Exit Tax Austria – Complete Guide

Anyone who moves their place of residence or economic interests abroad should address early on the Exit taxation deal with in Austria. This regulation ensures that the tax office is entitled to the income generated up to the time of relocation hidden reserves can access certain assets. Particularly affected are Equity investments in corporations, business assets, and in some cases, intangible assets. But when does taxation apply, how high is it, and are there options for deferral? In this article, we explain what you should consider before moving abroad to avoid tax surprises.

What is the expatriation tax?

The Exit taxation is a tax regulation in Austria intended to ensure that Austria until the time of moving out resulting hidden reserves still has access to certain assets. This is governed by Section 27(6) of the Income Tax Act (EStG) and Section 6(6) of the EStG, and applies in particular to equity interests in corporations. The amount is 27.5 %. 

Which assets are affected?

For private individuals in Austria affects the Exit taxation mostly Equity investments, in particular:

1. Equity investments in corporations
   If a natural person participates in a Corporation (e.g., GmbH, AG) holds and moves its residence from Austria abroad, the hidden reserve this investment is taxed (Section 27(6) of the Income Tax Act). In comparison, in the case of the Exit Taxation in Germany so that one must hold at least a 1 % stake in a company. 

2. Shares in Foreign Corporations
   Also investments in foreign corporations, which were subject to taxation in Austria, are subject to exit taxation.

3. Other Private Assets
   Queen Personal assets such as real estate, bank deposits, or securities are fundamentally subject to not the exit taxation. However, they may be affected by other tax regulations, such as limited tax liability after relocation.

4. Cryptocurrencies
   Cryptocurrencies—with the exception of NFTs purchased after March 1, 2021—would be subject to taxation if their value has increased since purchase.

When is the exit tax due?

The Exit tax In Austria, payment is generally due at the time of departure from Austria. However, in certain cases Deferral and installment payment options.

General due date of the expatriation tax

• The tax becomes due at the time of moving away from Austria, i.e., upon Abandonment of Residence or Habitual Residence.
• The assessment is based on the hidden reserves contained in the affected assets.
• The tax is based on the next income tax return to be paid for the year of departure.

Deferral and payment by installments (in the event of relocation to the EU/EEA)

If the relocation to a EU or EEA country takes place, the tax can be deferred upon application:

• Automatic deferral: Without security, as long as no disposal of the affected assets takes place.
• Installment payment: If a tax payment is required, a Installment payments over seven years be applied for.
• Facilitations within the EU/EEA: If the taxpayer can prove that the shares were not sold, the tax remains deferred.

Immediate due date upon moving to a third country

• When moving to a non-EU/EEA country (e.g., Switzerland, USA) the tax due immediately.
• In this case, no long-term deferral is possible, but in individual cases, a security deposit (e.g., bank guarantee) may allow for a deferral.

Subsequent refund or cancellation of the tax

• If the taxpayer within moves back to Austria five years ago, the exit tax can be reversed.
• However, this only applies if the assets have not been sold in the meantime.

avoid exit tax

Below are a few variants on how you can legally avoid or postpone exit taxation. 

Transfer of assets to a foundation

A transfer of corporate shares or capital assets to an Austrian or Liechtenstein foundation can help avoid expatriation tax. However, this should be carefully planned with a tax advisor, as gift and foundation taxes must also be taken into account.

Transfer of assets to family

There is also the possibility of transferring assets to family members through gifts or favorable sales in order to circumvent immediate exit taxation. Naturally, this goes hand in hand with a high level of trust.

Deferral

As mentioned above, the exit tax can be deferred if you move to an EU / EEA country. Payment in installments over seven years is possible. In Emigrating to Dubai however, if that were not possible. 

Summary

Exit taxation is a tax that also applies in Austria when moving abroad. The rate is 27.5 % and applies to hidden reserves, which typically include business interests, stocks, securities, and cryptocurrencies. If you move to an EU/EEA country, payment of this tax can be deferred for 7 years; otherwise, it is due immediately. Ideally, you should proactively address this issue before moving abroad in order to legally avoid or reduce the tax.