the Austrian Real Estate Transfer Tax Act. 5. cf TP 9 of the Austrian Court Fees Act. 6. cf s 26(1) of the Austrian Court Fees Act. 7. cf s 26(3)(1) of the Austrian Court Fees Act. 8. cf TP 9 of the Austrian Court Fees Act. 9. cf s 6(1)(9)(a) of the Austrian Value Added Tax Act (Umsatzsteuergesetz). 10. cf s 6(2) of the Austrian Value Added Tax Act. 11. cf TP 18 of the Austrian Stamp Duty Act. 12. cf s 1(3) in connection with ss 4(1) and 7(1)(2)(c) of the Austrian Real Estate Transfer Tax Act. 13. cf s 6(1)(8)(g) of the Austrian Value Added Tax Act. 14. cf s 98(1)(6) of the Austrian Income Tax Act (Einkommensteuergesetz). 15. cf s 33(1) of the Austrian Income Tax Act. 16. cf s 16(1)(8)(d) of the Austrian Income Tax Act, which contains a refutable presumption, pursuant to which 60% of the acquisition costs are to be allocated to the (depreciable) building, while 40% are attributable to the (non-depreciable) land. 17. cf ss 21(1)(1) and 21(1)(3) of the Austrian Corporate Income Tax Act as well as ss 98(1)(3) and 98(1)(6) of the Austrian Income Tax Act. 18. cf s 22(1) of the Austrian Corporate Income Tax Act. 19. cf s 8(1) of the Austrian Income Tax Act. The rate is 1.5% in case of buildings rented out for residential purposes. 20. cf art 6(1) of the OECD MC. 21. cf art 23 of the OECD MC. 22. cf s 10(2)(3a) of the Austrian Value Added Tax Act. 23. cf s 6(1)(16) of the Austrian Value Added Tax Act. 24. cf s 6(2) of the Austrian Value Added Tax Act. 25. cf s 33 TP 5 of the Austrian Stamp Duty Act. 26. cf s 7(2) of the Austrian Corporate Income Tax Act; s 5(1) of the Austrian Income Tax Act. 27. cf s 12(1)(10) of the Austrian Corporate Income Tax Act. 28. cf s 8(1) of the Austrian Income Tax Act. 29. cf s 98(1)(7) in connection with s 30(1) of the Austrian Income Tax Act. 30. cf s 30a of the Austrian Income Tax Act. 31. cf s 30a(2) of the Austrian Income Tax Act. 32. cf s 22(1) of the Austrian Corporate Income Tax Act. 33. In case of individuals, the acquisition cost is to be increased by certain larger maintenance costs (Instandsetzungsaufwendungen) and to be reduced by depreciation. 34. cf s 30(3) of the Austrian Income Tax Act. 35. cf s 98(1)(5)(e) of the Austrian Income Tax Act regarding individuals and s 21(1)(1) of the Austrian Corporate Income Tax Act in connection with s 98(1)(5)(e) of the Austrian Income Tax Act regarding corporations. 36. cf s 1(1) of the Austrian Real Estate Transfer Tax Act. 37. cf s 7(1)(2)(a) of the Austrian Real Estate Transfer Tax Act. © The Author (2017). Published by Oxford University Press. All rights reserved. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Trusts & Trustees Oxford University Press

Cross-border planning for real estate: Austria

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Oxford University Press
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© The Author (2017). Published by Oxford University Press. All rights reserved.
