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Residence and domicile
How is residence/domicile determined for tax liability purposes in your jurisdiction?
The residence of an individual determines whether he or she is tax liable in Austria. Individuals are resident in Austria under Austrian domestic tax law (ie, subject to unlimited tax liability) if they have either their domicile or habitual place of abode in Austria. In short, a domicile exists if the individual has an accommodation in Austria and it can be assumed that he or she will keep using this place to reside. Staying in Austria for a period exceeding six months is deemed to establish a habitual place of abode in Austria.
For individuals who have their centre of vital interests outside of Austria, unlimited tax liability can be avoided under certain conditions (see the section on planning considerations below).
Describe the income tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
Austrian tax law recognises seven categories of income for individuals:
- agriculture and forestry;
- professional and other independent services;
- trade and business;
- employment income;
- investment income;
- rents, lease payments and royalties; and
- other specified income.
The first and the third categories of income are calculated based on a profit and loss account. In case of smaller businesses, also in the field of agriculture and forestry, as well as for the second category income, the surplus of business income over business expenses is applied. For the other categories, the surplus of receipts over expenses is used. Apart from several restrictions, losses from the respective income categories are, in principle, deductible.
Generally, a tax return must be filed if an individual’s taxable income (ie, the sum of income from the seven income categories minus losses, special expenses, exceptional expenditure and deductions) exceeds €11,000. If an individual receives income only from employment, investment or alienation of real estate, then he or she is not in all cases obliged to file income tax returns. The tax return must be filed before April 30 of the following calendar year, or June 30 if it is submitted electronically. For taxpayers represented by a tax adviser, the deadline to file a tax return is longer. Non-residents must file a tax return if their taxable income exceeds €2,000.
The income tax rate is progressive, ranging from 25% for the lowest tax bracket for income exceeding €11,000 to 55% for income exceeding €1 million. With respect to income assessed by means of withholding (ie, income from employment, investment income, income derived from alienation of real estate, with respect to non-residents income from art, sports or entertainment-related activities, as well as lecturing) special regimes apply (see below).
Describe the capital gains tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
Capital gains are part of the income category ‘income from investment’, which consists of income from:
- capital gains (ie, alienation of shares, bonds and fund units);
- capital (ie, dividends, interest and distributions of private foundations); and
- derivatives (ie, margin payments, option premiums, settlement of forwards, futures and options, and income derived from derivative financial instruments).
It is fully taxable at a special rate of 27.5%, while a special rate of 25% applies only with regard to income derived from saving accounts, bank deposits and non-securitised other receivables from certain banks. Foreign income is subject to the same income tax as domestic income.
In most cases, if an Austrian custodian (ie, banks) or an Austrian paying agent (ie, Austrian companies paying dividends to their shareholders) is involved, a final withholding tax is levied on investment income for individuals that are fully tax liable in Austria. However, if no final withholding tax is levied, then the investment income must be taxed at the same rate as in the case of the final withholding tax (25% or 27.5%) by annual assessment of the taxpayer.
An option to taxation at the regular progressive income tax rate is available. Capital gains are in principle subject to limited tax liability of non-residents, as far as the sale of participations of at least 1% is concerned, but may be fully relieved if a double taxation convention applies.
Lower rates apply concerning dividends and interest and royalty payments made to non-residents who are resident in countries with which Austria has concluded a double tax convention.
Inheritance and lifetime gifts
Describe the inheritance and gift tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
Under existing Austrian law, no inheritance or gift tax exists, but donations or gifts must be reported to the Austrian authorities if they fulfil certain criteria. Donations or gifts do not have to be reported if they take place between relatives and do not exceed €50,000 per year or between non-relatives if they do not exceed €15,000 over five years. Intentional violation of the notification obligation may trigger fines of up to 10% of the fair market value of the assets transferred.
What taxes apply to individuals’ acquisition and disposal of real estate in your jurisdiction?
Capital gains from the alienation of immovable property are, in principle, subject to income tax at a special rate of 30%. Private residential property is exempt from tax if it serves as a principal residence for a continuous period of at least two years since the acquisition of the property or for a continuous period of at least five years before alienation within a 10-year period.
Further, the alienation of self-constructed buildings is tax exempt. The special tax rate applies only if the real estate has not been used for commercial activities before alienation. The basis for taxation is the difference between the sale price and the acquisition costs. The offset of losses resulting from the private alienation of real estate is restricted. A special withholding tax is imposed if the sale of Austrian real estate is handled by an attorney or notary who also handles real estate transfer tax, otherwise advance payments of the special income tax must be made by the individual.
The alienation of real estate is, in principal, exempt from value added tax (VAT). An option to apply VAT is available. In addition, the alienation of Austrian real estate falls under the scope of real estate transfer tax. The tax base is, in general, the value of the consideration – that is, the purchase price. The tax rate amounts to 3.5%, except if the transfer is carried out between relatives or in certain cases, where real estate is not transferred by means of a sale and purchase agreement. The acquisition of real estate also triggers registration fees of 1.1% of the market value of the registered right (ownership), which is generally equal to the purchase price.
Non-real estate assets
Do any taxes apply to the acquisition and disposal of other assets apart from real estate?
Apart from the special regimes of taxation for income on capital gains as regards income from the alienation of capital instruments and real estate (see above “What taxes apply to individuals’ acquisition and disposal of real estate in your jurisdiction?”), Austrian tax law foresees a tax of speculative gains regarding other non-business assets. Income derived from the alienation of private assets sold within one year of the acquisition (ie, the difference between the acquisition costs of the asset in question and its selling price) is taxed at the progressive tax rate.
Other applicable tax regimes
Are any other direct or indirect tax regimes relevant to individuals?
Self-employed individuals must take VAT aspects into account. Real estate transfer tax must be taken into account for transfers of real estate.
Stamp duty issues must be considered for certain contracts (mainly rental contracts for business premises, assignments of rights, concrete sureties unless they constitute an abstract guarantee and mortgages), if a written deed (document) is established and signed in a way that triggers Austrian stamp duty.
Are there any special tax planning considerations for individuals with a link to your jurisdiction?
A tax neutral step-up is available for assets (both in business and non-business property) held by a private individual if Austria gains a right of taxation with respect to these assets due to relocation to Austria. The step-up ensures that only those hidden reserves that arose while the taxpayer was subject to Austrian tax liability will be taxed in case of a later disposition.
In case of relocation to Austria, special privileges may apply. If the conditions stipulated in the Secondary Residence Regulation are met, it is possible that the taxpayer – despite having an Austrian residence – is subject to only limited tax liability including only sources of income derived from Austria. In detail, the Secondary Residence Regulation provides for the following conditions:
- the centre of vital interests of the taxpayer has to be abroad for more than five years;
- the domestic residence may not be used for more than 70 days in a calendar year (a record must be kept of the days actually spent in the domestic residence); and
- the domestic residence may not be the residence of the partner being subject to unlimited tax liability in Austria.
Parallel to the Secondary Residence Regulation, Austrian tax law foresees a relocation allowance that is available only to certain persons whose relocation serves the public interest (ie, artists, scientists and sportspeople) and enables the Ministry of Finance to grant relief by decree with regard to non-Austrian sourced income (ie, relief of worldwide tax). Further, a tax-exempt amount of up to 30% of taxable income is available on request under certain circumstances (as a lump sum deduction of expenses).
The salary or fee of a person is not deductible for the Austrian employer or principal for the base of income tax as far as it exceeds €500,000 per year, which has to be applied on the overall sum of salaries and service fees received by the person from the same group of companies.
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