Austrian Income Tax

Individuals who have a permanent domicile (Wohnsitz) and/or their habitual abode (gewöhnlicher Aufenthalt) in Austria are subject to income tax (Einkommensteuer) in Austria on their worldwide income (unlimited income tax liability).

If only a holiday home (secondary residence) in Austria is maintained, a journal regarding the days spent in the Austrian home must be kept (maximum of 70 days), in order to avoid unlimited tax liability in Austria. This exemption requires that the centre of vital interest has been abroad for the past five years.

Individuals who have neither a permanent domicile nor their habitual abode in Austria are subject to income tax only on income from certain Austrian sources (limited income tax liability).

The following types of income are subject to income tax:

• income from agriculture and forestry;
• income from self-employed work;
• income from trade and craft activities;
• income from employment;
• income from capital assets;
• income from rents and leases; and
• other income.

In Austria, there are progressive rates of income tax, up to 55%. The level of income tax depends on the taxable income received in a calendar year, which is the same as the business year and comprises a period of 12 months. Any operational losses may be deducted. There are provisions by which losses can be carried forward. An individual may deduct special expenses, such as certain charitable donations, the costs of tax advice and extraordinary expenses, including medical costs, up to a certain amount. There are also tax reliefs for children.

A special tax regime applies to income from capital assets, which is subject to a tax rate of 27.5%, which is often a withholding tax; no additional income tax is levied over and above the amount of tax withheld or the respective 27.5%.

There is also a 30% tax rate for capital gains from real estate. For property tax, each municipality levies an annual tax on Austrian real estate, which is deductible from rental income. Property tax is based on the unit value (Einheitswert, which is generally significantly below market value) and is decided upon by local authorities. Generally, the tax rate varies between 0.1% and 0.2% annually.

Austrian Corporate Income Tax

Corporations that have their place of effective management and/or their legal seat (Sitz) in Austria are subject to corporate income tax (Körperschaftsteuer) in Austria on their worldwide income (unlimited corporate income tax liability). Corporations that have neither their place of effective management nor their legal seat in Austria are subject to corporate income tax only on income from certain Austrian sources (limited corporate income tax liability). Partnerships are not subject to corporate income tax, but the partners are individually subject to income tax. Corporate income tax is levied on a corporation’s income after the deduction of any losses or allowances. The corporate income tax rate is 23% for fiscal year 2024.

Gift and Inheritance Taxation

Austria has not levied inheritance or gift tax since 2008. There is also no wealth tax in Austria.

Although there is no gift tax in Austria, there is a special notification obligation for gifts in cash, receivables, shares in corporations, participations in partnerships, businesses, movable tangible assets and intangibles if the donor and/or the donee have a domicile, their habitual abode, their legal seat or their place of effective management in Austria. The gift must be notified within three months from the donation; after that, a curing period of only one year exists.

Foundation Transfer Tax

Certain gratuitous transfers of assets to private foundations and comparable legal structures are subject to foundation transfer tax (Stiftungseingangssteuer), pursuant to the Austrian Foundation Transfer Tax Act (Stiftungseingangssteuergesetz). The tax rate is generally 2.5%, with a higher rate of 25% applying in special cases. Such tax is triggered if the transferor and/or the transferee at the time of transfer have a domicile, their habitual abode, their legal seat or their place of effective management in Austria.

Certain exemptions apply in cases of transfers mortis causa of financial assets within the meaning of Section 27(3) and (4) of the Austrian Income Tax Act (except for participations in corporations) if income from such financial assets is subject to tax at the flat rate of 27.5%, pursuant to Section 27a(1) of the Austrian Income Tax Act. The tax basis is the fair market value of the assets transferred minus any debts, calculated at the time of transfer.

In addition to Austrian foundations, Liechtenstein foundations are also popular. Pursuant to a special agreement between Austria and Liechtenstein, gratuitous transfers of assets from a person or entity with unlimited tax liability in Austria to a foundation under the laws of Liechtenstein would be subject to foundation transfer tax in Austria at rates between 5% (if all relevant documents of the foundation are disclosed to the Austrian tax authorities) and 10%.

Real Estate Transfer Tax

Real estate transfer tax is typically charged at a flat rate of up to 3.5% of the property value, but generally 2% for a transfer between close relatives in the case of agricultural and forest land. For reorganisations, a reduced rate of 0.5% applies. A registration tax of 1.1% also applies if the new owner is registered in the land register.