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1752-2110
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10.1093/tandt/ttx188
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Abstract

Abstract This article deals with the cross-border tax issues resulting from (i) the purchase of real estate, (ii) the holding of this real estate and its renting out to lessees, and (iii) a sale of the real estate at some point in time in the future, as well as (iv) gratuitous transfers through gifts or by way of death, and all of this under the tax law of Austria. The real estate may be purchased directly or indirectly through the acquisition of shares in a local company holding the real estate. The purchaser of the real estate may be a non-resident company or a non-resident individual. Introduction The four combinations mentioned in the Abstract may be depicted graphically as follows. View largeDownload slide View largeDownload slide Acquisition of real estate Direct acquisition Real estate transfer tax Pursuant to the Austrian Real Estate Transfer Tax Act (Grunderwerbsteuergesetz), the transfer of Austrian real estate is subject to Austrian real estate transfer tax at a tax rate of generally 3.5 per cent.1 The tax basis is the value of the consideration, but at least the fair market value (Grundstückswert).2 The term ‘consideration’ also comprises (i) any other services that the buyer grants to the seller in addition to the consideration agreed upon and (ii) any restrictions on the property reserved by the seller.3 Encumbrances on the land that are taken over by the buyer by virtue of law constitute part of the consideration.4 Real estate transfer tax is in practice borne by the buyer. Land register fee Pursuant to the Austrian Court Fees Act (Gerichtsgebührengesetz), the registration of ownership of real estate in the Austrian land register (Grundbuch) will—apart from nominal filing fees—trigger a 1.1 per cent land register fee (Eintragungsgebühr).5 Generally, the basis of this fee is the purchase price that would be attained in case of a disposal in the normal course of business.6 As long as there are no extraordinary circumstances that obviously had an impact on the consideration, the basis of the fee is the consideration, plus the other services that the buyer grants to the seller and any restrictions on the property reserved by the seller; encumbrances on the land that are taken over by the buyer by virtue of law constitute part of the consideration.7 Land register fees are also triggered in the case of the registration of a mortgage in the Austrian land register: here, a 1.2 per cent registration fee falls due, calculated on the basis of the mortgage.8 Land register fees (both types) are in practice borne by the buyer. Value-added tax The supply of goods and services in Austria by an entrepreneur (Unternehmer) against consideration is subject to Austrian value-added tax. The general tax rate is 20 per cent. The term ‘entrepreneur’ means any entity which carries out an economic activity in a sustainable manner in order to achieve revenues, even if it does not aim at achieving profits. An entrepreneur is generally entitled to claim value-added tax paid to a supplier as input tax (Vorsteuer), provided that the goods or services purchased relate to a taxable activity. If an entrepreneur sells real estate, such sale is in principle exempt from value-added tax.9 However, the seller may—and in practice normally will—opt for taxation,10 in which case the regular tax rate of 20 per cent applies. Stamp duty The Austrian Stamp Duty Act (Gebührengesetz) contains in section 33 an exhaustive catalogue of legal transactions which are subject to stamp duty (Rechtsgeschäftsgebühren) provided that (i) a written deed (Urkunde) is established and (ii) a certain nexus to Austria is given. Such legal transactions include, inter alia, mortgage agreements (subject to a rate of 1 per cent).11 Stamp duty would normally have to be borne by the mortgagor. Indirect acquisition Real estate transfer tax In case of indirect acquisitions, the acquisition of shares in an Austrian (or non-Austrian) company holding Austrian real estate is subject to Austrian real estate transfer tax at a tax rate of 0.5 per cent, assessed on the fair market value, provided that at least 95 per cent of the shares are unified in the hand of one single shareholder or in the hand of shareholders forming a tax group within the meaning of section 9 of the Austrian