The Real Estate Transfer Tax Act has been subject to numerous changes in the past year. Pursuant to the draft tax bill of the Tax Amendment Act 2015/2016, it will – again – face a general overhaul, in particular with respect to the provisions dealing with share deals involving property companies.
In addition to broadening the scope of the existing share consolidation provision, a new restriction targeting the transfer of interests in real estate-owning partnerships will be introduced.
Extension of the scope of consolidating shares in a real estateowning company
Under current law, the consolidation of all shares “in one hand” in a company owning Austrian real estate triggers real estate transfer tax. For that purpose, shares acquired or owned by more than one entity which are part of a VAT group are deemed to be treated as consolidated "in one hand", thereby equally triggering real estate transfer tax. In both scenarios, a consolidation/transfer of 100% of the shares in the property-owning company is required. Under the new provisions, such threshold will be decreased to 95% of the shares in a property-owning company.
Furthermore, instead of the VAT group requirement, shares acquired or owned by more than one entity will be deemed held "in one hand" to the extent the corporations are part of one corporate income tax group (Unternehmensgruppe).
In addition, the draft tax bill restricts the possibility to avoid real estate transfer tax by way of so-called trustee structures (a mechanism commonly used in the past) by way of deeming any shares held in trust to be allocated for real estate transfer tax purposes directly to the trustor, thereby denying the recognition of the interposition of a trustee. As a result, a mere trustee structure may not avoid real estate transfer tax from falling due in the future.
Substantial change in ownership of interests in real estate owning partnerships
The mere change in ownership of interests in partnerships owning Austrian real estate, currently does not trigger real estate transfer tax, apart from the acquisition of all interests by corporations which are part of a VAT group. The draft tax bill introduces a new provision pursuant to which the transfer of ownership of at least 95% of the interests in a partnership to new partners within a five years period will be subject to real estate transfer tax. As with share consolidations, legal ownership will be decisive for a change in ownership, however interests held in trust will be attributed directly to the trustor for real estate transfer tax purposes.
Tax basis and tax rate for share/partnership interest consolidation
In case of share deals, or the transfer of partnership interests involving companies/partnerships owning Austrian real estate which fall within the above described scope, a 0.5% real estate transfer tax based on the value of the underlying real estate (which will presumably be equal to the property's fair market value) will be triggered.
New tax basis and tax rate for reorganisation
For transfers of Austrian real estate in the course of a reorganisation which falls within the scope of the Austrian Reorganisation Tax Act, the preferential tax basis of twice the special (rather low) assessed tax value (Einheitswert) will be abolished. Instead, the taxable basis will be equal to the real estate's value with a 0.5% tax rate (instead of currently 3.5%) being applicable.
The amendments will become effective beginning as of 1 January 2016.