Buying property in Austria: instructions from A to Z for Citizens of the EU, the USA and the U.K.

Hiring a solicitor and notary

The whole transaction takes place with the participation of a notary or lawyer, which is a necessary part of the process to buying property in Austria. The notary will play the role of a mediator between a seller and a buyer, and will also be responsible for holding a deposit and facilitating the negotiations and transaction. If an agent is involved in the transaction, a contract is signed with them. The buyer selects the property, reviews the price and makes an offer. If the seller is not satisfied with the price, then the buyer can make a counteroffer to the seller in writing.

Paying the deposi

After the preliminary sales contract (Kaufanbot) has been signed by the seller and the buyer, a deposit may be requested from the seller. The contract specifies all calculations of fees and expenses when purchasing real estate, the amount of which usually ranges from 5% to 10% of the asking price. Try to be cautious about expressing too much interest in a property. In Austria the intent to purchase when expressed orally can be legally binding.

Sign the final sales contract and make the final payme

Once the seller agrees to your offer, the notary will draw up a sales contract (Kostenaufstellung). This will include information on the planned date of the transfer and when the purchase price is due. A buyer will be asked to transfer a sufficient amount to cover the purchase and additional expenses to the trustee account before the specified completion date. After the sales contract is signed by both parties, the notary transfers money to the seller. There is a special clause in the contract concerning the settlement of debts with suppliers by the seller. Therefore, after the final transaction, no lingering debts will be handled by the buyer. The final sales contract must be signed in the presence of the notary and registered in the tax office (Fiskalverwaltung).

Sale completion

The property must be registered in the Land Register, also known as Modus. The process takes from 9 to 32 days and the fees amount to approximately 4.5% of the property value.

IT IS WORTH NOTING: That in Austria it is not possible to cancel a transaction without incurring charges. If a buyer wants to have this option included, then such a clause must be written into the contract.

Purchase of Real Estate in Austria by Non-EU Nationals

A third-person national can only buy property in Austria if they have a permanent residence permit and take one significant step in order to buy and own property in the country: they must apply for a special permit with the permission of the Grundverkehkommission before purchasing residential and commercial real estate. The request can be submitted via the internet but the application process can take anywhere between one to four months. Thus, it is essential to find a seller who is willing to wait for the buyer to be approved. According to the Austrian government website, such requests are approved if the transaction is of cultural, social and macroeconomic interest and no national interests would be negatively affected.

The rules of obtaining a permit in each individual state vary, however, there are two notable exceptions in the city of Graz (Styria) and Vienna. In Graz, no extra permit is required for third-country citizens who wish to purchase property there and in Vienna, if you are a third-country national married to an Austrian citizen, extra authorization is also not required.

The reason behind extra permission for non-EU citizens is to ensure there is enough housing for Austrian citizens, as well as avoiding the surge of land and housing prices by speculations.

Foreign Legal Entities

If more than 50% of shares from a legal entity are owned by people who are not EU citizens, then such an organization is considered a foreign company. In this case, the owners of the company must apply for a special permit.

A two-tiered structure is an exception: in some federal states (e.g. Vienna) a legal entity that is wholly owned by another Austrian legal entity is not considered a foreign company, even if it is 100% owned by non-EU citizens. Thus, a special permit for the purchase of a real estate in Austria is not required.

EU Legal Entities

Legal entities registered in the European Union or the European Economic Area (EEA) do not qualify as foreign companies and can also freely acquire real estate in Austria. In this case, the citizenship of their shareholders does not matter.

As for legal entities registered in Austria itself, they are allowed to purchase almost any property, however, 51% of the company’s ownership must belong to EU citizens or EU-registered legal entities.

