Updated: Aug 20, 2021
By Niklas Schmidt e Melanie Dimitrov | Wolf Theiss
Acquisition of Real Estate
Before an acquisition of Austrian real estate takes place, it should be checked whether any legal provisions restrict the right to own and/or use Austrian immovable property. In this respect, it is necessary to distinguish between two groups of cases:
Firstly, if foreigners purchase a property as a primary place of residence, often a mandatory approval by the competent land transfer authority is required. However, citizens of Member States of the EU, citizens of signatory parties to the Agreement on the European Economic Area (EEA) and, based on treaties, citizens of other countries (e.g., Switzerland) enjoy the same legal status as Austrian citizens and thus do not require any such approval. Sometimes it might be possible to legally circumvent the approval requirement by interposing an entity. In Vienna, for example, it is possible for non-EU/EEA citizens to acquire real estate without needing an approval by interposing two entities (e.g., two Austrian limited liability companies) in a chain.
Secondly, due to the scarcity of land, many Austrian provinces (in particular in the Alps) to a certain extent restrict the use – whether by Austrians or by foreigners – of real estate for leisure purposes. There are certain investment models (e.g., buy-to-let concepts) that can be utilized in this respect.
The process of acquiring real estate in Austria requires (i) a written purchase agreement with the signatures certified by a notary public and (ii) the registration of the acquisition in the land register. The purchaser is not considered to be the legal owner of the real estate prior to this registration. The land register is a public register to which everybody has full access.
Regarding taxes and fees, the following should be noted:
In general, the sale of real estate is VAT exempt. However, the seller can opt in for VAT taxability of each respective sale. If the buyer is an entrepreneur and has the right to deduct the VAT as input tax, then the increase of the sale price by 20% VAT (in case the option is exercised by the seller) will not burden the buyer. For the seller, it is sometimes essential to exercise the option and sell subject to VAT, since otherwise any input tax reclaimed in the past might have to be repaid.
Furthermore, the acquisition of real estate triggers 3.5% real estate transfer tax on the purchase price. Such tax is normally borne by the buyer. Special tax rates apply in case of gratuitous transfers, e.g. in case of transfers between certain relatives: (i) up to and including EUR 250,000: 0.5%; (ii) over EUR 250,000 up to and including EUR 400,000: 2%; and (iii) over EUR 400,000: 3.5% of the property value (which is normally lower than the market value).
In addition, a 1.1% registration fee typically based on the purchase price is due when the transfer is recorded in the land register. In cases of transfers between certain relatives (such as to spouses, children and siblings) a reduced base applies, namely three times the tax value (an artificially low value in no relationship to the fair market value), up to a maximum of 30% of the fair market value.
Finally, mortgages can also trigger certain duties: A court fee of 1.2% of the mortgage's value falls due when it is recorded in the land register (which is mandatory for its validity). While there is also a stamp duty of 1% on mortgage agreements, an exemption applies to mortgages securing claims from loan agreements.
Renting of Real Estate
As with the acquisition of real property, also rental agreements may be subject to restrictions by land transfer and/or local zoning laws. Austria has strong tenancy protection, which may result in various impediments, e.g. the protection of the lessee against termination, caps on the permissible lease amount (basically depending on the age of the building at hand) or the obligation for the lessor to maintain the property. There are distinctions regarding the scope of applicability; therefore, a potential lessee should check whether the property falls – fully or partly – within the scope of the Tenancy Act.
Leases (with the exception of residential leases) are subject to stamp duty amounting to 1%. The tax base depends on the contractual duration of the lease: In case of an indefinite term, the tax base is the triple value of the annual rent (including operating costs and VAT, if applicable). If the lease agreement is entered into for a definite term, the annual rent multiplied by the number of years (but capped at eighteen years) is decisive.
Registration with Municipal Authority
Under public law, anybody taking up residence in an Austrian municipality must notify the municipal authority within three days of such fact.
Niklas Schmidt is a partner at the Austrian law firm WOLF THEISS in Vienna, Austria.
Melanie Dimitrov is a consultant at WOLF THEISS Niklas Schmidt (firstname.lastname@example.org)
Melanie Dimitrov (email@example.com)
Know more about WOLF THEISS.