Draft for the 2025 Budget Accompanying Act (BBG 2025)
On 2 May 2025 the long‑awaited draft of the 2025 Budget Accompanying Act (BBG 2025) entered the review process.
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It also contains the following significant tax adjustments:
- Real‑Estate Transfer Tax: extension of the share-pooling scope according to the RETT Act.
- Private foundations: increase of the foundation entry tax to 3.5 %.
- Income tax: substantial increase of the lump‑sum deduction for business expenses acc. to ITA.
Amendments regarding the Real‑Estate Transfer Tax (RETT)
In order to cover large real‑estate transactions structured as “share deals” more effectively for tax purposes, the taxable events of changes in the shareholder structure and of share-pooling or transfer of shares will be broadened, and further strict measures for real‑estate companies will be introduced.
The extension of the taxable events of changes of shareholders and of share-pooling is to be achieved above all by the following measures:
- Reduction of thresholds: First, the relevant shareholding threshold for triggering RETT is to be lowered from 95 % to 75 %. Hence, it is sufficient if 75 % of the shares are held by the same entity or 75% are transferred, instead of 95 % as hitherto.
- Indirect shareholdings: For the event of transfer or share-pooling, not only changes in direct shareholdings of real‑estate‑owning companies shall be relevant, but also indirect changes in the upstream (indirect) shareholder structure. The relevant 75 % threshold shall be determined by multiplicatively tracing through the percentage shareholdings at each level.
- “Stock‑exchange clause”: By inserting a “stock‑exchange clause”, transfers of shares in corporations that are traded on a stock exchange are to be disregarded for RETT purposes. A relevant stock exchange will be a regulated market pursuant to Section 1 (2) and (10) of the Stock Exchange Act 2018 or a comparable foreign trading venue.
- Relevant entities: For share-pooling, the relevant scope of entities will be changed from the CIT-group to specifically defined associations of entities. An association of entities exists when partnerships or corporations are held under uniform management by shareholdings or otherwise for economic purposes, or are under the controlling influence of a single person.
- Increase in assessment base / tax rate (real‑estate companies): In case of share-pooling, a shareholder change or a corporate reorganization is processed regarding a real‑estate company, the tax will amount to 3.5 % of the fair market value (previously 0.5 % of the property value) (procedures within a family are excepted). A real‑estate company is deemed to exist if the company’s main activity is the sale, letting or management of real property and if it pursues no, or only subordinate, other commercial activities.
The amendments shall enter into force on 1 July 2025 and shall apply to acquisitions for which the tax liability arises, or would arise, after 30 June 2025.
Amendments regarding Private Foundations
- Increase of tax rate: The rate for contributions to private foundations is to be increased from the current 2.5 % to 3.5 % with effect from 1 January 2026.
- Foundation privilege unchanged: The foundation privilege — i.e. the possibility to transfer hidden reserves under Section 13 (4) Corporation Income Tax Act — remains unaffected.
Amendments in the area of Income Tax
- Introduction of a rezoning surcharge on sale of land: Rezoning of land (particularly from green area land to building area) regularly leads to atypical increases in value, which are to be given greater weight in taxation. For this purpose, a rezoning surcharge is to be added to the positive (business and non‑business) income from the sale of the rezoned land.
This surcharge will generally to amount to 30 % of the positive income attributable to the land and is to apply irrespective of whether the land constitutes “old” or “new” assets, how the income is determined, or whether the special tax rate or the progressive rate is applied.
To prevent excessive tax burdens on rezoned land, the addition of the rezoning surcharge is to be capped: if the sum of the “sale gain” and the rezoning surcharge exceeds the sale proceeds, the income is to be capped at the sale proceeds.
Sales of land from 1 July 2025 onwards will be affected, provided the rezoning took place on or after 1 January 2025.
- Increase of the basic lump‑sum deduction for business expenses including the input VAT flat rate: As provided in the government program, for the calendar year 2025 the turnover limit for the income tax basic lump‑sum expenses deduction scheme is to rise from € 220,000 to € 320,000 and the lump‑sum business expenses rate from 12 % to 13.5 %. The reduced rate of 6 % (e.g. for writing, lecturing, scientific, teaching or educational activities) remains unchanged.
Since the income tax basic lump‑sum expenses deduction scheme is the central prerequisite for applying the VAT lump‑sum scheme (input‑VAT flat rate), the input VAT scheme is to be adjusted accordingly. The input VAT amount to be determined by the average rate remains unchanged at 1.8 % of total turnover.
- Tax‑free employee bonus: According to the BBG 2025, employers may grant an employee bonus of up to € 1,000 tax‑free in the calendar year 2025. The bonus may also be granted only to individual employees without constituting a group. If the bonus is not offered to all employees or not in the same amount, the differentiation must be justified objectively and by the nature of business.
The employee bonus must constitute an additional payment, i.e. a payment that has not previously been customary. Payments such as those resulting from performance agreements, regularly recurring bonus payments or extraordinary salary increases therefore do not qualify as tax‑free payments.
- Increase of the commuter euro (Pendlereuro): To give a more socially equitable recognition of the costs of those employees who have to commute to their workplace, the commuter euro is to be increased from the current € 2 per kilometer to € 6 per kilometer of the one‑way distance between home and workplace from 2026 onwards.
- Cold‑progression brake: For reasons of budget consolidation, the annual inflation adjustments for the calendar years 2026 to 2029 will only be processed to the extent of two‑thirds. Furthermore, the temporary increase in the tax concession for overtime work will expire.
- Suspension of inflation adjustment for the child tax credit (Kinderabsetzbetrag): The valorization of certain family benefits will be suspended for the calendar years 2026 and 2027, and accordingly the child tax credit won’t be adjusted for inflation in those years.
Further tax changes under the BBG 2025
- VAT exemption for feminine hygiene products and contraceptives: In line with the 2025‑2029 government program, contraceptives and feminine hygiene products will exempt from VAT from 1 January 2026 onwards.
- Increase in gambling levies: The gambling levy on lotteries will be increased from 16 % to 17.5 %.
The concession and gambling levy on electronic lotteries (online gaming) is to be raised from 40 % to 45 %.The gambling levy on draws with gaming machines and on draws with video‑lottery terminals is to rise from 10 % to 11 %, and the provincial surcharge (at 150 % of the base levy) consequently from 15 % to 16.5 %.
Furthermore, a gambling levy of 7.5 % is to be introduced on the administrative cost contribution for lotteries.
The increase of the gambling levy from 10 % to 11 % (Section 57 (4) Gambling Act, together with the effect on provincial surcharges) is to take effect on 1 January 2026.
The other adjustments are to enter into force on 1 July 2025.
- Energy crisis contributions (Energierkrisenbeiträge): As a result of the evaluation, an adjustment is needed regarding the design of the credit amount in respect of the electricity and fossil‑energy crisis contributions. This adjustment will be implemented within the BBG 2025.
- Extension of mandatory electronic service: Companies that are participants in FinanzOnline and are required to file a VAT return will in future be obliged to participate in electronic delivery service via FinanzOnline.
From the entry into force of this amendment on 1 September 2025, a waiver (opt‑out) by the companies concerned will no longer be possible.
Outlook
In our view, enactment can still be expected in early summer 2025.
The review period for the BBG 2025 ended on 9 May 2025.
