Austrian property taxes
Elizabeth Bagwell, Saturday, 25 January 2014
This article is part of a series of 8 articles about buying property in Austria. The other articles in the series cover the following topics:
Understanding the Austrian property tax system is essential if you want to create a profitable investment in the country. Taxes in Austria are moderate but as they're due at each stage of the property cycle, it's important to fully understand the system before buying a property. Read on to find out more.
Taxation can make or break a property investment. Property taxes in Austria are moderate, but come in many forms. As a result, it's important to ensure you fully understand all the taxes that will apply to your situation. You should expect to pay tax in Austria for property owned in Austria, even if you are an EU citizen resident in another EU nation. Double taxation is typically easy to avoid, although you should be a little more cautious if you are a citizen of a nation like the USA which insists on taxing non-resident citizens.
If you're buying an investment property in Austria, it's important to consider the full lifecycle of the investment. You should assess your risk for, at minimum:
Usually set at 3.5% of either the sale value or the property value (if the sale value is lower), property transfer tax applies to all transfers of real property with a value over EUR 2,000. In this case, real property refers to land and permanent, fixed constructions on that land, such as a house, shop, garage or business, but does not include the contents (such as a car in the garage).
There are a few cases where the property tax does not apply. The most interesting one for investors is that land up to the value of EUR 365,000 may be acquired as a business transaction without incurring tax. However, there are further conditions which must be met. Transfer of property between spouses or to divide a property formally according to the investment by multiple buyers (such as during a divorce) is also, typically, tax free. However, transfer after the death of the owner (inheritance) is not tax free.
It's important to note that property transfer tax may be based on the value of the land rather than the sale price. This is most commonly used in inheritance cases, gifts and business transactions.
Capital gains tax
Capital gains tax is a tax levied on profit made from capital, i.e. a cash investment. It applies even when the investment was made with borrowed money. This means that when you sell a property in Austria, you should expect to pay tax on the profit you make. In these terms, profit is the difference between the original buying price and the selling price. This means that if you sell at a loss, you will not usually pay any tax.
In Austria, capital gains tax is charged at the same rate as income tax and is part of the same allowance system. As of 1 April 2012, a fixed rate of 25% has been set for capital gains tax for real estate.
Capital gains tax does not apply if:
Expect to pay tax in Austria for any income in Austria, including rent. Unusually, a capital gain is treated no differently to ordinary income in Austria, so if you sell a property at the end of the year, after renting it out for several months, you may pay a higher tax than if you complete the sale in January.
Income tax is 0% for the first EUR 11,000 per year, and rises to 50% on any income over EUR 60,000 per year. However, each boundary is typically lowered by EUR 8,000 per year for non-residents, making these EUR 3,000 and EUR 52,000 respectively.
Maintenance, property management and other standard deductions are allowed. This means that typically you will only pay tax on the profit from your rental property, rather than the full income.
Ongoing property taxes Both national and local governments tax property on an annual basis. The tax is based on an assessed and registered value. The federal rate is typically 2% of the registered value of the property. The local government can increase this by up to 500% (i.e. if the federal rate is 2%, the local government rate can be up to an additional 10%, making 12% in total. As these figures can vary widely, it's important to make sure you understand the costs for the area you're interested in buying in.
If you're considering leasing the property, be aware that there is also a stamp duty required for certain contracts, including rental agreements. This is typically under 2% of the value of the contract.
Each situation is unique
Although we've made a strong effort to ensure that the facts and figures used in this article are accurate, it's important to remember that your personal situation or the property you buy may affect your tax liability. Taxes are also subject to change. We therefore recommend that you investigate further before making a decision. Professional advice can be sought from a tax adviser (Steuerberater), a local tax office (Finanzamt) or the Ministry of Finance, depending on the nature of your query
This article is part of a series of 8 articles about buying property in Austria. The other articles in the series cover the following topics:
Understanding the Austrian property tax system is essential if you want to create a profitable investment in the country. Taxes in Austria are moderate but as they're due at each stage of the property cycle, it's important to fully understand the system before buying a property. Read on to find out more.
Taxation can make or break a property investment. Property taxes in Austria are moderate, but come in many forms. As a result, it's important to ensure you fully understand all the taxes that will apply to your situation. You should expect to pay tax in Austria for property owned in Austria, even if you are an EU citizen resident in another EU nation. Double taxation is typically easy to avoid, although you should be a little more cautious if you are a citizen of a nation like the USA which insists on taxing non-resident citizens.
If you're buying an investment property in Austria, it's important to consider the full lifecycle of the investment. You should assess your risk for, at minimum:
- Property transfer tax
- Income tax
- Capital gains tax
- Ongoing property taxes
Usually set at 3.5% of either the sale value or the property value (if the sale value is lower), property transfer tax applies to all transfers of real property with a value over EUR 2,000. In this case, real property refers to land and permanent, fixed constructions on that land, such as a house, shop, garage or business, but does not include the contents (such as a car in the garage).
There are a few cases where the property tax does not apply. The most interesting one for investors is that land up to the value of EUR 365,000 may be acquired as a business transaction without incurring tax. However, there are further conditions which must be met. Transfer of property between spouses or to divide a property formally according to the investment by multiple buyers (such as during a divorce) is also, typically, tax free. However, transfer after the death of the owner (inheritance) is not tax free.
It's important to note that property transfer tax may be based on the value of the land rather than the sale price. This is most commonly used in inheritance cases, gifts and business transactions.
Capital gains tax
Capital gains tax is a tax levied on profit made from capital, i.e. a cash investment. It applies even when the investment was made with borrowed money. This means that when you sell a property in Austria, you should expect to pay tax on the profit you make. In these terms, profit is the difference between the original buying price and the selling price. This means that if you sell at a loss, you will not usually pay any tax.
In Austria, capital gains tax is charged at the same rate as income tax and is part of the same allowance system. As of 1 April 2012, a fixed rate of 25% has been set for capital gains tax for real estate.
Capital gains tax does not apply if:
- You have owned the property for 10 years or more
- You have lived in the property as your primary residence for the 2 years prior to the sale
- You built the property
Expect to pay tax in Austria for any income in Austria, including rent. Unusually, a capital gain is treated no differently to ordinary income in Austria, so if you sell a property at the end of the year, after renting it out for several months, you may pay a higher tax than if you complete the sale in January.
Income tax is 0% for the first EUR 11,000 per year, and rises to 50% on any income over EUR 60,000 per year. However, each boundary is typically lowered by EUR 8,000 per year for non-residents, making these EUR 3,000 and EUR 52,000 respectively.
Maintenance, property management and other standard deductions are allowed. This means that typically you will only pay tax on the profit from your rental property, rather than the full income.
Ongoing property taxes Both national and local governments tax property on an annual basis. The tax is based on an assessed and registered value. The federal rate is typically 2% of the registered value of the property. The local government can increase this by up to 500% (i.e. if the federal rate is 2%, the local government rate can be up to an additional 10%, making 12% in total. As these figures can vary widely, it's important to make sure you understand the costs for the area you're interested in buying in.
If you're considering leasing the property, be aware that there is also a stamp duty required for certain contracts, including rental agreements. This is typically under 2% of the value of the contract.
Each situation is unique
Although we've made a strong effort to ensure that the facts and figures used in this article are accurate, it's important to remember that your personal situation or the property you buy may affect your tax liability. Taxes are also subject to change. We therefore recommend that you investigate further before making a decision. Professional advice can be sought from a tax adviser (Steuerberater), a local tax office (Finanzamt) or the Ministry of Finance, depending on the nature of your query
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