Required Documents for Approval

The documents required to obtain approval from the authorities are the following:

• Request for approval (depending on the authority: application form or informal request)
• Contract or draft (copy)
• Declaration on the use of the property
• Surveyor's plan
• Current abstract from the land register (the land register is available for inspection in the courts, at the notaries, and on the internet)
• Passport
• Proof of income (if requested)

If the purchaser is an association, then in addition to the above-mentioned documents, it will require:

• Extract from the register of associations and the association statutes
• Proof of citizenship for the members of the association board

In the case of a legal entity, further papers include:

• Current extract from the company register
• Company deed
• Trade license

Legal Due Diligence

Potential buyers can consult the land registry records to clarify who actually owns the property and to see what issues may take place during the transaction. Courts, law firms and notaries have electronic access to the land registry and associated document archives.

Before buying off-plan real estate, investors also have the right to contact the municipal authorities to obtain all information regarding the building permit and the conditions set. However, in order to obtain such information, the prospective buyer must first obtain written permission from the property owner.

Home mortgage

Mortgages are a very popular option for buying a home in Austria if obtaining the full amount of funds is insufficient. Moreover, banks themselves are interested in issuing mortgage loans to buyers as the Austrian real estate market has shown constant growth, high stability and low volatility over the past 60 years.

Such transactions, as a rule, are handled by intermediaries – a lawyer or a notary andthe bank will provide a specialist after the mortgage deed. The lawyer/notary transfers this money to the client after receiving the documents required to register the mortgage and the buyer's ownership status.
Austrian banks can finance up to 60% of the primary property and up to 50% of a secondary. Annual interest rates in this case will range from 2% to 3.5%, which is very profitable in the long run. The mortgage may be issued for a period of 25 years at most. At the same time, the borrower’s age should not be over 75 years old by the end of the payment period.

• Fee for issuing a mortgage – 1-2% of the loan amount
• Interpreter (if necessary) and notary costs – from EUR 50 to 1,000
• Registration in the Land Register – 0.6% of the mortgage value
• Property insurance (obligatory) – 0.1% of the cost per annum
• Property valuation (not required for new buildings) – from EUR 200 to 2,000

If you are already a property owner in Austria, you have a right to use the bank as loan security. Your monthly outgoings and the repayment on your mortgage combined, should not exceed 40% of your gross monthly income.

NOTE: Some banks can cover the costs of hiring an interpreter and a notary by themselves.

Specifics of Mortgage for EU and Non-EU Citizens

With the latest regulations, mortgages in Austria are getting harder to obtain. Currently, both EU and non-EU residents must have income in euros and preferably be part of the taxation system in Austria. One of the solutions to this issue is acquiring property that already has an existing income in EUR, for instance, a guesthouse or an apartment house. In this case, the chance of obtaining a mortgage will be higher.

Non-EU nationals present a larger risk for the banks, therefore, they will ask for additional documents. The first step to be taken for both EU and non-EU nationals is opening a bank account with a European bank as this is obligatory to do so in order to purchase property or apply for a mortgage

After doing this, the third country citizen should obtain a special permit for property purchase from the local land committee. This will indicate whether the property will be used for residential or commercial purposes. Only after the permit is obtained, you may apply for a mortgage. It is worth noting if you intend to use the property as your permanent home, no permit is required.

EU citizens do not require any additional papers from the land committee and can submit the required documents to the bank at once.

For both EU and non-EU nationals the required set of documents are the following:

• Passport
• Signed property sale agreement (or signed offer to purchase)
• Proof of salary (for employees) or proof of company income (for business owners)
• Savings account statements
• Any other property contracts in your name

Property taxes in Austria

If you decide to sell an Austrian home, you will need to pay capital gains tax which was established in 2012 (Immobilienertragsteuer). The tax is 30% of the profit received from the sale of the property, however there are some exceptions here: if the owner has used the property as the main residence (Hauptwohnsitz) for at least two years in a row, then he is exempt from tax.