Exit Taxation

Generally, any circumstances resulting in a restriction of Austria’s right to tax certain (financial) assets (or, under certain circumstances, profit potential) may give rise to exit taxation of unrealised capital gains in Austria. There is no exit tax on other types of assets, such as real estate or art. Special rules apply within the EU and according to certain tax treaties, and there are tax exemptions for assets acquired before 2011.

There are exemptions from the obligation to file a gift notification for gifts (one or several gifts) between close relatives, not exceeding EUR50,000 in total per year. Gifts between third parties trigger a notification if the value of gifts made exceeds EUR15,000 during a period of five years. Gratuitous transfers to private foundations and of real estate are also exempt from the notification obligation.

There is an exemption from real estate transfer tax for family homes under Austrian tax law, under which the first 150 sq m of the family home may be transferred free of real estate transfer tax between living spouses. The same applies for the transfer mortis causa to the surviving spouse if the family home served as the principal residence of the spouses (at the time of death). There are also certain exemptions regarding real estate capital gains taxation in case of the sale of a principal residence.

Most importantly, Austria has no inheritance or gift tax (only notification obligations, as mentioned in 1.1 Tax Regimes), which enables several opportunities to arrange for a tax-efficient planning of asset transactions between individuals.

In order to avoid real estate transfer tax and land register duties when real estate properties located in Austria are to be transferred, it could be tax-efficient to use corporate entities as property owners, since real estate transfer tax would only be triggered if at least 95% of the shares in the property-owning entity are transferred.

In respect of capital assets subject to capital gains tax, a step up to the fair market value is granted upon the establishment of the right of taxation in Austria – ie, the relocation to Austria. Special planning tools are not required in this respect but it is advisable to keep records regarding the fair market value at the time of relocation. Additional income tax benefits may be granted to certain groups of persons whose relocation to Austria is in the public interest, provided there is a timely application.

However, gifting an asset to a private foundation does not lead to a step-up. In the case of shares in a corporation, the hidden reserves from a sale may be transferred and thus taxation may be deferred by the private foundation.

In Austria, each municipality levies an annual property tax on Austrian real estate, which is deductible from rental income. Property tax is based on the unit value (which is generally significantly below market value) and is decided upon by the local authorities. Generally, the tax rate varies between 0.1% and 0.2% annually.

Non-residents are subject to limited tax liability in Austria on income from the sale of Austrian real estate, at a rate of 30%. In addition, real estate transfer tax is typically levied at a flat rate of up to 3.5% of the property value, but generally 2% for a transfer between close relatives in the case of agricultural and forest land. For reorganisations, a reduced rate of 0.5% applies. A registration tax of 1.1% also applies.

Austrian tax provisions concerning estate and transfer tax laws have remained relatively stable over recent years. There are currently no pending tax reform projects concerning estate and transfer taxes; this could change with a new government after the elections in late 2024, although it remains unclear what potential changes could emerge. Whereas some parties favour estate taxes, others wish to maintain the current status.

Preventing Abuse/Loopholes in Tax Law

Under Austrian tax law, a distinction has to be made between legal structures (accepted for tax purposes) and illegal structures (not accepted for tax purposes). A transaction is not accepted for Austrian tax purposes if it either:

• violates special provisions of Austrian tax law; or
• infringes the Austrian general anti-avoidance rules.

Austrian tax law contains two provisions with general anti-avoidance rules.

Section 22 of the Federal Fiscal Code

The first provision is Section 22 of the Federal Fiscal Code, which is based on the “anti-abuse” doctrine that prohibits the abuse of law (as established by the jurisprudence of the Austrian Administrative Supreme Court). According to this provision, an abuse of law occurs if – with regard to the targeted goal – a legal structure has an unusual and inappropriate character and can be explained only by the intention of tax avoidance. Whether the structure remains meaningful without the tax minimisation effect must be assessed.

Section 21 of the Federal Fiscal Code

This second provision is based on the “substance over form” doctrine and provides that, for the purpose of evaluating tax structures under an economic approach, the formal appearance is not essential but the actual economic substance of the facts and circumstances is essential.

Common Reporting Standard, DAC6 and FATCA

Austria has adopted various legislative measures with regard to the Common Reporting Standard, which were often driven by or were part of corresponding EU Directives and/or Regulations. The exchange of information with third countries is therefore often based on double taxation treaties, and a robust legal framework for tax information exchange exists within the EU.

