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Austria I May 2025
Austrian Budget Accompanying Act 2025 (BBG 2025): consultation draft publishes – focus on real estate transactions in the form of share deals
In brief
On 2 May 2025, the Austrian Federal Ministry of Finance (BMF) published the draft of the BBG 2025 for review. As announced in the government programme in February 2025, there will be particular tightening of taxation related to the share transfers in property-owning corporations and partnerships (share deals) and the taxation of real estate companies. Therefore, the focus is on comprehensive extensions to the Austrian Real Estate Transfer Tax Law (RETT-Law) as well as changes to the real estate income tax related to the taxation of profits from rezoning. Additional changes are planned in the areas of foundation entry tax, employee bonuses, and basic flat-rate scheme.
Key changes regarding RETT
General
The following real estate transactions were, among others, previously not subject to the real estate transfer tax (RETT):
- Acquisition of shares in a property-owning corporation, provided that none of the purchasers acquired 95% (or more) of the shares (e.g., splitting 94:6) and the purchasers were not members of the same tax group pursuant to section 9 Austrian Corporate Income Tax Act (CIT)
- Indirect acquisition of shares through an intermediary legal entity
The consultation draft of the BBG 2025 includes the following tightening measures regarding taxation connected to the transfer of shares in property-owning corporations and partnerships (share deals) and of real estate companies:
Extension of the scope
RETT – Law initially distinguishes between the “direct change of shareholders” and, subsidiarily, the “consolidation and transfer of shares”. For both taxable events, the significant participation threshold is to be lowered from the current 95% to 75%.
a) Direct change of shareholders:
- RETT is triggered when at least 75% of the shares in the partnership or in the corporation are transferred directly to new shareholders within seven years.
- In the future, not only changes of shareholders in partnerships but also in
corporations will be in scope.
- The observation period has been extended from five to seven years.
- Introduction of a stock exchange clause: Due to the lack of traceability of share transfers in publicly traded corporations, direct transfers of shares in corporations listed on a stock exchange are to be disregarded.
b) Consolidation and transfer of shares:
- Now, RETT is to be triggered not only by direct but also by indirect share transfers if at least 75% of the shares in partnerships and corporations are consolidated in the hands of one person or association of persons.
- Instead of the taxation in the hand of a tax group according to section 9 CIT, the concept of “association of persons” is introduced for RETT purposes. According to the consultation draft, such an association exists “when partnerships and corporations are consolidated under unified management for economic purposes or are under the controlling influence of a person due to share holdings or other direct or indirect means. An association of persons also includes individuals who exercise unified management or controlling influence”.
- The determination of the participation threshold is carried out by multiplying the shareholdings in percentage at each level. Treasury shares held by the company are to be excluded from the calculation, and the participation threshold should be determined based on the remaining shares held (contrary to the current prevailing legal opinion).
Example from the explanations to the BBG 2025:
B-GmbH holds 80% of the shares in the property-owning A-GmbH.
C-GmbH, which owns 95% of the shares in B-GmbH, transfers all its shares in B-GmbH to D-GmbH.
Through the transfer of shares from C-GmbH to D-GmbH, there is an indirect share shift regarding the participation in A-GmbH amounting to 76% (95% of 80%). This results in a taxable indirect consolidation of shares by D-GmbH concerning the properties of A-GmbH. If B-GmbH also owned properties, this would additionally lead to the realization of a direct consolidation of shares by D-GmbH.
- The new regulations are intended to apply to cooperatives as well.
Tightening measures for real estate companies
The term “real estate company” is newly introduced. This is intended to ensure that share deals, where the acquisition of real estate is the primary focus, will be subject to a tax burden comparable to asset deals in the future. This is to be achieved through the following measures:
- Tax rate of 3.5% (instead of the previous 0.5%)
- Fair market value (market price) as the tax base (instead of the typically significantly lower real estate value previously used in practice).
- The increased tax rate of 3.5% and the fair market value as the tax base will also apply to organization within the meaning of the Austrian Reorganization Tax Act in connection with real estate companies.
According to the draft of the BBG 2025, a company is considered a real estate company if its primary focus is on the sale, rental, or management of properties, and it engages in little or no other commercial activities. The classification as a real estate company is determined based on the company’s assets or the income it generates.
A company is considered a real estate company particularly
- when its assets predominantly consist of properties that are not used for its own business purposes. The sale, rental and management of real estate does not count as business purposes; or
- when the income of the company is primarily generated from the sale, rental, or management of real estate.
If the company’s assets include mixed-use properties, these must be proportionately considered based on their usage when determining the primary focus of the company.
The draft provides a special regulation for real estate transactions between close relatives.
Entry into force & transitional provisions
- The changes will generally enter into force on 1 July 2025 and shall apply to acquisition transactions for which the tax liability arises or would arise after 30 June 2025.
- The entry into force of the BBG 2025 itself is not intended to trigger a RETT.
- The taxable events of the shareholder change and consolidation of shares are to be raised according to the transitional provision when there is a shift in shares and they do not fall below the significant participation threshold (75%).
Changes regarding real estate income tax
The draft of the BBG 2025 includes a rezoning surcharge for both business and non- business (private) property sales by individuals. In the future, a rezoning surcharge of 30% is to be added to the positive income from real estate sales if the property was rezoned after 31 December 2024. This measure is justified by the fact that rezoning leads to atypical increases in value, and therefore the taxpayer should make an additional tax contribution from this increase in value.
The following points should be noted regarding the rezoning surcharge:
- A rezoning particularly occurs when the development of a property is enabled for the first time. The rezoning surcharge is only applicable if the rezoning takes place after the purchase of a property, or if a property was acquired at no cost and a rezoning occurred after 31 December2024 by the gratuitous legal predecessor.
- Only income from the sale of rezoned land is affected. Buildings are not subject to this surcharge.
- The surcharge applies regardless of whether the property is considered as “old asset” or as “new asset” for income tax purposes.
- The rezoning surcharge is only to be considered to the extent that the capital gain and the surcharge does not exceed the sale proceeds.
Example from the BBG 2025 explanations (abbreviated):
In 2010, A purchased undeveloped land for EUR 10,000. In 2025, this land is rezoned as building land, and A sells the undeveloped land for EUR 100,000. The capital gain of EUR 90,000 would typically be increased by a rezoning surcharge of EUR 27,000 (30% of EUR 90,000), resulting in total income of EUR117,000. Since this amount exceeds the sale proceeds of EUR 100,000 by EUR 17,000, the rezoning surcharge must be reduced to EUR 10,000. Thus, total taxable income of EUR 100,000 (comprised of EUR90,000 + EUR 10,000) aligns with the sale proceeds. Applying the special tax rate results in a tax liability of EUR 30,000 (30% of EUR 100,000).
Conclusion and recommendation
The proposed amendments to the RETT regarding share deals, particularly through the expansion to indirect share acquisitions and the increased real estate income tax burden for real estate companies, represent a significant tightening of the current legal situation.
Since these changes related to the real estate transfer RETT in connection with share deals enter into force already on 1 July 2025, the existing ownership structure of real estate assets should be carefully considered and it should be assessed whether ongoing transactions can be completed before 1 July 2025, or if planned transactions can be expedited.
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