Corporate Income Tax Act (Körperschaftsteuergesetz).12 In this context it should be noted that shares held on trust by a nominee (Treuhänder) are to be attributed to the principal. Thus, taking this into account, real estate transfer tax could be avoided if, for example, two separate buyers (not being nominees or members of a tax group) acquire 90 per cent and 10 per cent, respectively, of the shares. Land register fee In case of indirect acquisitions, as the ownership of the real estate in the Austrian land register will not change, no land register fee is triggered here. Value-added tax In the context of indirect acquisitions of real estate it should be noted that the purchase of shares in a company is exempt from value-added tax.13 Holding of real estate Direct holding (Corporate) income tax Regarding the tax consequences of non-residents holding Austrian real estate, it has to be distinguished between individuals and corporations: Individuals subject to limited income tax liability in Austria are, inter alia, taxable on rental income from Austrian real estate.14 This is subject to the progressive Austrian income tax, with the following rate bands applying: (i) up to and including EUR 11,000: 0 per cent; (ii) over EUR 11,000 up to and including EUR 18,000: 25 per cent; (iii) over EUR 18,000 up to and including EUR 31,000: 35 per cent; (iv) over EUR 31,000 up to and including EUR 60,000: 42 per cent; (v) over EUR 60,000 up to and including EUR 90,000: 48 per cent; and (vi) over EUR 90,000: 50 per cent.15 Additionally, for the years 2016–2020 a new maximum tax rate of 55 per cent shall become applicable to income exceeding an amount of EUR 1 million. Please note that only the net income is taxable, meaning that expenses in relation to the real estate (eg depreciation of buildings, maintenance expenses, and interest payable) are generally deductible from the revenues for Austrian tax purposes. The general depreciation rate for buildings held as non-business assets (Privatvermögen) amounts to 1.5 per cent of the acquisition or manufacturing costs.16 Corporations subject to limited corporate income tax liability in Austria are, inter alia, taxable on rental income from Austrian real estate.17 This is subject to the flat tax rate of 25 per cent.18 Again, only the net income will be taxable, meaning that expenses in relation to the real estate are deductible from the revenues. The general depreciation rate for buildings held as business assets (Betriebsvermögen) is 2.5 per cent of the acquisition or manufacturing costs.19 In addition to domestic tax law, also the provisions of a double taxation treaty concluded between Austria and the state of residence of the investor have to be analysed. Pursuant thereto, the taxation right for rental income earned by a treaty resident (whether individual or corporation) from immovable property located in Austria is always allocated to the state in which the immovable property is situated, thus Austria.20 Such Austrian source income is to be exempted from tax in the other state, or the Austrian tax is to be credited against tax in the other state.21 Real estate tax Pursuant to the Austrian Real Estate Tax Act (Grundsteuergesetz), municipalities levy a recurrent real estate tax (Grundsteuer) on real estate situated in Austria. The tax basis is the tax value (Einheitswert) of the real estate. The tax value is in no relation to the fair market value, since it is in general artificially low (in most cases somewhere between 0.1 per cent and 10 per cent of the fair market value). The tax rate is calculated by multiplying the general rate (Steuermesszahl) with a multiplier (Hebesatz) determined by the respective municipality. The general rate depends on the type of real estate and is between 0.05 per cent and 0.2 per cent. The multiplier may not exceed 500 per cent. Thus, the tax rate is 1 per cent in the worst case. Value-added tax The lease of real estate for residential purposes is subject to a reduced tax rate of 10 per cent.22 The lease of real estate for other purposes (eg leases of office premises) is in principle exempt from value-added tax.23 However, the lessor may opt for taxation,24 in which case the regular tax rate of 20 per cent applies. This could make sense in order not to lose the right to claim a refund of input tax, if any, in connection with the acquisition of real estate. While value-added tax is paid by the lessee in addition to the net rent, the lessor will have to remit