With respect to DAC6, Austria has recently adopted legislation to implement reporting obligations for potentially aggressive tax planning schemes (EU-Meldepflichtgesetz – EU-MPfG). The scope of the Austrian EU-MPfG corresponds to the text of DAC6, stating that an intermediary is required to report only cross-border tax arrangements. Domestic tax arrangements that relate to taxes set out in DAC6 are not subject to the EU-MPfG, so are not reportable.

In 2014, Austria (like many countries worldwide) entered into an Intergovernmental Agreement with the USA (the US Foreign Account Tax Compliance Act – FATCA). This Agreement means that all domestic financial institutions will have to report specific data on persons and accounts, and the custody account details of persons that are subject to US tax to the IRS.

Public Beneficial Ownership Registers

Like other EU member states, Austria implemented a public beneficial ownership register (Register der wirtschaftlichen Eigentümer) in 2018 on the basis of an EU Directive. The register was open to the general public until 2022, where the CJEU ruled that the public access provisions violated certain EU fundamental rights (eg, respect for private life). Under the current rules, certain authorised parties are entitled to inspect the register. In addition, any person or organisation is granted access to the register if they can demonstrate a legitimate interest in doing so.

The desire of the older generation to determine and control the future developments of their wealth is a common factor in succession planning. Several legal tools are used to safeguard a family’s wealth. Firstly, the transfer of assets inter vivos is often combined with requirements and conditions in favour of the older generation, such as provisions prohibiting transfer and disposal or the right to usufruct. Secondly, the installation of executors of the last will and the establishment of private foundations are used to prolong control over family assets.

International estate planning has become increasingly important in the last couple of years. The key factor in addressing the relevant legal and tax provisions is to initiate a timely engagement regarding estate planning. Legal provisions such as forced heirship or taxes such as inheritance or gift tax may require estate planning transfers inter vivos or the establishment of foundations or well-structured wills to avoid negative effects for the next generation.

From an Austrian perspective, forced heirship provisions need to be taken into account in order to avoid the division of family estate. Austria does not currently levy inheritance or gift tax, but foreign tax obligations often play a decisive role in estate planning in international cases.

Austrian inheritance law contains provisions on forced heirship (Pflichtteilsrecht). In principle, the descendants of the deceased and the spouse/registered partner are entitled to a compulsory share (Pflichtteil), which amounts to half of the statutory share. Other relatives of the deceased, such as parents or siblings, are not entitled to a compulsory share.

The statutory share is calculated by dividing the estate by the number of children of the deceased – eg, in the case of two children, the statutory share is 50% of the estate for each child. The compulsory share would be 25% of the estate. If a child has passed away prior to the testator, they shall be substituted by their own children (ie, the testator’s grandchildren) regarding the respective compulsory share.

If the deceased person is survived not only by their children but also by a spouse, the statutory share is one third for the surviving spouse and two thirds for the children of the deceased – eg, in the case of two children, the statutory share of each child would be one third of the estate, and the compulsory share of each child would be one sixth of the estate.

In order to make a specific claim to the compulsory share, one must not:

• have renounced the compulsory share (Pflichtteilsverzicht);
• be unworthy of inheritance (erbunwürdig); or
• be disinherited (enterbt).

Renunciation of the inheritance (Erbverzicht) in general leads to the loss of the claim. The renunciation of inheritance may be concluded with effect for the renunciant or with extension of effect to the renunciant’s descendants.

The reasons for disinheritance include certain criminal acts of the beneficiary against the deceased and their close relatives, or an offence against the last will of the deceased.

The compulsory portion to which the descendants and the spouse or registered partner are entitled may be reduced by last will. This presupposes that the deceased and the beneficiary of the compulsory portion never had a relationship that corresponds to a respective family relationship, or that such a close relationship did not exist for a longer period of time (eg, 20 years) until the death of the deceased.

The compulsory portion may be fulfilled through the assignment of specific assets by the deceased (so it is not a straight cash claim) or through awarding the position of a beneficiary in a private foundation.

Under Austrian law, the principle of the separation of property applies during marriage (Prinzip der Gütertrennung), which means that the spouses remain the sole owners of the assets they bring into the marriage and acquire during the marriage. Therefore, each spouse may freely dispose of their property during a marriage.

