Investment Incentives 2025
Austria is not a low-tax country, but it offers an extensive package of tax incentives and subsidies.In 2025, limited liability companies (GmbHs) and stock corporations (AGs) will be subject to a corporate tax rate of 23%. Distributions of profits or dividends from these corporations to individuals residing in Austria are subject to a capital gains tax of 27.5%. Under certain conditions, this capital gains tax (KESt) can be reduced to 0% for profit distributions to companies or international persons. Profit shares from holdings in corporations may also remain tax-free for Austrian companies under specific conditions. Private foundations provide additional structuring opportunities.
Individuals in Austria are subject to a progressive income tax rate. The first EUR 13,308 of income is tax-free, while income up to EUR 103,072 is divided in income parts with increasing tax rates of 20%, 30%, 40%, and 48%. Income part exceeding EUR 103,072 is taxed at 50%, and income part over one million euros is taxed at 55%.
Having this background in mind we highlight some important tax incentives and funding instruments:
Tax Incentives 2025
Investment Allowance (IFB)
The IFB can be claimed as an additional business expense alongside depreciation. It generally amounts to 10% of acquisition or production costs. For assets related to ecological measures, the IFB increases to 15%. According to the Öko-IFB Regulation, eligible assets include those receiving environmental subsidies. Additional examples are electric vehicles, electric machinery, charging stations, bicycles, assets for shifting freight transport to rail, assets for generating or storing electricity from renewable sources or assets for producing hydrogen from renewable sources.The IFB can be claimed by multiple businesses owned by the same taxpayer, but the base value for the calculation of the IFB is limited to a maximum of EUR 1 million per business and per fiscal year.
Eligible assets must have a minimum useful life of four years and be allocated to domestic businesses or permanent establishments. The IFB and the profit allowance cannot be claimed for the same asset.
Excluded from the IFB are used or low-value assets, facilities related to fossil fuels, non-electric passenger cars or intangible assets not related to digitalization, ecological measures, or health/life sciences. Buildings do not qualify for the IFB; however, heat pumps, biomass boilers, district heating/cooling exchangers, district heating transfer stations, and micro-networks for heat and cooling supply related to buildings may qualify as independent assets for the IFB.
15% Eco Bonus for Residential Buildings
For tax purposes, an additional 15% cost deduction can be claimed for investments in building insulation, window or exterior door replacements, green roofs and facades, or transitioning to heat pumps, central wood heating (e.g. pellet heating) or district heating connections.The eco-bonus cannot be claimed if an IFB has already been applied.
Transfer of Hidden Reserves
Under § 12 of the Austrian Income Tax Act (EStG), individuals can transfer hidden reserves uncovered during the sale of fixed assets to the acquisition or production costs of new fixed assets purchased or produced in the same fiscal year. Hidden reserves refer to the difference between the sale price and the book value of the sold asset, which would otherwise be immediately taxed.This incentive applies only to individuals and partnerships; corporations such as GmbHs and AGs are excluded. The sold asset must have been part of the business's fixed assets for at least seven years. This period extends to 15 years for real estate on which hidden reserves have previously been transferred and for buildings that have been subject to accelerated depreciation under § 8(2) EStG.
The transfer of hidden reserves must occur within the same asset category from which they originated (e.g. land, buildings, tangible or intangible assets). Transfers to the acquisition costs of (partial) businesses, partnerships and financial assets as well as reserves from the sale of (partial) businesses or partnerships are not permitted.
Hidden reserves can also be transferred when fixed assets are removed due to force majeure, official intervention or imminent intervention. In such cases the 7- or 15-year holding periods do not apply.
If an immediate transfer is not possible, a tax-free reserve (transfer reserve) can be established for one year. This period extends to 24 months in cases of force majeure, official intervention, or the need to avoid such intervention. The 24-month period also applies to reserves transferred to building construction costs if actual construction begins within 12 months.