it to its competent tax office, so that it does not constitute a burden for the lessor. Stamp duty In connection with the conclusion of a rental agreement in written form, generally Austrian stamp duty at a rate of 1 per cent falls due.25 The tax base is (i) three times the annual consideration in case of a rental contract with unlimited duration; and (ii) the value of the annual consideration times the duration of the rental contract (but at most 18) in case of a rental contract with limited duration). Stamp duty is typically to be borne by the lessee. Indirect holding (Corporate) income tax In the case of an indirect acquisition (ie acquisition of Austrian company holding Austrian real estate), the following applies: Corporations subject to unlimited corporate income tax liability in Austria are taxable (at a rate of 25 per cent) on their worldwide income. A corporation’s tax basis is the profit as shown in its financial statements.26 In addition, where mandatory tax provisions deviate from financial accounting rules, adjustments have to be made. As a general rule, expenses incurred in acquiring, securing, and maintaining taxable income are tax-deductible. Thus, in the case of rental income, for example, operating costs, interest expenses, depreciation, royalties, and other costs may be deducted. Interest paid may normally be deducted except if paid to a related party corporation subject to a low rate of tax.27 Depreciation is to be calculated on a linear basis, the rate is 2.5 per cent in general and 1.5 per cent in case of buildings rented out for residential purposes.28 Further, irrespective of its income, a corporation is subject to a minimum corporate income tax amounting to (i) EUR 500 per annum for the first five years after they have become subject to unlimited corporate income tax liability; (ii) EUR 1000 per annum for the next five years; and (iii) EUR 1750 per annum, thereafter. Any minimum corporate income tax is creditable against the final amount of corporate income tax assessed for future tax years. Other taxes Regarding real estate tax, value-added tax and stamp duty, please see sections ‘Real estate tax’, ‘Value-added tax’, and ‘Stamp duty’ above. Sale of real estate Direct sale (Corporate) income tax Non-residents of Austria are, inter alia, taxable on capital gains from Austrian real estate.29 In case of individuals, these are subject to a flat rate of 30 per cent;30 an option exists for taxation at the progressive income tax rate.31 In case of corporations, they are subject to a flat rate of 25 per cent.32 The taxable income is calculated as the difference between the sales price and the acquisition cost.33 Expenses associated with the sale are in general not deductible in case of individuals.34 Pursuant to Article 13(1) of the OECD Model Convention (MC), gains from the alienation of immovable property which is situated in Austria may be taxed in Austria. Such Austrian income is to be either exempted from tax in the state of residence of the seller, or the Austrian tax is to be credited against the tax in the state of residence of the seller. Real estate transfer tax As already mentioned above in section ‘Real estate transfer tax’, the sale of real estate will trigger real estate transfer tax. Land register fee As already mentioned above in section ‘Land register fee’, the direct sale of real estate will trigger land register fee. Value-added tax As already mentioned above in section ‘Value-added tax’, the sale of real estate will in principle be exempt from value-added tax, with the seller having an option for taxability at 20 per cent. Indirect sale (Corporate) income tax In case of non-residents selling shares in an Austrian corporation, capital gains are subject to 27.5 per cent income tax (in case of individuals) or 25 per cent Austrian corporate income tax (in case of corporations), provided that the seller has at any point in time in the last five years held a stake in such subsidiary of at least 1 per cent.35 The taxable capital gains are in general calculated as the difference between the sales price and the (initial as well as any later) acquisition costs. Pursuant to Article 13(5) of the OECD MC, gains realized by a resident of one state from the alienation of shares in a company resident in the other state (ie Austria) may only be taxed in the first state. However, many Austrian double taxation treaties contain a provision corresponding to Article 13(4) of the OECD MC, which would