In deviation from this general rule, spouses may agree on one of the following different property regimes:

• community of property during life, whereby the spouses acquire co-ownership of the joint assets;
• community of property on death, whereby the assets remain separate until the death of one spouse; or
• community of surplus, whereby the assets remain separate but the surplus is divided equally between the spouses.

The amendment of the principle of separation of property may be concluded in a prenuptial or postnuptial agreement. Furthermore, regulations regarding the separation of assets in the case of divorce or regulations regarding inheritance may also be subject to a prenuptial or postnuptial agreement. Such agreements have to meet certain formal requirements.

If nothing has been agreed between the spouses, the marital property and marital savings must be divided at divorce. However, companies (respectively shares in such) are excluded from this principle by law, as long as there are not merely investments.

The transfer of property on the basis of a gift is subject to special formal requirements (under certain conditions). To be able to enforce the donation, a notarial deed is required, in order to ensure the donor’s awareness of the consequence of their action. Such a notarial act naturally leads to additional costs. In connection with the transfer of real estate, the necessary registration fees in the land register are additional costs that must also be taken into account.

If the transfer concerns real estate, the acquisition costs of the real estate are carried forward by the successor. If the successor relocates from Austria to another country and Austria’s right to tax the respective capital gains is restricted, a taxable step-up (to the fair market value of the real estate) applies. Furthermore, a real estate transfer tax of up to 3.5% of the value of the real estate is triggered.

Certain donations must be reported to the tax authority. The notification requirement only applies to inter vivos gifts (eg, not gifts on death) and only to certain assets, such as cash. Donations between relatives up to a value of EUR50,000 within one year are exempt. Donations between third persons up to a value of EUR15,000 within five years are exempt. No notification is required if the donation concerns real estate.

There is no inheritance or gift tax in Austria, so there are no requirements for planning mechanisms for the tax-free transfer of assets to younger generations. However, there is a special notification obligation for gifts of cash, receivables, shares in corporations, participations in partnerships, businesses, movable tangible assets and intangibles. A violation of the notification obligation may trigger fines of up to 10% of the fair market value of the gift.

The “digital estate” includes all digital data and content, such as internet profiles, social media, email accounts, telephone contacts, blogs, accounts with messenger services, photos and videos, streaming rights, cryptocurrencies, etc. There are no legal regulations or Austrian Supreme Court decisions that explicitly govern the digital estate per se. However, it is the prevailing opinion that the digital estate passes to the heirs by means of universal succession.

In its landmark decision in 2018, the German Supreme Court (BGH III ZR 183/17) explicitly stated that heirs should have access to online accounts and storage space. Based on this decision, a 2020 court decision in Austria stated that the digital estate is inheritable and that the heirs have the right to access the digital estate.

However, the mere surrender of the access data does not yet entitle the heir to dispose of the digital estate; usage contracts of the service providers have to be observed.

It is increasingly common to include information on digital accounts in last wills.

The Austrian legal system does not provide for trusts. However, it is possible to establish a private foundation (Privatstiftung) (inter vivos or mortis causa), which essentially serves the purposes established by the settlor in the foundation documents (charity, wealth preservation, support of family members, etc).

The private foundation is a legal entity that enables the settlor (or several settlors) to regulate the internal organisation and purpose of the foundation. Due to its legal personality, the private foundation has full ownership of its assets. Private foundations are often used for the purposes of succession planning and the preservation of family assets. The private foundation is established by a foundation deed (Stiftungsurkunde) and endowed with assets, which are managed by a foundation board (Stiftungsvorstand) consisting of at least three members. This management is supervised by a foundation auditor (Stiftungsprüfer). Both the foundation board and the foundation auditor are mandatory bodies of the private foundation. Additional bodies may also be implemented, such as a supervisory board.

Depending on the settlor’s will, an Austrian private foundation may serve personal purposes such as estate planning and the preservation of family wealth, and it may also be established to serve charitable purposes. An Austrian private foundation may be implemented to avoid succession disputes that might lead to the breaking up or division of a family business or estate. Furthermore, the preservation of art collections or historical buildings may be obtained by establishing a private foundation.

Neither the Austrian Individual Income Tax Act nor the Austrian Corporate Income Tax Act contain explicit provisions dealing with trusts. Austrian civil and tax law is not familiar with the concept of a trust. Very few court cases exist and not a lot of guidance has yet been provided by the Austrian tax authorities concerning the qualification of (foreign) trusts or the tax consequences in Austria for beneficiaries of foreign trusts. Therefore, trusts are not used as an estate planning vehicle in Austria. In this context, it should be noted that Austria is not part of the Hague Trust Convention and that there are currently no known plans for this to change in the future.

