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      The new Austrian government, formed by the coalition parties ÖVP, SPÖ, and NEOS, presented its government programme just over two months ago.1  Important parts of that programme include a number of fiscal measures, amongst which: introducing a revised income tax law; dedicating sufficient resources to the financial administration aimed partly at improving working and training conditions; and addressing share deals to more effectively tax real estate transactions.

      In this GMS Flash Alert we focus on key aspects of these proposed measures. 

      WHY THIS MATTERS

      Some of the tax measures in the government's programme will impact individuals, thereby affecting – if enacted – cost projections for future assignees and budgeting for international assignments to Austria and from Austria where such assignees will be subject to Austrian taxation.  Furthermore, any resultant tax differentials may impact tax equalisations.  Finally, if appropriate, payroll administrators should make adjustments to withholdings once these rules are enacted.

      Key Fiscal Proposals in the Government’s Programme

      Income Tax Law

      The Austrian Income Tax Act (EStG), dating back to 1988, is set for a major overhaul.  The new government plans to introduce a revised income tax law, focusing on simplification in tax regulations, payroll accounting, and employee assessments.  Key measures include:

      • Extension of the top income tax rate of 55 percent (applicable for income exceeding €1,000,000) for four years, reversing the plan to remove this top rate in 2026.  (This has already passed the lower house of parliament and the Federal Council – codified in the Budgetsanierungsmaßnahmengesetz 2025 – with an entry in force 1 April 2025.)
      • Suspension of one-third of the inflation adjustment of the income tax rate (cold progression).  (Background information: The income tax rates are automatically adjusted annually by two-thirds of the inflation rate.)
      • Digitisation and simplification of payroll accounting and employee assessments.
      • Tax benefits for overtime and bonuses (in 2027).
      • Incentives to increase working hours and promote employment.
      • Increase in the tax-free allowance for additional payments (13th and 14th salaries).  (Background information: In Austria wages are paid 14 times (13th and 14th are vacation allowances, and a tax-free allowance in the amount of  €620.00 is currently applicable.)
      • Evaluation of tax exemptions for employer contributions to employees, such as company events and tax-free employee vouchers.
      • New income model for retirees (people in old age retirement).
      • More effective taxation of zoning gains in real estate capital gains tax by 2025.

      The following additional possible measures in the area of income tax are particularly relevant for companies:

      • Improved tax-free employee bonus (up to €1,000).
      • Increase in the luxury tax threshold for corporate cars to €55,000 (2027) and then €65,000.
      • Reduction of mileage allowance for bicycles and motorcycles to 25 cents (non-taxable benefit employers can reimburse to their employees).
      • Only applicable for natural persons with business income types: Increase in the basic allowance (profit allowance) from 15 percent up to €33,000 to 15 percent up to €50,000 (2027).

      Efficiency and Resource Allocation, Investment Encouragement

      The government aims to allocate sufficient resources to the financial administration and improve working and training conditions.  Planned measures include:

      • Simplification of withholding tax refunds through FASTER (automized system within the EU for reclaiming withheld tax).
      • Improved conditions for cross-border home office arrangements through international efforts (OECD, EU) for coordinated and legally-secure frameworks.
      • Further enhancement of employee participation programmes.
      • Evaluation of investment options for young people, including securities (e.g. ETF savings plans).
      • Increase in the annual allowance for private pension contributions.

      Additional Business Measures

      • Reduction of ancillary wage costs through phased relief of contributions under the Family Burden Equalisation Fund.

      Real Estate Transfer Tax

      • Addressing of share deals as of 1 July 2025, to more effectively tax real estate transactions (share deals), such as stronger aggregation of related buyers and increased tax rates.  
      • Examination of the abolition of state ancillary fees and the real estate transfer tax (GrESt) when acquiring the first home (e.g., as already with the registration fee for first acquisitions up to €500,000).

      Fraud Prevention Package

      • Abolition of input tax deduction for "luxury real estate."
      • Expansion of the reverse charge system in VAT to include real estate.
      • More effective design of exit taxation.
      • Effective use of new data sources, such as automatic information exchange on crypto accounts.

      Other Measures

      • Early abolition of the VAT zero rate for PV (photovoltaic) systems. (This has already passed the lower house of parliament and the Federal Council – codified in the Budgetsanierungsmaßnahmengesetz 2025 – with an entry in force of 1 April 2025).
      • Extension of the motor vehicle insurance tax to electric cars.  (Has already passed the lower house of parliament and the Federal Council – codified in the Budgetsanierungsmaßnahmengesetz 2025 – with an entry in force of 1 April 2025).
      • Health insurance obligation for small jobs (income up to €551.10 per month for 2025).
      • Examination of tax incentives for stronger support of art and culture by private individuals and companies

      KPMG INSIGHTS

      The detailed political negotiations and legislative implementation are still awaited.

      It is essential to get in front of the changes described in this newsletter and to communicate clearly with key stakeholders, so that they can properly plan, budget, and make any necessary payroll and other adjustments – to appropriately prepare for these (actual and potential) changes.

      Taxpayers with questions about how the above-noted measures may impact them and/or what steps they may need to take to be in compliance, and to mitigate their tax-related costs, should consult with their usual tax service provider or a member of the GMS tax team with KPMG in Austria (see the Contacts section).

      FOOTNOTE:

      1  See (in German) "Regierungsprogramm" at: Regierungsdokumente - Bundeskanzleramt Österreich.

      Reuters, "Austria's coalition agreement: what are main policies in the parties' joint programme?" (27 February 2025) at: https://www.reuters.com/world/europe/key-policies-austrias-new-coalition-government-agreement-2025-02-27/.

      Central European Times, "Austria coalition ends five months of limbo" (3 March 2025) at: https://centraleuropeantimes.com/2025/03/austria-coalition-ends-five-month-limbo-period/.

      Please note that by clicking on the above links, you are leaving the KPMG website for an external (non-KPMG, non-governmental) site, that KPMG is not affiliated with nor does KPMG endorse its content. The use of the external site and its content may be subject to the terms of use and/or privacy policies of its owner or operator.

      Contacts

      angelika-schloegl-jettmar
      Angelika Schloegl-Jettmar

      Manager, Global Mobility Services, Tax

      KPMG Austria

      Marlies Hohlrieder
      Marlies Hohlrieder

      Senior Associate, Global Mobility Services, Tax

      KPMG Austria

      christiane-bischoff
      Christiane Bischoff

      Director

      KPMG Austria

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      The information contained in this newsletter was submitted by the KPMG International member firm in Austria.

      GMS Flash Alert is a Global Mobility Services publication of the KPMG LLP Washington National Tax practice. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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