Tax Aspects of Inheritance in Austria

The absence of inheritance and gift taxes in Austria offers significant advantages in transferring wealth between generations; however, planning remains essential. Thoughtful planning of asset transfers – whether through a will or during one’s lifetime – can save tens or even hundreds of thousands of dollars, especially when dealing with assets that have high capital gain potential or tax implications in other countries. In this article, we will highlight the advantages of investing in Austria, compare the situation to that of Israel and other countries, and discuss the importance of advanced planning and drafting a will for efficient inheritance realization.

Inheritance Tax in Austria

Inheritance and gift tax in Austria was abolished in August 2008, as the government attempted to revise the tax law but failed to reach an agreement on it.

The reason Austria abolished the existing law on inheritance or gift tax was due to the unfairness and inequality between real estate and financial assets. The government found the law unconstitutional and chose not to replace it.

While Austria doesn’t have an inheritance or gift tax, real estate received through inheritance or gift is subject to transfer tax. In addition to the real estate inheritance tax, a land registration fee of 1.1 percent of the market value is owed by the heir. Reporting inheritance or gifts is also necessary when the total exceeds 50,000 Euros per year for Donations from close relatives and life partners from and  15,000 Euros donations from other groups of people.

Advantages for Investors

• There is no inheritance or gift tax on the transfer of assets across borders and generations.
• Austria has strong property rights and attractive investment laws, which give investors opportunities for long-term planning with global assets.
• Vienna, the capital of Austria, has a stable legal system with access to the European market and is a significant financial and cultural hub. Vienna boasts a high quality of life, complemented by a strong and stable economy.

Why is Advance Planning Still Important?

Despite the absence of inheritance tax in Austria, it’s essential to recognize that planning asset transfers is not merely a matter of taxation, but primarily a legal, regulatory, and family matter. Early planning of inheritances enables the efficient handling of bureaucratic procedures, prevents objections, and anticipates possible tax charges in other countries.

Inheritance Tax in Israel Compared to Austria

In Israel, like Austria, there is no estate tax or inheritance tax. But in Austria, real estate received through inheritance or gift is subject to transfer tax.  In both countries, in some instances, an heir’s tax may be imposed on the full value of the inheritance received, such as capital gains tax when selling the asset.

The tax treaty between Israel and Austria includes provisions that can prevent double taxation; however, it’s essential to plan the reporting and filing accurately to avoid double payment.

To read the Israeli-Austria tax treaty in English, click here.

Comparison to Other Countries

Many countries continue to impose inheritance tax at varying rates:

• Spain – Up to 34 percent tax depending on the relationship and region.
• France – Up to 60 percent tax depending on the relationship and value.
• Germany – 7 to 50 percent tax depending on the relationship and amount.
• Switzerland – Up to 50 percent tax varies by canton.
• Italy – 6 to 8 percent tax depending on the amount.

In contrast, countries such as Portugal, Latvia, Sweden, and Cyprus have abolished the inheritance tax, like Austria.

Making a Will in Austria – The Key to Tax Savings and Dispute Prevention

Despite the absence of inheritance tax, making a will in Austria is essential due to local inheritance laws. Heirs don’t always receive their inheritance smoothly. Sometimes complex procedural steps are needed to obtain a probate order or permission to realize the assets. A will allows for determining the distribution of assets according to the deceased’s wishes and prevents future disputes.

A well-organized and detailed plan can ensure that assets are transferred smoothly and efficiently to the heirs. The will should include the deceased’s wishes but must also be adapted to comply with the requirements of the law, ensuring its validity is not compromised.

Austria’s forced heirship laws restrict the testator’s right to bequeath their property, requiring them to leave a portion of the inheritance to their legal heirs.

In Austria, you are allowed to choose the law of your nationality to regulate the process, provided it is clearly stated in the will, by UN regulations.

If there is no valid will, the inheritance will be distributed to the prioritized heir according to Austrian inheritance law.

 If you own assets in Austria, we recommend creating a will to ensure that the transfer of assets is done as smoothly as possible. A will can prevent misunderstandings or lengthy legal processes and ensure that the process proceeds in an orderly manner even after the death of the deceased.

Practical Information on Realizing Inheritance in Austria

To inherit property in Austria, documents such as the deceased’s death certificate, will, copies of heirs, identification documents, asset ownership documents, bank account confirmations, and more are usually required.

Individuals should note that the process of inheriting from Austria can take several months to a year or more, depending on the complexity of the deceased’s estate, the number of heirs, and the existence of a will, among other factors.