About property taxes in Austria

Vienna is known for its high level of living, as it has been ranked the best city in the world to live in for 10 consecutive years in the ‘Mercer's Quality of Living’ from 2009-2019. As a result, the Austrian capital, as well as Austria itself, is one of the leading real estate destinations in the world.

In addition to the regular property acquisition issues, you also have to be aware of the local property tax system if you are eager to create a lucrative investment in the country. Taxes in Austria are modest, however, since they are due at each stage of the property cycle, it is essential to fully comprehend the system before purchasing a property. In this article we will take a look at the rates of these taxes, how they are calculated, and whether there are any benefits and exemptions available to foreigners, among other tax-related issues.

Annual Property Tax

The law regarding an annual property tax (Grundsteuer) came into effect back in 1955, as per the Property Tax Act 1955 - GrStG 1955, Federal Law Gazette 149/1955. This tax is levied by the municipalities, which obtain the full amount of this tax. That being said, the property tax sum is calculated by the Austrian tax office (Bundesministerium Finanzen) based on the estimated cost of the respective unit, according to section 18 and 19 of the Property Tax Act.

The following property types are subject to Grundsteuer:

• Business property
• Residential property
• Agricultural and forestry property

As stated by the Financial Equalization Act, the municipalities have the right to apply an assessment rate of a maximum of 500% to the real estate tax base when calculating the tax. The formula is as follows: tax base amount * assessment rate = annual property tax. While the real estate tax debtor is the owner of the property, the tax can be passed onto tenants, counting as the operating costs of a property.

In case the tax exceeds EUR 75 per annum, it has to be paid in 4 installments on the dates mentioned below:

• February 15th
• May 15th
• August 15th
• November 15th

At the same time, sums up to EUR 75 are levied in a single installment on May 15th.

• Next, we will take a look at the tax rates which are legally defined by percentages.

NBD! If you are a resident of Austria and own a property overseas, you do not have to pay property tax, as it is applicable only to real estate located within the country. You can learn more about the entire tax system in Austria in this article.

Single-family houses:

• for the first EUR 3,650 of the assessed value - 0.5%
• for the following EUR 7,300 or part thereof - 1%
• for the remaining amount - 2%

Rented residential and mixed-use real estate:

• for the first EUR 3,650 - 1%
• for the following EUR 3,650 - 1.5%
• for the remaining amount - 2%

Agricultural and forestry property:

• for the first EUR 3,650 - 1.6%
• for the remaining amount - 2%
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  Other real estate types:
  

• for the first EUR 3,650 - 1%
• for the remaining amount - 2%

As a property owner, you are obliged to check the assessed amount in the tax notice. If the amount is too large, you can contact the tax office for the reassessment.

According to the requirements of the Austrian tax office, the long-term tax exemptions are applicable to public transport routes, watercourses and real estate for public use owned by the public authorities.

Capital Gains Tax

Thanks to the Austrian Stability Act 2012, which came into force on April 1, 2012, private gains from the property transfer are taxed regardless of the ownership period. That being said, the taxable base is determined by the difference between sales revenue and purchase costs. Additional expenses, such as cadastral register charge, notary costs, or conveyance duty increase the acquisition costs.

Since January 2016, capital gains from the sale of new properties or those acquired as of 31 March 2002 are taxed at a flat rate of 30%. In specific cases, real estate purchased as of 31 March 1997 can be treated as new assets. At the same time, old properties without redesignation, or properties redesignated before 1 January 1988 are taxed at 4.2% of the sale price. Additionally, real estate developments which are purchased as of 31 December and repurposed from a land site to a building site are liable to a capital gains tax of 18%.

