Austria: New system of taxation regarding real estate transactions

Up to 31 March 2012, the sale of private real estate, consisting both of land and houses and apartments, which were previously held by the seller for ten years and sold realizing a capital gain, were tax exempt. Thus the sale of real estate before the ten years’ term had expired was subject of up to a 50% rate of capital gains tax applied on the gains realized by the sale.

“Gain” in this context is generally considered to be the difference between selling price and acquisition cost. Acquisition in this case is referring to acquisition against payment. In the event of an acquisition without payment, for example following a donation, the calculation was based on the last transaction performed against payment.

As of 1 April 2012, the gain will generally be subject to a special tax rate of 25%. From the eleventh year after the acquisition, an allowance for inflation will be applied reducing the gain by 2% annually up to a maximum of 50%. In the event of the sale after 2045, real estate purchased in 2010 will be therefore be subject to a capital gains tax of 12,5%.

If on 31 March 2012 the ten-years-term for real estate has not yet expired, a lump sum rate is applied in order to determine the purchase price and calculate on this base the gain realized by the sale. The lump sum rate amounts to 86% of the gain realized, thus the tax due is 3,5% (25% of 14% of the gain). Alternatively it is also possible to take into consideration the actual cost of acquisition but then it is necessary to apply the allowance for inflation.

As of 1 April 2012, also the reclassification of land is subject to taxation. If the reclassification occurred after 31 December 1987, proceeds have to be reduced by 40% in order to calculate the gain. The tax due in this case amounts to 15% of the proceeds from the sale, i.e. to 25% of 60% of the capital gain.

Also from 1 April 2012 the sale of company real estate is subject to the special tax rate of 25%. When determining the company’s income from the sale of land belonging to the fixed assets, an inflation allowance can be considered. This does not apply to buildings in the case of the sale of developed real property because for this item depreciation has already been by means of amortization.

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