However, in many cases, foreign trusts may have a nexus to the Austrian tax jurisdiction – eg, when an Austrian tax resident is the settlor and/or the beneficiary of a trust, or when a foreign trust manages Austrian assets.

From an Austrian tax law perspective, a trust is basically an agreement between a settlor and a fiduciary regarding certain assets. Whether foreign trusts are recognised as a separate legal entity or not depends on whether the income of the trust may be directly attributed to a person according to the general principles of Austrian income tax law.

If the income can be attributed to a person, the trust may not be qualified as a separate taxable entity; in other words, the trust is transparent for tax purposes. If the income cannot be attributed to a person, the trust qualifies as a separate, taxable, non-transparent entity for Austrian tax purposes.

According to Austrian tax law, the following qualifications may be distinguished.

• Allocation of income to the settlor (transparency of the trust) – the settlor transfers assets to the fiduciary and determines the purpose in the course of the establishment of the trust. Thereby, the settlor loses legal ownership, while the fiduciary becomes the legal owner. In order to determine whether the income from the trust assets is to be attributed to the settlor, the trust documents and the factual practice have to be examined. In general, it will be the fiduciary who disposes of the source of income. However, this will be different if the settlor has far-reaching instruction (directive) rights vis-à-vis the fiduciary regarding the administration of the assets. An attribution to the settlor would definitely occur if the settlor, in addition to instruction rights, has the option to determine amounts to be distributed and could revoke the trust; this would also be the case with comprehensive amendment rights of the settlor or if the settlor factually managed the trust assets.
• Allocation of income to the beneficiaries (transparency of the trust) – the income from the trust can be attributed to the beneficiaries under the conditions mentioned above (regarding the settlor). This would be the case with bare trusts, where the fiduciary acts on the instruction of the beneficiaries and has to transfer the assets to them upon request. The same applies if the settlor has extensive rights regarding the trust assets and these rights are transferred to the beneficiaries after the settlor’s death.
• Allocation of income to the fiduciary (transparency of the trust) – the fiduciary manages the trust assets separately (either physically or through accounting measures) from their own assets. An attribution of the income to the fiduciary is not permissible if they are fulfilling instructions given by the settlor and thus are not free to dispose of the source of income. Neither the success nor failure of the management will have an impact on the fiduciary. An attribution will only be possible in the exceptional case that the fiduciary violates their powers.
• Allocation of income to no other person (non-transparency of the trust) – a trust should be qualified as a separate taxable (non-transparent) entity if the income cannot be attributed to a person (settlor, beneficiary or fiduciary). This is the case if neither settlor, beneficiary nor trustee have comprehensive instruction and supervision rights regarding the management of the trust assets. The settlor, for example, has no such rights in the following structures:
1. a testamentary trust;
2. an inter vivos trust after the settlor passed away; and
3. a discretionary trust where they have transferred the entire management to the fiduciary with full discretion and the beneficiaries are determined.

Taxation of Individuals of a Trust

Regarding distributions from foreign trusts to individuals who are subject to unlimited income tax liability in Austria, the following two situations need to be distinguished.

• When the trust is qualified as a non-transparent foreign entity, no allocation of the trust’s income to the individual is necessary; rather, the individual is subject to tax only regarding distributions received from the trust. The tax rate would be 27.5% if the trust is comparable to an Austrian foundation; otherwise, the progressive tax rate of up to 55% would apply.
• When the trust is qualified as a transparent foreign entity, the income of the trust is allocated to the individual from a tax perspective, regardless of received distributions; the individual will be subject to tax on the current income of the trust (eg, interest and dividends received by the trust are taxed at a rate of 27.5%).

Regarding Austrian private foundations, it should be noted that the legal options for a settlor or the beneficiaries to retain powers are restrictive. In particular, beneficiaries or their close relatives cannot be members of the foundation board, and reserved settlor’s rights such as the right to amend the foundation documents or the right to revoke the private foundation cannot be passed on to beneficiaries. Such rights generally expire upon the death of the settlor.

