The draft tax bill of the Tax Amendment Act 2015/2016 provides for new rules on the taxation of gratuitous transfers of real estate, including amendments to the tax basis and the introduction of new progressive tax rates.
New regime on the taxation of gratuitous real estate transfers
Currently, gratuitous transfers of real estate within the family are subject to a beneficial tax basis equaling three times the value of a special (rather low) assessed tax value (Einheitswert) of the real estate, and a reduced tax rate of 2%. The draft tax bill provides for changes in determining the tax basis for all gratuitous transfers of real estate, and introduces progressive tax rates from 0.5% to 3.5%. Special rules apply to gratuitous transfers of real estate used in a farming or forestry business.
A gratuitous transfer (unentgeltlich) for the purpose of real estate transfer tax, will be defined as a transfer for either no consideration, or for a consideration which is less than 30% of the real estate's value. Transfers of real estate for a consideration amounting to between 30% and 70% (teilentgeltlich) of the real estate's value will have to be split into a gratuitous part (being subject to the rules on gratuitous transfer) and the remaining part being subject to general rules. Any transfer of real estate, the consideration of which exceeds 70% of the real estate's value, will not be governed by the rules targeting gratuitous transfers. In addition, all transfers of real estate inter vivos within a family, and transfers inter mortuos will be treated as gratuitous transfers.
Tax basis and applicable tax rate for gratuitous transfers
For (partly) gratuitous transfers (except for transfers of real estate used in a farming or forestry business) the applicable tax rate will depend on the amount of the taxable basis which corresponds to the real estate's value. In the case of a taxable base of up to EUR 250,000, the tax rate amounts to 0.5%, for the subsequent EUR 150,000 tax base, the tax rate increases to 2%, and for any amounts exceeding such threshold, the tax rate amounts to 3.5%.
In order to determine the applicable tax rate, all gratuitous transfers of real estate effected between the same persons within a five year period will have to be taken into account.
The real estate's value will serve as the taxable basis for gratuitous real estate transfers, and is defined as the sum of the value of the building(s) and the value of the land (being triple the adjusted tax value of the land according to Sec. 53 par 2 Assessment Act). Alternatively, the value of real estate may also be based on an appropriate real estate price index (Immobilienpreisspiegel). In both cases, the determination of the value of the real estate will be outlined in more detail in a separate decree to be published by the Austrian Ministry of Finance. In any case, the taxpayer may also demonstrate a lower fair market value by way of an expert's appraisal.
In addition, the current tax exemption for business real estate gratuitously transferred, in particular within a family, will be increased from EUR 356,000 to EUR 900,000. Furthermore, the scope for exempt transfers between spouses or registered partners will be extended. Lastly, a new provision applicable to gratuitous transfers will allow for paying real estate tax liability in annual instalments over a maximum period of five years, with the downside being that the amount of real estate transfer tax payable will be increased accordingly.
The new provisions will become effective for transfer of real estate effected after December 31, 2015.