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: (If increased rent or legally regulated higher rent is charged to finance these manufacturing expenses, the expenses may be evenly distributed over the period of the increased rent, but at least over ten years.)

Profit Allowance (Gewinnfreibetrag)

The profit allowance under § 10 of the Austrian Income Tax Act (EStG) applies to sole proprietors and partnerships as follows: (Totaling a maximum of € 46,400 for a taxable base of € 583,000 or more.)

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: Important Notes:

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:

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: Additionally, Austria´s federal states offer their own funding programs tailored to regional needs, complementing federal subsidies.

Federal Logistics Subsidies

The SCHIG mbH manages the following federal funding programs:

Tourism

The OeHT - Tourism Bank offers, among other programs:

Export Promotion and Internationalization


Research Funding


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