However, legal entities may act as settlors of an Austrian private foundation, in which case the right to amend the foundation documents may maintain as long as the legal entity exists (some uncertainties remain in cases where the shares in such entities are transferred). The use of a legal entity to act as a co-settlor of a private foundation has become a common legal instrument in estate planning.

The most popular legal options for asset protection include corporate structures in combination with shareholder agreements, private foundations and, to some extent, prenuptial and postnuptial agreements.

In particular, private foundations can be a useful option to protect wealth from inheritance disputes (eg, forced heirship claims), but also in order to protect wealth from creditors of the next generation. According to the Austrian private foundation law, the private foundation becomes the owner of the endowed assets. Claims of beneficiaries against the private foundation may be barred in the foundation’s documents. In addition, qualified board members of a private foundation appointed by the settlor may ensure that family assets are preserved.

A common way to retain influence over assets is to transfer them inter vivos but to agree the right to usufruct. This can be applied to companies as well as real estate. The prohibition of sale and encumbrance is commonly used in the course of transferring real estate between family members. The transfer of shares in a company can also be restricted.

Structured wills including the establishment of an executor of the last will in combination with resolving conditions to prevent the violation of the testator’s will are common tools for prolonging influence and preserving wealth after death. Generally, the executor of the last will does not have such a strong position as in other jurisdictions, such as Germany.

Similarly, while German inheritance law has a broader scope of inheritance contracts (which have a binding effect, unlike wills) often used in relation to family-owned companies, such contracts are only available between spouses in Austria.

Generally, no adjustment or discount of the fair market value applies in the transfer of parts of assets. In the case of a donation inter vivos, no gift tax applies and the donee may carry forward the acquisition costs of the donor.

The most common reasons for wealth disputes and family disputes are divorce, disagreements regarding the strategic direction of family businesses, and insufficient corporate and estate planning structures.

Such disputes lead to corporate or succession litigation proceedings that may trigger disproportional damages for the family businesses. Mediation has become more and more important in such situations. Family constitutions, shareholder agreements and clear assignment of power in family companies may also help to avoid long and costly litigation proceedings.

The task in solving compensation claims is to find a way to compensate for damages without jeopardising the continued existence of a family business. If a private foundation is involved, the establishment of a foundation may be a suitable solution.

Corporate fiduciaries are not common in Austria.

Board members of corporations or private foundations managing third-party assets are subject to a higher standard of conduct. A violation of professional care and duty obligations may lead to a liability of the board members for damages. Such liability is qualified according to the business judgement rule, which is stipulated in the Austrian Act on Limited Liability Companies and in the Austrian Stock Corporation Act, and is also deemed applicable for board members of private foundations.

The general rules applicable for board members of corporations or private foundations are also applicable for fiduciary investments. Such rules include the principle of risk spreading.

An Austrian private foundation must not be actively engaged in a trade or business – ie, only the mere administration of assets is permissible, including the holding of participations.

Domicile in Austria

In general, an individual who has accommodation in Austria is deemed to have domicile in Austria; this may be a rented apartment or real estate property that might be used for accommodation. In addition, Austrian law provides for a registration if someone permanently lives in a certain place in Austria.

Austrian Residency

EU citizens have no visa obligations and are allowed to reside in Austria for a period of three months (the same applies for EEA and Swiss citizens). EU citizens have the right to reside in Austria for more than three months in the following cases:

• if they are employed or self-employed in Austria;
• if they have sufficient resources and comprehensive health insurance for themselves and their family members; or
• for educational reasons, provided they have sufficient resources for living and health insurance.

Third-country nationals who stay or intend to stay in Austria for more than three months need to obtain a residence permit.

Depending on the personal situation, there are various options for residence permits. The following applications are the most frequent:

• Red-White-Red Card for employment and self-employment;
• residence permit for students and scientists;
• “Family Reunification” permit; and
• “Settlement permit – residence without access to the labour market”.

Generally, Austria has rather restrictive laws in place regarding residence permits for third-country citizens.

Austrian Citizenship

Citizenship by descent

Children automatically become Austrian citizens at the time of their birth if their mother is Austrian; the same generally also applies if the father is an Austrian citizen.

Citizenship by marriage

A foreign spouse of an Austrian citizen may obtain Austrian citizenship if the applicant has been legally and continuously resident in Austria for at least six years and has been married for at least five years and lived in a joint household.

Please note that the foreign spouse has to generally renounce their former citizenship if Austrian citizenship is granted.