Declining-Balance Depreciation
Instead of linear depreciation, businesses can apply a declining-balance depreciation method of up to 30% of the residual book value per year. This allows for more than half of an asset´s value to be depreciated within two years, compared to five years with a 10-year linear depreciation model. However, declining-balance depreciation is not permitted for buildings, goodwill, non-electric passenger cars, intangible assets (except in digitalization, ecological measures, and life sciences), used assets or facilities related to fossil fuels.Accelerated Building Depreciation
For office buildings in business assets depreciation is set at 2.5% per year without proving a specific useful life. In the first year, a temporary higher rate of 7.5% applies, followed by 5% in the second year.For residential buildings, the standard rate is 1.5%. However, for buildings completed between January 1, 2024, and December 31, 2026, with a minimum "Bronze" standard, depreciation can be increased to 4.5% in the first three years.
15-Year Depreciation for Manufacturing Expenses in Rental and Leasing applies to:
- Expenses under §§ 3 to 5 of the Austrian Tenancy Act (Mietrechtsgesetz) in buildings subject to the provisions regarding the use of main rental income.
- Expenses for renovation measures, provided that:
- A subsidy approval under the Housing Renovation Act, the Starter Apartment Act, or regional housing renovation subsidy regulations has been granted, or
- A federal subsidy under Section 3 of the Environmental Promotion Act (UFG) has been paid, or it is plausible that the conditions for such a subsidy are met.
- Expenses due to the Monument Protection Act (Denkmalschutzgesetz).
Profit Allowance (Gewinnfreibetrag)
The profit allowance under § 10 of the Austrian Income Tax Act (EStG) applies to sole proprietors and partnerships as follows:- 15% for profits up to € 33,000
- 13% for the next € 145,000
- 7% for the next € 175,000
- 4.5% for the next € 230,000
This allowance applies to business income, including self-employed managing directors, supervisory board members and foundation board members.
The first 15% (for profits up to € 33,000) is automatically granted as a basic allowance (€ 4,950). Additional allowances require investments in depreciable tangible assets with a minimum useful life of four years (excluding certain assets like passenger cars, low-value assets and used goods) or in specific securities that must remain in business for at least four years.
Electric Vehicles (CO₂ Emission Value: 0 g/km)
Tax benefits for electric vehicles include:- Full VAT deduction for purchase costs up to €40,000 (gross), proportional deduction for costs between €40,000 and €80,000 (gross).
- Declining balance depreciation.
- Investment allowance (IFB) of 15% on tax-relevant acquisition costs (limited to € 40,000 gross).
- Exemption from the NoVA (Standard Fuel Consumption Tax).
- No taxable benefit in kind (Sachbezug: € 0) - also applies to shareholder-managing directors, regardless of their stake, but not to sole proprietors or partnerships.
- Exemption from motor vehicle tax.
- Electric vehicles do not qualify for the profit allowance.
- Hybrid vehicles do not benefit from electric vehicle incentives.
- Future government policies may eliminate some incentives.
Low-Value Assets (Geringwertige Wirtschaftsgüter - GWG)
Assets costing up to € 1,000 (net, if eligible for VAT deduction) can be fully expensed in the first year.Research Premium (Forschungsprämie)
A 14% tax credit (subsidy) for research activities is granted by the tax authorities. It is distinguished between in-house research and contract research (outsourced research to another company). For contract research, the benefit is capped at a taxable base of € 1 million EUR. The Research Premium Regulation allows for the inclusion of a notional entrepreneur's salary in the taxable base for in-house research.Funding Programs 2025
Austria Wirtschaftsservice GmbH (aws)
Aws supports businesses of all sizes, with a focus on small and medium-sized enterprises (SMEs). A medium-sized enterprise has fewer than 250 employees and an annual turnover of up to EUR 50 million or a balance sheet total of up to EUR 43 million.Examples include:
- Guarantees for commercial and industrial businesses for investment and working capital loans (the standard guarantee limit of EUR 15 million increases to EUR 25 million for ecological and digitalization projects).
- ERP loans for startups, modernization, growth and innovation with low interest rates and volumes up to EUR 30 million.
- aws Preseed and Seed Financing: grants of up to EUR 1 million for technology transfer and startups.
- aws Innovation protection: consulting for IP development and protection.
- aws Equity: co-investment in startups with experienced investors.
- aws Digitalization: grants up to EUR 150,000.
- aws Energy & Climate: grants up to EUR 200,000 for startups and SMEs.
