1. Legal position on Property Transfer Tax in Austria
The current provisions in the field of property transfer tax entered into force with Federal Law Gazette (BGBl) I No. 36/2014 from 1.6.2014. The current legal position is that the Property Transfer Tax Act (GrEStG) distinguishes between two distinct groups:
- “Family” for purposes of property transfer tax (GrESt), and
Transfers within the “property transfer tax family” are currently assessed on the basis of 3 times the assessed value of the property; but on application, the property transfer tax is assessed at up to 30% of the fair value, which de facto represents the current market value. Such transfers are furthermore subject to the preferential tax rate of 2%.
In all other cases (except for special cases such as reorganisations), the assessment is in principle based on the consideration paid. But if there is no consideration, or none is evident, or it is less than the fair value, the assessment is based on the fair value (de facto the current market value). Outside the family, a tax rate of 3.5% applies.
2. New (proposed) legal position oin PTT
- General applicability of consideration, at least fair valueThe new legal position applicable uniformly from 1 January 2016 is a departure from the existing system, since in future all property transfer tax positions are to be assessed uniformly on the basis of the consideration paid, but not less than a property value derived from the fair value.
- Extension of the exemptions, and introduction of a graduated scaleThis drastic increase in the basis of assessment (especially in the family context) is cushioned by extending the exemptions, by introducing a graduated scale for gratuitous transfers (which generally arise only in the family context), and payment of the tax in up to five annual instalments.
The proposed graduated scale applicable to the gratuitous component of a transfer is as follows:
– For the first EUR 250.000 0,5 %
– For the next EUR 150.000 2,0 %
– Thereafter 3,5 %
- Re-definition of monetary considerationThat portion of a transfer for which payment is made is subject to tax at the standard rate of 3.5%. The Property Transfer Tax Act (GrEStG) defines
- Gratuitous: if the consideration is not more than 30%
- Partly gratuitous: if the consideration is more than 30% but not more than 70%
- Non-gratuitous: if the consideration is more than 70%
- New aggregationIn this case, acquisitions between the same natural persons within the last five years are aggregated to determine the applicable tax rate. The five-year period is assessed in each case from the date the tax liability originates. The property transfer tax may be distributed over two to five years for gratuitous acquisitions.
TPA Tip on Austrian Property tax
Any proposed or required transfers within the family should therefore generally be effected soon, by 31 October 2015 at the latest.
2.2. New provisions in brief
- Consolidation of shares NEW:Property transfer tax will now also apply to transfers of property companies if at least 95% of all shares in the company are held by the transferee. The scope for direct consolidation of shares is also extended, since a group of companies for purposes of section 9 of the Corporation Tax Act (KStG) can now also lead to indirect consolidation of shares, in addition to combination for the purpose of a VAT group.
As in the German model, consolidation of shares arises in the case of transfers of shares in partnerships owning real estate, if at least 90% of the shares of the partnership’s assets transfer to new partners within five years. In the case of consolidation of shares, the applicable tax rate is a uniform 0.5%.
- Trusteeships “abolished”Company shares conveyed in trust are attributed to the trustor from 1 January 2016. This provision is to apply equally to partnerships and corporations, abandoning the previous trusteeship structuring practice.
- Agriculture and forestry escape unscathedThe existing tax treatment of agricultural and forestry land continues to apply; the assessed value still applies.
- Business transfers are still possibleIn the case of gratuitous or partly gratuitous business transfers, the business exemption is increased to EUR 900,000; property transfer tax for the gratuitous part will moreover be limited to 0.5% of the property value. In the case of agriculture and forestry, the tax allowance is EUR 365,000; in this case the tax rate limit is 2% (as before).
- Preferential treatment for spouse’s residenceResidential properties of up to 150 m2 are to remain tax-free in the case of acquisition inter vivos and acquisition inter mortuos (by the partner or spouse). Previously the exemption applied only if the overall size of the residential property was not exceeded. In future, only the excess area (i.e. the area in excess of 150 m2) is to be subject to property transfer tax, so the 150 m2 figure is now to be deemed tax exempt.
- Foundation entrance tax equivalent
The foundational entrance tax equivalent is integrated into the new logic, and retained unchanged. As expected this will not give rise to any relief or improvement for foundations compared to the current legal position.
- ReorganisationsReorganisations covered by the Company Reorganisation Tax Act (UmgrStG) are now assessed on the basis of the consideration paid, but not less than a property value derived from the fair market value. The applicable tax rate in this case is 0.5%.
TPA Tip for Real Estate Taxation in Austria
Property transfer tax considerations will in future be increasingly important when structuring acquisitions and reorganisations. In some cases it is likely to be more beneficial to bring forward any necessary restructuring rather than postponing reorganisations. Reorganisations as of 31 December 2014 must be effected by 30 September 2015, so there is no time for delay.
If you have questions about the new planned taxes in Austria, do not hesitate to contact our tax experts for real estate matters:
TPA Partners in Austria