Citizenship by application

Foreigners have the right to obtain Austrian citizenship if:

• they have lived in Austria permanently for at least 30 years; or
• they have lived in Austria permanently for at least 15 years and can evidence successful personal and professional integration in Austria; this includes German language skills.

Foreigners may also apply for Austrian citizenship if they meet the following preconditions:

• at least ten years of continuous stay in Austria (a minimum five years of which as a permanent resident);
• sufficient financial means/secure income;
• no criminal record;
• sufficient knowledge of the German language; and
• a positive attitude towards the Republic of Austria.

EU citizens may apply for citizenship after six years of permanent residence in Austria.

Dual Citizenship

In general, Austria does not support dual citizenship: whoever acquires Austrian citizenship by conferral is generally obliged to withdraw their former foreign citizenship. If the previous home law does not provide for the automatic loss of citizenship upon the acceptance of Austrian citizenship, Austrian citizenship is first granted. In order to finally obtain Austrian citizenship, the person concerned generally has to renounce their previous citizenship within two years, during which time the original proof of leaving the previous nationality (certificate of discharge) has to be submitted to the competent Austrian authority.

Austria may waive the obligation to withdraw the former citizenship but only if the granting of Austrian citizenship is in the special interest of the Republic of Austria due to the extraordinary achievements already made by the foreigner and still to be expected from them.

Pursuant to Section 10(6) of the Austrian Citizenship Act, citizenship may be granted to a foreigner regardless of the residence period spent in Austria if the federal government confirms that the granting of citizenship is in the special interest of the Republic of Austria due to the extraordinary achievements already made by the foreigner and still to be expected from them.

Extraordinary achievements are only those that are currently far above the average in the respective field. Furthermore, the granting of citizenship on the basis of these achievements has to serve the special interest of Austria to an extraordinary extent.

Such extraordinary achievements may be in the scientific, economic, sporting or artistic field; examples include the acquisition or creation of a business with high economic performance or the creation and safeguarding of jobs in Austria on a relevant scale.

In inheritance proceedings involving minors as heirs or forced heirs, mandatory guardians are appointed by the court to safeguard the minors’ rights if a conflict of interest is given – eg, conflicting inheritance rights between the surviving spouse and the minor children.

Bankable assets owned by minors have to be invested and managed in accordance with special legal requirements (Section 215 ff of the Austrian Civil Code) in order to avoid the risk of loss. Extraordinary investment decisions as well as management decisions regarding the property of minors have to be approved by the competent family court.

Furthermore, preliminary and posterior heirship may be stipulated in a last will. The appointed pre-heir receives the estate but only has the right to usufruct regarding the assets of the estate. Such structure may be used in order to protect the estate until a minor heir is of age.

The same legal measures may be used if an intellectually disabled adult is involved. The establishment of a private foundation with the purpose of safeguarding the maintenance of intellectually disabled adults is a common legal instrument.

According to Austrian law, there are several options for the appointment of guardians. In general, the appointment of a guardian is required if a person is not capable of managing their own affairs without the risk of causing harm to themselves.

In order to secure one’s personal and financial affairs in case of future loss of mental capability, a lasting power of attorney (Vorsorgevollmacht) may be established. Such lasting power of attorney has to be established before an attorney at law, a notary public or an adult protection association, and needs to be registered in the Austrian Central Register of Representatives (ÖZVV).

If an individual is no longer capable of establishing a valid lasting power of attorney, a guardian may be chosen by the respective individual if they are able to understand the consequences of such a representation. Only an adult who has a relationship of trust with the individual concerned may be chosen as a guardian. The appointment of the chosen guardian becomes effective upon the conclusion of an agreement drawn up before an attorney at law, a notary public or an adult protection association, and upon the registration of the guardian in the respective ÖZVV.

If an individual does not have decision-making capacity or does not want to appoint or choose a guardian, close relatives become representatives of the respective person ex lege. Close relatives are spouses, parents, grandparents or adult children. The legal adult representation becomes effective upon entry in the ÖZVV. The registration has to be effected by an attorney at law, a notary public or an adult protection association.

None of the three types of adult representations are appointed by the family court.

If none of the types of guardians can be appointed, the competent family court may appoint in ultima ratio a guardian to safeguard the interest of the disabled adult. A guardian appointed by the family court may only be appointed for specific affairs. A guardian is also appointed by the court if a chosen guardian or a close relative acting as a guardian (ex lege) does not comply with the required care and duty.