- aws Growth Investment: grants up to EUR 1 million for machinery, IT, prototypes, and construction investments.
Environmental Subsidies by Kommunalkredit Public Consulting (KPC)
KPC provides environmental subsidies to small and large businesses, as well as private individuals and public authorities. The funding varies depending on the project and can cover up to 30% of eligible investment costs. Examples of funded projects include:- Contaminated site remediation
- Waste reduction
- Energy savings and heat recovery
- Energy-efficient construction and building renovation
- Reducing energy consumption in lighting and air conditioning
- Electromobility
- Solar and photovoltaic systems
- Environmental measures related to air, noise, or waste
- Resource management
- Heat projects, such as:
- Biomass and wood heating
- Solar energy
- Heat pumps and geothermal energy
- Wind power and hydropower
- District heating and heat networks
- Heat recovery
- Wastewater disposal and water supply
- Environmental research
Federal Logistics Subsidies
The SCHIG mbH manages the following federal funding programs:- Private Rail Sidings: Grants of up to 40% and a maximum of € 2.5 million for investments in tracks, ramps, cranes, forklifts, loading equipment, etc.
- Terminal Facilities: Grants of up to 30% or € 2.5 million for intermodal transshipment facilities where goods are transferred from road to rail or waterways.
- Grants for Combined Transport: Up to 30% or € 1 million for transport equipment, facilities, and innovative technologies, systems and ICT for freight transport in intermodal or environmentally friendly modes. Feasibility studies and training measures are subsidized up to 50%.
- EBIN: Grants for converting bus fleets to zero-emission propulsion systems.
- Grants for Innovative Logistics Concepts: Aimed at increasing competitiveness and location attractiveness while ensuring social and environmental sustainability. Funding is provided as follows:
- Feasibility studies: up to 70% or a maximum of € 150,000
- Pilot implementations: up to 60% or a maximum of € 350,000
- Implementation support: up to 60% or a maximum of € 200,000
Tourism
The OeHT - Tourism Bank offers, among other programs:- Investment loans: Up to € 5 million for SMEs, with interest subsidies of up to 2% for the first 10 years.
- Green Tourism Loan: Up to € 1 million for SMEs, with interest subsidies of up to 3% plus a sustainability bonus of 7%.
- ERP Loan: Up to € 30 million with favorable fixed interest rates.
- Loan Guarantees: For SMEs, covering up to € 4 million or 80% of the loan.
- Sustainability Bonus: For SMEs, up to 7% and a maximum of € 350,000 for investments in ecology, employees & regions, and digitalization & economy.
- Young Entrepreneur Support: Up to 7.5% grant, with a maximum of € 500,000.
- Business Stabilization: For SMEs, including interest subsidies and guarantees.
- Low-interest Loans: For SMEs with a high proportion of overnight stays from international guests (according to the regulations of the Austrian Kontrollbank AG).
Export Promotion and Internationalization
- The Austrian Kontrollbank (OeKB) offers low-interest financing and financial guarantees to support exporting SMEs and large enterprises. This support covers working capital financing, domestic investments, and the financing and safeguarding of international projects, participations, and investments.
- Additional support is available from institutions such as the Austrian Development Bank (OeEB), ADA Austrian Development Agency, Advantage Austria (Austrian Foreign Trade Office), "go-international," AWS (Austria Wirtschaftsservice), and FFG (Austrian Research Promotion Agency).
Research Funding
- The FFG (Austrian Research Promotion Agency) provides grants and low-interest loans for companies of all sizes. Increased funding is available for SMEs, collaborations, thematic programs, or international R&D projects.
- Horizon Europe: The EU funds R&D projects with international partners or scientific personnel, covering up to 100% of costs.
Regional and Federal State Funding
Austrian federal states, as well as some cities and municipalities, offer numerous independent funding programs or increase existing federal and EU grants. Regional development areas receive more extensive and higher subsidies.Vienna, 30th of January 2025
For more information:
Walter Baumann: +43 664 244 16
Maulbertschgasse 6 | 1190 Wien | T + 43 1 440 22 75 | M + 43 664 244 16 06 | wbaumann@baumann-consult.at