When making a transaction, the buyer pays the property transfer tax (RETT), which is up to 3.5% of the cost of the property: 0.5% for the first EUR 250,000, 2% for the next EUR 150,000 and 3.5% for the remaining. This ruling also works when a residential property is transferred to close relatives: spouses, children, brothers, sisters or grandchildren; a transfer between relatives generally makes up 2%. Furthermore, you will need to pay 1.1% of the cost of the property for registration in the local land registry (Grundbuch).

Local tax land should also be paid, which depends on the type of property. It is based on an assessed tax value (Einheitswert) where the amount is approximately 0.1% per annum of the market value of the property.

These regulations are valid for both EU and non-EU citizens.

NOTE: If a third-country national decides to sell the property within 10 years of the purchase date, the transaction income will be subject to income tax at a special rate of 30% only on the difference of the original price and the current selling price. In the case of commercial real estate, this rate will be 25% for a non-resident company owning real estate in Austria.

Rental Taxes

If an EU/non-EU investor rents out the property, they must also pay income tax (or corporate tax, in the case of a company) and file an annual tax return to be filed by April 30 for the following year (paper form) or the end of June of the following year (electronic filing).

It is worth noting that Austria has a dual taxation agreement with a majority of important countries including the UK, Australia, Canada and China. As a result, citizens and residents do not have to pay tax twice on the same income. The full list of such countries may be found on the website of Austria’s Federal Ministry of Finance.

Rental tax is subject to the same rates as income tax. As of 2021, the rates are:

• EUR 11,000 and below – 0%
• EUR 11,001 to 18,000 – 20%
• EUR 18,001 to 31,000 – 35%
• EUR 31,001 to 60,000 – 42%
• EUR 60,001 to 90,000 – 48%
• EUR 90,001 to 1,000,000 – 50%
• Above EUR 1,000,000 – 55%

If the property is new, then the rental income will also be liable to VAT and a tourist tax of approx. EUR 0.1 per night.

Each municipality in Austria has different tax requirements for non-EU citizens who own rented property. For instance, in Vienna, you have to open an online tax account. You can use a local tax calculator to find out the exact amount you are required to pay.

Income Taxes

The income tax is known as Einkommensteuer in Austria. The tax system is pay-as-you-earn and is withheld throughout the year. Any individual who has a regular residence/habitual abode in Austria is subject to unlimited tax liability, which is constituted if a stay in Austria exceeds six months. As for limited liability, this applies to those who do not have both residence and habitual abode in Austria. Such individuals are taxed on income from Austrian sources only.

EU/EEA nationals with no main place of residence in Austria but main source of income in Austria (90% is generated in Austria or income generated abroad does not exceed EUR 11,000) can apply for limited tax liability in Austria when filing a tax return assessment (Erklärung Zur Arbeitnehmerinnenveranlagung). Consequently, only the incomes generated in Austria will be taxed.

Taxes for Legal Entities

A company is considered a ‘resident’ if its legal seat or place of management is in Austria; such entities are taxed on their worldwide income. Non-resident companies are subject to taxation on the income generated in Austria only. The corporate tax rate is fixed at 25%. There is also capital gains tax at 27.5% on domestic investment income and foreign investment income drawn in Austria.

According to the Double Taxation Avoidance Agreement, a company based in Austria can only be taxed in Austria, unless it is running a business in a non-EU country through a permanent establishment.

It is worth noting that the total income tax is actually fairly low, as all expenses related to owning and managing property are deducted from the tax base.

In 2019, Austria implemented the CFCR (taxation rules for controlled foreign companies). According to which, tax residents of a non-EU country have to pay tax on the generated income from a foreign company under their control. Nevertheless, income tax payable in a state that is not an EU member must be reduced by the capital tax paid in Austria.

Protection for the rights and interests of the buyer

Austrian law allows concluding a preliminary contract and reserving property for a specific buyer (Rangordnungsbeschluss).

Property buyers are also fully protected from possible interference from third parties. Only a direct owner with a notarized document can claim his rights in relation to real estate.