All types of guardians are subject to court supervision. The adult guardian is generally entitled to the reimbursement of expenses.

Since 2010, the Austrian government has been pursuing a co-ordinated and comprehensive pension strategy to bring about long-term health promotion.

Elder law in Austria is a cross-cutting issue between family, inheritance, labour and social security law. Austrian law offers various possibilities of adult representation in order to provide for potential health deterioration. There is also the possibility of establishing a living will (Patientenverfügung) to stipulate future medical treatment.

On the other hand, Austrian social security law offers various forms of support, such as care allowance, depending on the health condition of the person concerned.

In Austrian law, children born out of wedlock, adopted children and children born during marriage have equal rights.

In general, surrogacy is prohibited in Austria, although the Austrian Constitutional Court has decided that surrogacy does not violate fundamental Austrian values. Since 2019, several Austrian authorities have acknowledged foreign authorities’ decisions on parenthood regarding surrogate children.

Posthumously Conceived Children and Inheritance Law

If the testator does not mention an unborn child in their will, the legal consequences for the respective child depend on the knowledge of the testator regarding the unborn child:

• if the testator was aware of the child, it is to be assumed that the omission was intentional and the child is entitled to a compulsory portion;
• the omission of unknown children besides existing children in a last will is interpreted as though the testator had considered all children equally; and
• in the case of intestate succession (gesetzliche Erbfolge), the child born after the death of the testator is entitled to receive the same right of inheritance as their siblings.

Based on the decision of the Austrian Constitutional Court in 2017, same-sex marriages are recognised in Austria. Since the beginning of 2019, same-sex couples have been able to choose between entering into a registered partnership (eingetragene Partnerschaft) or a marriage.

In contrast to, for example, Germany, an already existing registered partnership cannot (yet) be converted into a marriage in Austria, as legal regulations in this regard have not yet been enacted.

Austrian registered partners are treated equally to married spouses regarding inheritance and matrimonial law.

Charitable donations are generally not tax-deductible in Austria.

However, there are exceptions in place, one of which is that donations to specific charitable institutions may be tax-deductible in an amount not exceeding 10% of the income. These institutions have to be registered in Austria in the list of beneficiary donation recipients of the Federal Ministry of Finance (BMF).

A variety of legal forms for structuring charities exist in Austria, with the most common being:

• the charitable association (Verein);
• the charitable private foundation (gemeinnützige Privatstiftung); and
• charitable foundations pursuant to the Federal Law on Foundations and Funds (BStFG-Stiftung).

Charitable Association

No share capital is required for the formation of an association, and the incorporation is rather simple. One advantage of an association is that an unlimited number of members or donors may be admitted. A non-profit association has legal personality and may therefore own property and assets.

A non-profit association has to ensure in its statutes that its assets are used exclusively for non-profit purposes, even in the event of its dissolution. Such non-profit purposes are charitable (gemeinnützige Zwecke), benevolent (mildtätige Zwecke) or ecclesiastical (kirchliche Zwecke). If these criteria are met, a charitable association may be tax-privileged.

Charitable Private Foundation

Please see 3. Trusts, Foundations and Similar Entities regarding the general requirements of a private foundation.

If the purpose of a private foundation is determined to be for the benefit of the general public, it is deemed to be a charitable private foundation. Such classification may lead to various tax exemptions. For example, the foundation entry tax of 2.5% on any donations to an Austrian charitable private foundation does not apply to charitable private foundations, and a charitable private foundation may be exempt from Corporate Income Tax and VAT in Austria. If the charitable private foundation is registered with the Austrian Federal Ministry as a beneficiary donation recipient, for which various requirements need to be fulfilled, donations may be tax-deductible at the level of the donor.

Charitable Foundation Pursuant to the Federal Law on Foundations and Funds

The BStFG 2015 applies exclusively to foundations and funds whose assets are designated by an act of dedication under private law for the fulfilment of charitable (gemeinnützig) or benevolent (mildtätiger) purposes only. Private foundations, on the other hand, may pursue private interests and/or charitable purposes.

A difference is the capital required for the foundation. For the establishment of a private foundation (with a private or charitable purpose), at least EUR70,000 is required, whereas at least EUR50,000 is sufficient for the establishment of a charitable foundation according to the Federal Law on Foundations and Funds (BStFG-Stiftung).