The capital gains tax has an array of exemptions that can be found below:

1. Primary residence is a home or commonhold property, where the seller has resided continuously for at least 2 years since the purchase, and up to the sale time. The property area has to be up to 1,000 sq. m. Moreover, the primary residence exemption is also valid if the seller lives in a house/apartment for at least 5 years within the last 10 years prior to the sale. In addition, this exemption for a 5-year primary residence is applicable if the property was rented out for the remaining time frame (up to 5 years). There is a tolerance period of 1 year both in terms of the establishment of the primary residence for the exemption of the 2-year regulation, and for relinquishing the primary residence.
2. Gifts and inheritances are not liable to property income tax, however you have to pay a property transfer tax of 3.5%. In the case that the transaction is concluded between relatives, the tax rate is set at 2%
3. Producer exemption is related to self-constructed buildings, however, the associated land is subject to the tax. A self-constructed building is the one built by the taxpayer from scratch, as well as the one constructed by an appointed contractor, but the owner takes the responsibility for the risk of any cost overruns. If the building was erected by the previous owner, then it is not covered by the exemption. The only exception for this exemption is when the building was used to generate income within the last 10 years. If the property has served only partially to generate yields (partial rental), then the non-rented part is not liable to the capital gains tax, while the rental part is to be taxed.
4. Sales concluded to prevent official expropriations are tax-exempt.
5. Exchange transactions regarding forestry and agricultural land plots as part of land consolidation and amalgamation procedures, and exchange deals with land plots as part of land rationalisation are exempt from tax.

You can reduce the amount of the tax by providing the information regarding the additional expenses related to the development, which increased its cost.

You can reduce the amount of the tax by providing the information regarding the additional expenses related to the development, which increased its cost. When paying capital gains tax, you will need to send the information regarding the profit to your notary, who will subsequently send the details to the tax office. After you receive the corresponding notice, you are obliged to pay the tax.

NBD! If a self-constructed building falls both under the producer and the primary residence exemption, the latter is of a higher priority. This is also more lucrative, as the associated land in this case is exempt from tax as opposed to the case of the producer exemption.

Rental Tax

For home rentals, apartment rentals and subletting, you should be prepared to pay taxes as well. Expenses such as repairs and maintenance, depreciation, interest payments and administrative fees are deductible. When paying income tax to the respective tax agency, you need to calculate it on your own.

As of July 2022, the income tax rates are as follows:

• Up to EUR 11,000 - 0%
• EUR 11,000-EUR 18,000 - 25%
• EUR 18,000-EUR 31,000 - 30%
• EUR 31,000-EUR 60,000 - 42%
• EUR 60,000-EUR 90,000 - 48%
• EUR 90,000-EUR 1,000,000 - 50%
• Over EUR 1,000,000 - 55%

NBD! The third bracket (EUR 31,000- EUR 60,000) will be reduced from 42% to 40% as of 1 July, 2023, as per the eco-social tax reform 2022.

Property Transfer Tax

Transfer tax is set at 3.5% (plus a 1.1% registration fee with the land register) on deals, and it is generally calculated on the basis of the purchase price. Nevertheless, the taxable base has to be at least the property value (Grundstückswert), which is calculated either on the basis of the amount of the projected pro rata three-fold land value (Bodenwert) and the pro rata cost of the building, or derived from the property price index. If the taxpayer is able to prove that the fair market price is lower than the property value, the fair market value accounts for the taxable base.

If there is no consideration, the real estate transfer tax and registration fee are usually based on the fair market value (with a tax rate between 0.5% and 3.5%). For certain privileged transactions (e.g. reorganizations or transfers of at least 95% of the shares in a company holding Austrian real estate), a real estate transfer tax of 0.5% and the registration fee are based on the lower of the following:

• 3 times the assessed value of the land plus the value of the building
• Standardized values provided by the Ministry of Finance
• Fair market value

When real estate transfers take place within the closer family circle, the threefold estimated rateable value (capped at 30% of the fair market value) accounts for the tax base, and a tax rate of 2% applies. For transfers connected with corporate restructuring under the Reorganisation Tax Act, the two-fold assessed standard rateable value is taken as the tax base.

The taxable base for free-of-charge transfers is the property value. Meanwhile, the rate for transfers without compensation is liable to different levels and is as follows:

• 0.5% for a property value of below EUR 250,000
• 2% up to EUR 400,000
• 3.5% over EUR 400,000

Property deals with a tax base of EUR 1,100 or below are exempt. When a land plot is acquired by a private foundation, the tax will be 2.5% of the value of the object.