Buying a holiday home in Austria remains unprecedentedly popular. Many Austria lovers are looking for an alternative to their savings that they can enjoy themselves. In addition, buyers are naturally interested in the tax consequences of renting out such a holiday home. They are curious about reclaiming VAT, whether the rental income is subject to sales tax and about the income tax on the rental income.

Can I reclaim Austrian VAT on my holiday home?

If you are not offering the house or flat for rental in Austria, then you obviously cannot claim a VAT refund. However, for many new construction projects, mayors in popular areas now only issue a building permit in combination with a rental obligation. This is because rentals contribute to liveliness in the village, generate tourist tax and tourists spend money at the ski lifts, restaurants, etc.

When buyers offer their holiday homes for rental, they can apply for a VAT number from the Austrian Finanzamt. At that point, they are considered a small entrepreneur and can therefore reclaim the VAT on purchase price. We recommend having this taken care of by an Austrian Steuerberater.

In the case of new-build properties with a letting obligation, it is possible in some cases to transfer the VAT to the developer, so you do not have to pre-finance the VAT and can pay the instalment payments excluding VAT.

What about sales tax on rental income?

Rental income generated in Austria is taxed at a rate of 10 per cent sales tax. If, as an owner, you rent out your holiday home independently, you pay this sales tax as the owner yourself. For owners who have purchased their Austrian holiday home, whereby the rental is organised centrally for the owner through a rental organisation, the rental organisation pays this 10 per cent VAT. In that case, you receive your rental income from the rental organisation plus 20 per cent turnover tax. You remit this 20 per cent sales tax again. Therefore, on balance, there is no difference compared to owners who rent independently.

Do I always have to file income tax returns in Austria?

For foreign taxpayers, it is compulsory to file an income tax return if the annual income exceeds the exemption of EUR 2,000 per person. This obligation expires if this limit is not exceeded. The moment you receive a tax return form from the Finanzamt, then a tax return must always be filed, even if you remain below the limit.

How is income tax calculated?

The income tax payable is calculated on the Fiscal profit realised on the rental result. The Fiscal profit is taxed in Austria and is subject to Austrian income tax. No tax is payable in the Netherlands on the rental income on your chalet in Austria. Whether you have to pay income tax in Austria on your rental income depends on several factors.

Fiscal profit is calculated by reducing the rental income by an annual fiscal depreciation of 1.5% on the building (excluding land value), annual fiscal depreciation of 10% on the inventory of 10% and the interest paid for any mortgage.

EU citizens generating rental income in Austria are classified as Beschränkt Steuerpflichtig. This is subject to a tax exemption of €2,000 per person. If you buy together with your partner, you have an exemption of 4,000 euros for your joint residence. On the excess, you pay income tax according to a progressive system. In many cases, this means you pay no income tax or a small amount. All in all, in practice, if you own one holiday home and you bought it together with your / a partner, in many cases you will pay no or only limited income tax.

The content may be subject to change. You cannot derive any rights from the above information. For tailored advice, we recommend that you always consult an Austrian Steuerberater (tax expert).

Source: Gerard & Pauline Haagsma – Second Home Invest