Real Estate Transfer and Income Tax - Benn-Ibler
Real Estate Transfer and Income Tax: Changes Effective July 1, 2025
The Austrian legislature’s 2025 Budget Accompanying Act (Bundesbegleitgesetz, hereinafter BBG) tightens real estate transfer tax rules for share deals. Starting July 1, 2025, a reclassification surcharge could apply to real estate income tax. This article covers the key changes.
Income tax: What applies when there is a change of shareholders?
In the past, the transfer of 95% of the shares in a partnership holding real estate within a five-year observation period resulted in the company incurring real estate transfer tax liability.
The following changes will apply from July 1, 2025:
- Extension of real estate transfer tax liability when shareholders of real estate-owning corporations change
- Transfer of 75% of shares results in tax liability
- Observation period extended to seven years
- Assessment of tax-triggering shareholder changes must include a real estate perspective
- In the case of a change of shareholders, only direct share transfers are relevant, unlike share consolidation.
Transfers of publicly traded shares in corporations are not regarded as a change of shareholders.
The tax liability resulting from a change of shareholders is borne by the company that owns the property.
The tax liability for the share consolidation lies with the person in whose hands the shares are consolidated.
Income tax: What changes in the case of share mergers?
If there is no real estate transfer tax liability due to a change in shareholders, tax liability may also arise from a share consolidation.
Taxable transactions are those in which, directly or indirectly, at least 75% of the shares in a company owning real estate are consolidated in the hands of one acquirer or a group of acquirers, or 75% of the shares are transferred to one acquirer or a group of acquirers.
Direct acquisitions take priority over indirect ones. If there are multiple indirect acquisitions that meet the requirements, the one nearest to the property-owning company takes precedence. A single acquirer’s direct or indirect acquisition takes precedence over a group of acquirers.
The changes related to the consolidation of shares are summarized below:
- The tax subject is now the acquirer or acquirer group, as defined by the Austrian Corporation Tax Act.
- Indirect share transfers are included.
- The participation threshold is reduced to 75% from 95%.
- Own shares are excluded.
- Only direct share combinations matter for group reorganizations.
In the event of a change of shareholders, only direct share transfers are relevant. Transfers of publicly traded shares of corporations do not constitute a change of shareholders. The tax liability resulting from a change of shareholders is the responsibility of the company that owns the property.
Income tax: When is a company considered a real estate company?
The tax rate for real estate companies increases to 3.5% of fair market value (from 0.5% of property value) for restructuring, mergers, or shareholder changes.
A real estate company focuses on the sale, rental, or management of property. However, share transfers within the family, as per Section 26a (1) (1) of the Austrian Court Fees Act (Gerichtsgebührengesetz, hereinafter GGG), are exempt.
However, transfers of shares within the family within the meaning of Section 26a (1) (1) of the GGG are excluded.
Transitional provisions
The following transitional provisions are provided for:
- No acquisition will be realized upon the entry into force of the BBG 2025.
- The changes will apply for the first time to acquisitions for which the tax liability arises after June 30, 2025.
- If, on June 30, 2025, at least 75% of the shares in the company’s assets or in the company are held by one person, taxation based on the share consolidation shall also apply to legal transactions if this changes the extent of the shareholding, but does not fall below 75% and no share consolidation or change of shareholders has already been effected in relation to these shares.
Real estate income tax: When is the reclassification surcharge payable?
In the event of a reassignment occurring after December 31, 2024, which for the first time permits the development of a property as building land, the profit derived from the sale of the reassigned property must be increased by 30%. Nonetheless, the rezoning surcharge is to be applied only insofar as the profit, including the rezoning surcharge, does not surpass the sale price.
The amendments to the real estate income tax regulations will be effective for property transactions occurring after June 30, 2025.
This article is intended solely for general informational purposes and should not be considered as a substitute for personalized advice in specific cases.
