Ultimate Guide on Corporate taxation in Austria 2025

For years, this region has been synonymous with a secure and business-friendly European nexus. Situated in a strategic location with strong legal framework and transparent tax processes, the country is an ideal destination for organisations and investors. Corporate taxation in 2025 continues to be competitive and built on reliable compliance and clear rules with incentives for innovation, funding and expansion. A thorough knowledge of the specificities of the Austrian tax system is crucial for domestic as well as foreign businesses in order to maximize and protect their tax position, to be in compliance with the law and to benefit from tax incentives.

Corporate Tax in Austria

Liabilities of the activity not associated with the activity are seldom deductible, though it may also be interpreted in favor of the activity. As far as formality is concerned, the Austrian tax system exhibits elements of transparency, and the country follows transinternational rules. It believes that in times of judicial challenge, a good tax policy ensures the preservation of a competitive tax system.

Commercial Entities and Tax Treatment

1. GmbH & AG

Categories of Organisations: The majority of enterprises in Austria are private or public. GmbH owners have slightly more oversight over the company than an AG, which is run by a chief executive panel and a monitoring committee.

2. FlexCo (implemented in 2024)

This Austria FlexCo model is flexible in converting the combination of shareholder and employee involvement and fills the void between Austria’s GmbH and AG undertakings.

Transparent Partnerships

The other main type is a full or limited partnership, which is fiscally clear, meaning that income is attributed to and taxed on the partners on an accrual basis. The most popular of these is the GmbH & Co KG, a hybrid that combines liability protection with pass-through tax status.

Residence

The residents of this jurisdiction  or managed companies are subject to comprehensive revenue taxation. The tie-breaker rule in double taxation avoidance agreements  (DTAAs) is “site of effective control”.

Taxation Rates for Organisations(2025)

• Corporations: 23%
• Persons: Gradual increase to 55%
• Earnings from shares and other capital holdings: 27.5%
• Income from Property Disposals: 30%

Key Tax Regime Features

1. Profit Computation

Earnings are calculated according to commercial accounting principles with tax add-ons.

2. Fiscal Advantages

• R&D Allowances: Maximum of 1 million EUR/year.
• Investment Relief: 10% (15% for green assets) of the acquisition cost of eligible investment with an investment cost ceiling of EUR 1 million per year.
• Loss Relief: Losses are now forwards-only, with a 75% clawback of the year’s income.
• Earnings Stripping Rules: Limitation on net financing costs tied to operating earnings before depreciation and amortisation; disallowance at the tax status level of the payee is involved.
• Consolidated Tax Computations: Profits/losses of subsidiaries controlled (over 50%) by the parent and subsidiary/group existence are introduced for 3 full years.
• Appreciation gains: Usual taxable circumstance is 23%, with foreign equity granted relief under the participation exemption system.

3. Other Taxes

• VAT is generally levied at 20%, while a 10% mitigated rate applies to certain goods and services.
• Land Transfer Tax: Certified notarial statement due to the sale/transfer of immovable property or indirect sale/transfer such as stock conveyance of the property holding company.

Corporations vs Non-Corporate Firms

1. Local Firms

The GmbH is the most common type for companies with limited liability.

2. Levy Levels

• For Corporations: 23% plus 27.5% if profit is distributed.
• Private taxpayers: Up to 55%. Fees are arm’s length to remove disguised distribution.

3. Earnings Retention

Undistributed profits are only falling within the scope of taxation once repatriated.

4. Equity Shares

There are no exemptions for closely-held firms or public companies. Non-crown landholders get a 50% concession on land tax, and their liability on any increase in value is limited to either 27.5% or the lower top personal rate of tax.

Inbound Investment

1. Withholding Tax (WHT)

• Dividends: 27.5 percent for individuals, 23 percent for corporations. There are also EU corporate shareholder exemptions.
• Treaties on Taxation: The country has adopted about 90 programmes, mainly with Germany, Switzerland, Luxembourg, and the UK.

2. Transfer Pricing

The OECD wants to see arm’s length, compliant documentation that represents what happens in the market.

Non-Local Corporations

1. Branches vs Subsidiaries

The tax treatment may not actually differ much between the two, but splitting earnings could be a bit trickier.

2. Capital Gains

According to the law, capital gains generated by foreign customers are only to be taxed in case of fictitious equity disposal profits generated by in-country sources (spared under DTT).

3. Control Changes

Depending on changes in ownership or activities, you might be denied your losses.

4. Related-Party Loans

Terms must be on an arm’s length basis; otherwise, interest could be disallowed.

Foreign-sourced revenue of Austrian corporations

1. Universal Taxation Principle

The Austrian levy framework is based on the principle of global application; however, it is largely relieved with double taxation relief by its wide-reaching DTT programme.

2. Participation-Based Tax Relief

Nil tax on qualified foreign affiliate dividends and capital gains (10% parent ownership held for 1 year).

3. CFC Rules

The effective tax rate is such that 

• companies will not be charged when they repatriate active income at a 12.5% rate, and 
• they must take on the risk of repatriation, as well as the risk of reinvestment of the profit. The tax applies generally to all low-taxed affiliates’ profits.

Anti-Avoidance

Austria has general and specific anti-avoidance rules transposing the EU ATAD, including substance-over-form and abuse of law rules in its tax legislation.

Audit Practice

Audits are conducted in a programmed manner or after a risk analysis based on criteria set by fiscal authorities.

BEPS Implementation

Austria has fully introduced all OECD BEPS Action Points:

• Full effectiveness of EBIT cap on interest deductions, hybrid mismatches, and CFC provisions.
• The OECD guidelines regulate transfer pricing.
• The country announced a 5 percent tax on digital services in 2019.
• Pillar Two (Min. Tax Revenue 2023) utilizes WPA and QDMTT.
• DAC7/DAC8 – the Digital New Platforms and the Disclosure of Crypto-assets – introduced new standards.
• CBCR-PCBCR is proposed to apply to fiscal years of a MNE group.