Profits from the sale of private property may be exempt from income tax under certain conditions in accordance with Section 30 (2) Austrian Income Tax Act. In practice, the main residence exemption is of particular importance. Put simply, a capital gain is exempt from income tax if the taxpayer had their main residence on the property sold.
The portion of the capital gain attributable to the building shall be tax-free in any case. However, land should only be exempt to the extent that it is “normally required as a building site”, whereby according to the Austrian Administrative High Court (“VwGH”), this is to be based on the public perception.
The tax authorities assume that the main residence exemption applies up to a property size of 1,000m² (see EStR 2000 Rz 6634). This legal opinion has also been confirmed by the Austrian Financial Court in several cases in the past.
The VwGH dealt with this issue in a recent decision (VwGH 24.4.2024, Ro 2022/15/0020). In the specific case, the appellant sold a property used as a main residence with a total property size of over 3,000m².
The VwGH first addresses the legislative materials on which the main residence exemption is based, according to which this applies only to land that is “usually required as a building site”. From the term “usually”, the Court deduces that a standardized approach must be applied, which must be based on average values. In the context of such an average consideration, a building site of 1,000m² is to be considered sufficient in general.
The VwGH applies a nationwide identical standard. No differentiation is made according to the location of the property concerned. This can lead to inappropriate results, as properties in urban areas are often significantly smaller than those in rural areas. However, due to their location, these smaller properties may be worth significantly more than the larger properties in more affordable locations. As the VwGH does not differentiate on the basis of location, it is possible that a significantly higher capital gain from the sale of an urban property is fully exempt from income tax, while a lower gain from the sale of a rural property is partially taxable. We will be happy to assist you with any tax issues in connection with the sale of your real estate.
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We will be happy to assist you with any tax issues in connection with the sale of your real estate.
Please do not hesitate to contact us at office@vanas.at or +43 1 312 505.
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