If there is any information on the property that has been changed in the land register unbeknownst to an official owner, they will receive a notice about it at once. Furthermore, in case of illegal activity, they can also appeal against the court decision serving as the basis for a changed entry.

Protection of the rights and interests of the seller

The seller in Austria is guaranteed to receive the full financial amount from the transaction. This is why there is always a third party involved in the whole process; a lawyer or a notary, who can help to prevent any possible fraud. Only after the agreed amount of money is transferred to the trusted party, the ownership of the property can then be registered in the land registry.

Cost of a real estate transaction in Austria

In Austria, first-time property buyers frequently encounter additional costs (Nebenkosten). While in some countries sellers and real estate agents are obliged to list the full price of the property including fees and taxes, in Austria this rule does not apply. The total amount of Nebenkosten depends on many factors, however, they should be around 10% of the total selling price.

Nebenkosten includes administrative costs and fees similar to stamp duties valid in other countries. Additional costs include:

• Real estate transfer tax – 3.5% of the transaction price
• The filing fee for the e-application to the land register – EUR 47 or EUR 66 if not submitted electronically
• Entering the ownership title in the land register – 1.1%
• Entering mortgage into the register – 1.2%
• Preparation of purchase contracts fees – 1-3%
• Notary fee – 2-3%

New properties are subject to Value Added Tax (VAT), around 20%, however only if you plan to use this house as your permanent residence rather than rent it out. Additionally, other unexpected expenses may include some of these financing fees: one-time payments for account management fees, credit residual debt insurance and valuation fees. Most often the buyer is responsible for covering all Nebenkosten.

One also has to take into account awaiting costs after the transaction, which have to be paid immediately after taking ownership. These include water, insurance, property management/body corporate fees, sewage, garbage disposal, heating, electricity, gas and cleaning. When purchasing a standalone house, these expenses are solely your responsibility. Meanwhile, in an apartment, these fees are shared with other property owners in the building.

Austrian land register

Administered by the District Court, the Austrian Land Register, alongside the cadaster, is the base of the Austrian system of real estate protection. It consists of three sections:

• Section A: Register of real estate objects and registration numbers (property, the area it occupies, the mailing address and the terms of the permission to use)
• Section B: Register of owners of these land plots
• Section C: Register of Debts and Other Encumbrances (contains information about mortgages and other encumbrances)

In addition to these three sections, the land registry contains all the documents related to the registration rights to this property.

What role does the real estate agent play in the transaction?

The real estate agent will choose suitable property options and establish contact between the interested purchaser and the vendor.

Acting as an intermediary, they will organize and execute the negotiations and inform the buyer of any issues concerning the chosen property, as well as the purchase terms.

The fee for using a real estate agent is set by law at 3-4% of the property purchase price or market value and 20% VAT. Both a buyer and a seller cover these expenses. It is worth noting that agents get a higher commission for properties that cost under EUR 50,000.

Long-term rental agreement

Long-term leases are widely spread in Austria. They ensure a return on investment without having to search for potential tenants all the time and resolve legal issues.The conditions of ending a tenancy are included in the rental contract. Otherwise, the general rules are the following:

• For the lease of offices and commercial properties - three months' notice with a termination date at the end of the quarter
• For rental of residential properties - three months' notice with a termination date at the end of the month

In case of changed ownership, the termination of the contract does not take place. If the tenant does not fulfill his obligations of paying to the landlord, the eviction process will take 6-12 months. In special cases, such as destruction or damage of the rented-out property, the agreement can be terminated at once.

Highlights

• EU citizens have the same equal rights as Austrian citizens in property acquisition.
• For non-EU potential buyers, the first step to be taken before the purchase is obtaining a permit from the authorities.
• The requirements for foreign investors may vary in different provinces.
• A notary must be present at all stages of a transaction.
• If the income, including rental, is below EUR 11,000, then it is tax-free in Austria.
• With a corporate tax fixed at 25%, Austria is one of the most business-friendly countries in the world.