Austria: 93 tax treaties, 20% VAT, and tighter input VAT rules for “luxury” residential lettings from 2026

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Austria maintains one of the broadest tax treaty networks in the EU, with 93 income tax treaties currently in force, while key provisions of the treaties with Russia and Belarus are under suspension. Austria’s treaty policy broadly follows the OECD Model Convention and incorporates BEPS-related instruments — the MLI has been in force since 1 July 2018.

In domestic law, tax treaties have the rank of ordinary legislation, but in practice they typically prevail over domestic provisions under lex specialis/lex posterior, and Austria has not enacted specific treaty override legislation.

VAT: 20% standard rate, 10% and 13% reduced rates

Austria’s VAT system is based on EU VAT rules. The standard rate is 20%. A 10% reduced rate applies to, among other items, food, books, newspapers and periodicals, passenger transport, hotel accommodation and residential lettings. A further reduced rate of 13% applies to certain recreational and cultural services. A temporary COVID-related 5% rate applied until 31 December 2021.

Key change for 2026: restricted input VAT deduction for “particularly representative” residential properties
The text highlights a major change introduced by the Fraud Prevention Act 2025 (BBKG 2025). Going forward, the letting of “particularly representative properties” (luxury residential properties) will be mandatorily VAT-exempt without input VAT recovery. The threshold is EUR 2 million (net) in acquisition and/or construction costs within five years; for apartment buildings, the test is applied per unit. The rule is generally intended to apply to transactions and relevant circumstances occurring after 31 December 2025, provided the property was acquired/constructed by the lessor after that date.

Withholding taxes: dividends, royalties, interest

Dividends paid to non-residents: 27.5% WHT for individuals and 23% for corporations, subject to treaty/EU Parent–Subsidiary relief (10% participation and one-year holding period).

Royalties: 20% WHT, potentially reduced under treaty/EU Interest & Royalties relief (25% participation and one-year holding period).
Interest paid to non-resident corporations is generally not subject to WHT, though interest deductibility limitations apply (ATAD-style interest limitation and additional domestic restrictions).

From 1 January 2026, Austria also envisages raising the minimum taxation threshold relevant for deductibility limitations on intra-group interest and licence fees paid to low-tax jurisdictions from 10% to 15%.

Corporate income tax and grouping

Austria taxes corporate profits at 23%, with a minimum annual corporate tax of EUR 500. A group taxation regime allows profit/loss attribution to the parent; foreign members’ losses may be attributed proportionally under specific limitations and potential recapture rules.

Real estate: major RETT reform since 1 July 2025

The text also points to significant changes to Austria’s real estate transfer tax regime, particularly for share deals: lower thresholds (75%), longer monitoring periods (seven years), a new “real estate company” concept potentially triggering 3.5% RETT, and an extension to indirect ownership changes.

BEPS and digital measures: 5% Digital Tax and public CbCR

Austria has implemented multiple BEPS/ATAD-related measures, including CFC rules (with a low-tax threshold moving to 15% from 2026), interest limitation, and DAC6 reporting. Austria also applies a 5% Digital Tax on online advertising (since 2020) and has enacted legislation to make CbCR publicly accessible under the Public CbCR Act.