allow source taxation in Austria. Real estate transfer tax The sale of shares in a company holding Austrian real estate might—depending on the circumstances—trigger real estate transfer tax (see section ‘Real estate transfer tax’). Land register fee The sale of shares in a company holding Austrian real estate will not trigger land register fee. Value-added tax The sale of shares in a company holding Austrian real estate will not trigger value-added tax. Gratuitous transfer of real estate Direct transfer Austria does not anymore levy a comprehensive inheritance and gift tax. However, the gratuitous transfer of Austrian real estate triggers real estate transfer tax,36 with the following tax rate bands applying:37 (i) up to and including EUR 250,000: 0.5 per cent; (ii) over EUR 250,000 up to and including EUR 400,000: 2 per cent; and (iii) over EUR 400,000: 3.5 per cent of the fair market value. In addition, the re-registration of ownership in the Austrian land register will—apart from nominal filing fees—again trigger a 1.1 per cent land register fee. Indirect transfer As a side remark please note that if—by way of inheritance or gift—at least 95 per cent of the shares in a company holding Austrian real estate are acquired, then Austrian real estate transfer tax at a tax rate of 0.5 per cent, assessed on the fair market value, will fall due as already stated above in section ‘Real estate transfer tax’. Niklas J.R.M. Schmidt, is a Partner at Wolf Theiss in Vienna, Austria. Footnotes 1. cf s 1(1)(1) in connection with s 7(1)(3) of the Austrian Real Estate Transfer Tax Act. 2. cf s 4(1) of the Austrian Real Estate Transfer Tax Act. 3. cf s 5(1)(1) of the Austrian Real Estate Transfer Tax Act. 4. cf s 5(2)(2) of the Austrian Real Estate Transfer Tax Act. 5. cf TP 9 of the Austrian Court Fees Act. 6. cf s 26(1) of the Austrian Court Fees Act. 7. cf s 26(3)(1) of the Austrian Court Fees Act. 8. cf TP 9 of the Austrian Court Fees Act. 9. cf s 6(1)(9)(a) of the Austrian Value Added Tax Act (Umsatzsteuergesetz). 10. cf s 6(2) of the Austrian Value Added Tax Act. 11. cf TP 18 of the Austrian Stamp Duty Act. 12. cf s 1(3) in connection with ss 4(1) and 7(1)(2)(c) of the Austrian Real Estate Transfer Tax Act. 13. cf s 6(1)(8)(g) of the Austrian Value Added Tax Act. 14. cf s 98(1)(6) of the Austrian Income Tax Act (Einkommensteuergesetz). 15. cf s 33(1) of the Austrian Income Tax Act. 16. cf s 16(1)(8)(d) of the Austrian Income Tax Act, which contains a refutable presumption, pursuant to which 60% of the acquisition costs are to be allocated to the (depreciable) building, while 40% are attributable to the (non-depreciable) land. 17. cf ss 21(1)(1) and 21(1)(3) of the Austrian Corporate Income Tax Act as well as ss 98(1)(3) and 98(1)(6) of the Austrian Income Tax Act. 18. cf s 22(1) of the Austrian Corporate Income Tax Act. 19. cf s 8(1) of the Austrian Income Tax Act. The rate is 1.5% in case of buildings rented out for residential purposes. 20. cf art 6(1) of the OECD MC. 21. cf art 23 of the OECD MC. 22. cf s 10(2)(3a) of the Austrian Value Added Tax Act. 23. cf s 6(1)(16) of the Austrian Value Added Tax Act. 24. cf s 6(2) of the Austrian Value Added Tax Act. 25. cf s 33 TP 5 of the Austrian Stamp Duty Act. 26. cf s 7(2) of the Austrian Corporate Income Tax Act; s 5(1) of the Austrian Income Tax Act. 27. cf s 12(1)(10) of the Austrian Corporate Income Tax Act. 28. cf s 8(1) of the Austrian Income Tax Act. 29. cf s 98(1)(7) in connection with s 30(1) of the Austrian Income Tax Act. 30. cf s 30a of the Austrian Income Tax Act. 31. cf s 30a(2) of the Austrian Income Tax Act. 32. cf s 22(1) of the Austrian Corporate Income Tax Act. 33. In case of individuals, the acquisition cost is to be increased by certain larger maintenance costs (Instandsetzungsaufwendungen) and to be reduced by depreciation. 34. cf s 30(3) of the Austrian Income Tax Act. 35. cf s 98(1)(5)(e) of the Austrian Income Tax Act regarding individuals and s 21(1)(1) of the Austrian Corporate Income Tax Act in connection with s 98(1)(5)(e) of the Austrian Income Tax Act regarding corporations. 36. cf s 1(1) of the Austrian Real Estate Transfer Tax Act. 37. cf s 7(1)(2)(a) of the Austrian Real Estate Transfer Tax Act. © The Author (2017). Published by Oxford University Press. All rights reserved.

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Trusts & TrusteesOxford University Press

Published: Feb 1, 2018

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