Investment in real estate assets in Austria and their tax consequences
In case of direct investment in real estate assets in Austria, consider the following tax regulations:
- Real Estate Transfer Tax, Land Register Fee:
When purchasing a property, a real estate transfer tax of 3.5 % and a land register fee of 1.1 % has to be paid. Determination base is the purchase price.
The ongoing management of real estate assets is subject to income tax in Austria. The surplus of revenue over the cost of advertising (all costs associated with rental) has to be determined for each year and represents a taxable source of income. The surplus has to be disclosed to the tax authorities as part of the annual income tax return. As tax rate the general progressive average tax rate applicable in Austria has to be applied. As a matter of principle, all expenses required for the management of real estate assets can be deducted from the rental income.
Tax-relevant expenses are e.g.:
- deferred financing costs
- maintenance costs
Since buildings are subject to depreciation, the purchase price share (which apportioned to the building) is distributed over the estimated useful life and hence depreciated. In principle, 60 % of the acquisition costs must be attributed to the building, 40 % to the land – in case buildings are not held as business assets. Nevertheless, there are a broad number of exceptions.
For buildings used to earn rental income, the useful life is 66.6 years without proof of an expert’s report (1.5 % of the determination base).
In Austria, property ownership is usually subject to property tax. Property tax is calculated from the unit value of a property. Simplified, the unit values in the respective area correspond to the average basic prices of 1973, plus an extra charge of 35 %. The property tax is calculated and levied by the municipalities.
The management of real estate assets/ properties provoke in general VAT. Rental for residential purposes is subject to a 10 % VAT rate, other rentals to a 20 % VAT rate. If there is a VAT-liable rental, the landlord is able to recover VAT.
Since 1st April of 2012, profits derived from private property sales are subject to income tax. The base for the 30 % tax is the difference between the purchase and the selling price of the property.
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