Changes to Income Tax & Real Estate Capital Gains Tax
Restriction of the Investment-Related Profit Allowance
For financial years beginning after 31 December 2026 and before 1 January 2030, the investment-related profit allowance (investitionsbedingter Gewinnfreibetrag) will be limited to investments in tangible assets. Investments in securities of any kind – including Austrian government bonds (Bundesschatz) – will no longer qualify during this period. For financial years beginning after 31 December 2029, the allowance may once again be claimed for eligible securities investments.
New Progressive Corporate Income Tax Rate from 2028
Starting in 2028, Austria will introduce a progressive corporate income tax regime. While the standard corporate income tax rate of 23% will remain unchanged, income exceeding €1 million will be subject to a higher rate of 24%.
The new rules will apply to both resident corporations subject to unlimited tax liability and non-resident corporations subject to limited tax liability. However, the tax rate for domestic corporations with limited tax liability will remain unchanged at 23%.
In addition, a progression clause will be introduced for resident corporations. As a result, income that is exempt from Austrian taxation under a double taxation treaty will nevertheless be taken into account when determining the applicable corporate income tax rate.
For tax groups, the progressive tax rate will be applied to the group's total taxable income. Consequently, the 23% rate will only apply to the first €1 million of group income, regardless of how many companies form part of the tax group.
Increase in Real Estate Capital Gains Tax
The Budget Accompanying Act also introduces changes to the taxation of gains derived from the disposal of grandfathered real estate assets (Altvermögen) after 31 December 2026.
The changes affect properties that were no longer subject to taxation as of 31 March 2012, generally meaning properties acquired before 31 March 2002. While the statutory tax rate remains unchanged at 30%, adjustments to the deemed acquisition cost rules will result in a higher effective tax burden.
Previously, deemed acquisition costs for grandfathered properties were calculated at 86% of the sale proceeds, resulting in an effective tax burden of 4.2% of the sales price. For disposals taking place after 31 December 2026, the deemed acquisition cost percentage will be reduced from 86% to 80%, increasing the effective tax burden to 6%.
For grandfathered properties that were rezoned as building land after 31 December 1987, provided that the rezoning occurred after the most recent acquisition for consideration, the deemed acquisition costs will be reduced from 40% to 30% of the sale proceeds. This increases the effective tax burden from 18% to 21%.
Where a property was rezoned after 31 December 2024, the additional 30% rezoning surcharge already introduced under the Budget Accompanying Act 2025 must also be taken into account. In these cases, the effective tax burden rises from 23.4% to 27.3%.
Key Takeaway
The Budget Accompanying Act 2027–2028 introduces several significant tax measures, including temporary restrictions on the investment-related profit allowance, the introduction of a progressive corporate income tax rate for high-income corporations, and a higher effective tax burden on the disposal of grandfathered real estate assets. Businesses and investors should review the potential impact of these changes well in advance of their effective dates.