Reform of the Austrian real estate transfer tax | KPMG | GLOBAL

Reform of the Austrian real estate transfer tax – hidden inheritance and gift tax?

Reform of the Austrian real estate transfer tax

Following the reform of the Austrian real estate transfer tax, gratuitous transfers of large real estate within the family are now subject to comparably higher taxation, learn more about this change and its effects.

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Innsbruck, Austria

Since July 31, 2008 and due to a ruling of the Austrian Constitutional Court, Austria imposes neither inheritance nor gift tax. Political efforts by the Socialist party to reintroduce the tax have not succeeded until now. In 2015, a reform of the Austrian real estate transfer tax was passed with effect as of 1 January 2016 which makes gratuitous transfers of large real estate within the family subject to comparably higher taxation as currently.

The Austrian real estate transfer tax act has been subject to various changes in the more recent past: First, the Austrian Constitutional Court ruled the provision on the tax base for gratuitous transfers of real estate unconstitutional. In 2014, with effect from June 1, 2014 the real estate transfer tax was reformed. Transfers (with or without consideration) within the family are subject to a preferential treatment. The tax applicable is 2 percent, the tax base three times the “Einheitswert”, a tax value which is – in comparison to the fair market value of real estate property – considerably favourable. Moreover, the tax base is limited to 30 percent of the fair market value (burden of proof is on the taxpayer) of the real estate property. In all other cases the tax is calculated on the consideration, in case there is none, on the fair market value. The tax on transfers outside the family is 3.5 percent.

As an effect of the critic of international organizations such as the OECD on Austria’s low wealth taxes, the discussion about reintroduction of an inheritance and gift tax (or a wealth tax) popped up again. Due of the fact that the Austrian coalition of the Social Democrats and the Conservatives could not agree on the reintroduction of an inheritance and gift tax and due to the fact that the 2015 wage tax reform had to be financed, the real estate transfer tax was reformed. Again.

The main points of the reform include:

  • Introduction of the new “real estate value” for purposes of the real estate transfer tax, which forms the minimum tax base in case there is no consideration or the consideration is lower than the real estate value. In any other cases the consideration forms the tax base.
  • Differentiation between transfers with consideration, gratuitous transfers and partly-gratuitous transfers (which are to be split into a gratuitous and a non-gratuitous part)
  • Introduction of a progressive tax rate of 0.5 percent up to 3.5 percent and applicable to gratuitous transfers. The 3.5 percent tax rate is applicable to parts of the tax base exceeding EUR 400,000 of gratuitous transfers.

The real estate value may be assessed in three different ways: First, it may be calculated according to a decree not published yet by the Austrian Minister of Finance with approval of the Austrian Chancellor, either based on the valuation act (“Bewertungsgesetz”) or on price comparison lists. However, the taxpayer may prove that the actual fair market value is below these values. So, the real estate value is limited to the actual fair market value.

A transfer is deemed to be

  • gratuitous if the consideration does not exceed 30 percent;
  • non-gratuitous if the consideration does exceed 70 percent and
  • partly-gratuitous if the consideration is between 30 and 70 percent

of the real estate value.

Transfers within the close family are always deemed to be gratuitous. However, since a progressive tax rate for gratuitous transfers which prefers transfers of real estate not exceeding EUR 400,00 has been introduced, transfers of valuable real estate (even within the family) will definitely be more expensive. The new rules are applicable from January 1, 2016 on.

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