Top Tax Tips for Foreign Buyers in Austria

Top Tax Tips for Foreign Buyers in Austria

Purchasing property in Austria offers excellent opportunities but comes with a specific tax regime and EU compliance requirements foreign buyers must navigate to optimize their investment. This guide outlines key considerations and tax-saving tips for foreign investors entering the Austrian real estate market.

Understanding Austria Real Estate Taxation

1. Real Estate Transfer Tax (RETT)

• Any transfer of real estate in Austria triggers a Land Transfer Tax at a standard rate of 3.5% of the purchase price or property value. This tax is payable by the buyer and is calculated based on the higher of the purchase price or the assessed property value, which includes the land and building values.
• Transfers within families can benefit from reduced rates: 0.5% on property values up to €250,000, 2% on values between €250,000 and €400,000, and 3.5% on amounts exceeding €400,000.
• Recent legislative changes effective from mid-2025 have reduced the ownership threshold for triggering RETT on share deals from 95% to 75%, closing loopholes used to avoid transfer tax through complex corporate share structures.

2. Capital Gains Tax on Real Estate Sales

• Profit from selling Austrian real estate is subject to a capital gains tax, generally at a flat rate of 30% on the gain between acquisition cost and sale price.
• Exemptions exist for main residence owners who have lived in the property continuously for at least two years or cumulatively five years within the last ten years.
• Properties acquired before 31 March 2002 are taxed under a different, more favorable regime.

3. VAT Considerations

• Real estate purchases are typically exempt from VAT. However, if the seller is an entrepreneur and the buyer opts to use the property for commercial rental purposes, the sale can be treated as VAT taxable at 20%, making VAT recoverable for the buyer under certain conditions.

4. Registration Fees and Other Costs

• Registering ownership or mortgages at the Austrian Land Registry incurs a registration fee of 1.1% of the loan amount or property value. Notarial fees for certification, although not mandatory for mortgages, can range from about 1% to 3% depending on complexity.

EU Property Compliance for Foreign Buyers

• No Restrictions for Foreign Buyers: Austria places no limitations on foreign nationals acquiring real estate. Foreign lenders can legally secure mortgages and enforce collateral under Austrian law without foreign exchange or capital transfer restrictions.
• Anti-Money Laundering (AML) Checks: Due diligence, including AML checks, is mandatory for all real estate transactions to prevent illicit financial flows.
• Cross-Border Tax Treaties: Foreign buyers must consider double taxation treaties between Austria and the buyer’s home country to avoid double taxation on rental income, capital gains, and other property-related income.
• Real Estate Investment Vehicles: Foreign investors often use partnerships or trusts such as Austrian Real Estate Investment Trusts (REITs), which are treated as transparent for tax purposes, with beneficiaries paying capital gains tax at 27.5% or corporate income tax at 23% depending on the entity type.

Tax Optimization Strategies for Foreign Buyers

• Leverage Main Residence Exemption: Use the property as your primary residence for at least two years to avoid capital gains tax upon sale.
• Careful Holding Period Planning: Holding real estate for longer periods can reduce taxable gains and benefit from exemptions, especially with older properties acquired before 2002.
• Consider Corporate Structures Carefully: With new RETT rules lowering thresholds on share deals and extending look-back periods, structuring investments through corporate entities requires expert tax advice to avoid unexpected transfer taxes.
• Utilize Available Incentives: Austria offers tax incentives for ecological renovations and accessibility improvements that can be deducted or subsidized, helping reduce the effective tax burden on property ownership.
• Plan Transfer and Succession Efficiently: Although inheritance and gift tax has been abolished, gratuitous transfers are still subject to real estate income and transfer taxes. Proper planning considering family relationships and property values can minimize costs.
• Professional Advice Is Essential: Given the complexity of Austrian and EU tax laws, engaging local tax advisors ensures compliance and maximizes tax efficiency across acquisition, ownership, and disposition phases.

Conclusion

Foreign buyers in Austria face a well-defined real estate tax environment focused on a 3.5% real estate transfer tax, a 30% capital gains tax on profits, and various compliance rules aligned with EU standards. By understanding these key tax points and leveraging exemptions and incentives, foreign investors can optimize their Austrian property investments while ensuring full compliance with tax and legal obligations.

For bespoke investment strategies, speak to our global advisory team.