Inheritance tax and inheritance law in Austria
Taxation Researcher | February 22, 2020
The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Austria: what restrictions there are and whether making a will is advisable.
Inheritance tax is abolished effective 01 August 2008.
Gift Reporting Tax
The information duty replacing inheritance tax effective 01 August 2008 is known as ´gift reporting tax´. This is levied on all gifts, donations, grants over €50,000 between relatives and over €15,000 between non-relatives. Occasional gifts exceeding €1,000 is also subject to gift reporting tax.
Transfers of real estate are excluded from gift reporting tax as these transactions are subject to property transfer tax at the general rate of 3.5%.
For transfers between family members, the applicable property tax rate varies depending on the property value: 0.5% for properties below €250,000, 2% for properties exceeding €250,000 up to €400,000, and 3.5% for properties over €400,000.
Thanks to Christian Marth of DORDA BRUGGER JORDIS
What inheritance laws apply in Austria?
Which law applies to the succession,
depends on the citizenship of the deceased at death.
Austrian inheritance law is, in principle, only applicable to Austrian citizens; however, foreigners may become subject to Austrian law, if the legal provisions of the country where they have citizenship refer back to Austrian law (renvoi). Hence, for an accurate assessment, the law of the decedent´s citizenship needs to be taken into account.
Austrian jurisdiction is always applicable to property located in Austria.
Austrian courts always have jurisdiction where inheritance rights regarding real estate located in Austria are concerned (even if, as mentioned above, foreign material law is applicable). Any exeption to the general rule only applies to real estate (immovable property) not to any other parts of the estate (moveable property) which fall under the jurisdiction of the country where the decedent is a citizen.
Austrian courts will, in most cases, only have jurisdiction over movable property located in Austria if the deceased (assumed not to be an Austrian citizen) had his/her habitual residence in Austria. Any parts of the estate not located in Austria will not be dealt with by Austrian courts.
The courts dealing with inheritance issues in Austria are the regional civil courts.
The court in the district where the decedent had his/her last habitual residence or the court in whose district most of the decedent´s property is located, has jurisdiction. The notary public also plays an important role in Austrian inheritance procedures. Among other things, he/she is responsible for the registration of the death, and the necessary official activities carried out between the death and the final distribution of the estate according to court order.
In the absence of a will, the entire estate goes to the heirs.
If the deceased is intestate, the order of precedence of the succession is as follows. The children (or the grandchildren, respectively) inherit two thirds and the spouse is entitled to one third of the entire estate.
In the absence of descendents, the spouse inherits two thirds and the parents (or the parents´ children respectively) one third. If there are no relatives, up to the great grandparents, the estate is transferred to the Republic of Austria.
There is a "reserved portion" in Austrian law.
Under Austrian law children (including adopted children) and the spouse are entitled to a "reserved portion". The children´s and the spouse´s "reserved portion" has to cover at least half of the portion they would get in the case of intestacy. In the case of childlessness, the parents inherit, but their "reserved portion" is only one third of the portion they would get in the case of intestacy.
The decedent is not subject to restrictions concerning the residue of the estate that is not subject to the reserved portion. The residue can be bequeathed to any persons, including those who are already inheritors according to the "reserved portion" rules.
It is quite common to make a will.
According to Austrian law, every natural person is entitled to make a will. Consequently, it is also possible for foreigners to make a local will in Austria. Under the assumption that Austrian material law is applicable to the estate, or parts thereof, the validity of a will is judged according to the Hague Convention of 5 October 1961 on the Conflicts of Laws relating to the Form of Testamentary Dispositions. Under this Convention a will is valid if the form of the will complies with the law of the place the will was made, the testator is a citizen of, or domiciled in that place, or (important as far as real estate is concerned) it complies with the law of the place where the real estate is situated.
There are three methods of making a valid will in Austria
- Private will: either written and signed by the decedent himself, or written by a third person, and signed by three witnesses, and the decedent
- Judicial will: written or oral
- Notarial will: written or oral
Foreign citizens should be aware that according to Austrian law, it is not possible to write a will by proxy. Consequently, when making a testamentary disposition of real estate located in Austria, the testator must use one the three forms of valid will listed above.
The owner is not necessarily free to
donate his/her property to anyone prior to death.
In principle, there are few restrictions on how an owner disposes of his/her estate. However, assuming that Austrian law is applicable, the Austrian Civil Code provides for several regulations aimed at protecting mandatory heirs (children and spouse) from the decedent donating all his/her estate to other people prior to death. According to these regulations, the mandatory heirs can request the donee to give back the gift, if their "reserved portion" has thereby been reduced. There is, however, a time restriction. In principle, it is limited to gifts given during the last two years before the decedent´s death. On 1st August 2008 the taxation of gifts was abolished in Austria. However a land transfer tax is levied for any donations of real estate.
Special provisions apply in connection with "partnerships of owners".
It is possible for two natural persons to jointly own a flat, apartment, or condominium (partnerships of owners). If one of the partners dies, the remaining owner will (as a general rule and unless agreed otherwise between the owners) obtain full ownership, irrespective of inheritance law or testamentary disposition. In this case, the surviving owner is obliged to effect certain payments to the heirs.
In Austria, all land is registered in the national real estate registry.
The national real estate registry is operated and administered by the Austrian district courts (depending on the location of the real estate). It is open to the public (except for certain privileged data) and its information can be accessed online.
Only upon registration in the relevant land registry can ownership be transferred to the buyer or inheritor. As long as a legal transaction involving real estate is not registered, it is not effective in relation to third parties. Hence, before registration, the party to the contract has only a contractual claim for performance against the other contracting party, but has not yet become legal owner of the property. Furthermore, according to the principle of good faith, entries in the land registry can be relied on as accurate and valid.
Marriage does not create common ownership of property in Austria.
According to Austrian law, real estate is owned separately, unless the parties agree to joint ownership. Under Austrian law the surviving spouse is entitled to remain in the former dwelling that he/she occupied together with the deceased, provided that he/she lived there together with the deceased at the time of his/her death. This right is not limited in time and remains valid so long as the spouse actually lives in the property, even in the case of remarriage. Foreigners should be aware that different rules may apply according to international private law if the real estate is owned by foreign citizens.
A guardian is appointed to administer the property rights of minors.
In the case that real estate in Austria is inherited by a minor (under the age of 18 years) the minor must be assigned a guardian, who is appointed by the court which has jurisdiction.
Austria abolished inheritance tax on 1st August 2008.
There is currently no inheritance tax in Austria, but a transfer tax of 3.5% (2% for close relatives) is levied on the transfer of the property to the successor. This is based on three times the assessed value of the real estate concerned, which is usually far below the market value of the property.