Private client law in Austria: overview

A Q&A guide to private client law in Austria.

The Q&A gives a high level overview of tax; tax residence; inheritance tax; buying property; wills and estate management; succession regimes; intestacy; trusts; co-ownership; familial relationships; minority and capacity, and proposals for reform.

To compare answers across multiple jurisdictions, visit the Private client Country Q&A tool.

The Q&A is part of the multi-jurisdictional guide to private client law. For a full list of jurisdictional Q&As visit www.practicallaw.com/privateclient-mjg.

Niklas Schmidt and Holger Bielesz, Wolf Theiss
Contents

Taxation

Tax year and payment dates

1. When does the official tax year start and finish in your jurisdiction and what are the tax payment dates/deadlines?

The tax year is the same as the calendar year.

An income tax return must be filed with the competent tax office by 30 April or, if electronic filing is used, by 30 June of the following calendar year. An extension to these deadlines can be applied for and is usually granted. Taxpayers who employ tax advisers benefit from longer deadlines. If a deadline is not met, a fine of up to 10% of the income tax may be triggered.

Quarterly pre-payments of income tax are due on 15 February, 15 May, 15 August and 15 November of the tax year. Pre-payments are creditable against the final amount of income tax assessed for that tax year. Any balance is payable within one month after receipt of the income tax assessment notice. Different rules apply for individuals earning employment income, in which case the income tax is generally withheld from the salary (Lohnsteuer) and remitted to the tax authorities by the employer.

 

Domicile and residence

2. What concepts determine tax liability in your jurisdiction (for example, domicile and residence)? In what context(s) are they relevant and how do they impact on a taxpayer?

Domicile

A domicile (Wohnsitz) is maintained where a taxpayer has a dwelling that they intend to keep and use. The dwelling must consist of one or more rooms which are furnished for the purpose of living. It is the potential for use of the dwelling rather than possession of legal title to the dwelling place which is decisive in assessing if domicile has arisen. Habitual abode (gewöhnlicher Aufenthalt) arises where a taxpayer stays in a place under circumstances which indicate that the taxpayer intends to stay there more than temporarily. Staying in Austria for more than six months qualifies as habitual abode, even for the first six months. Temporary stays or repeated short term visits do not result in habitual abode.

Residence

Individuals who have a domicile or their habitual abode in Austria are classed as residents and are subject to unlimited income tax liability on their worldwide income (subject to applicable double taxation treaties). All other individuals (non-residents) are only subject to limited income tax liability and are taxable only on their Austrian-source income. Certain non-resident EU and EEA citizens may opt for treatment as residents.

 

Taxation on exit

3. Does your jurisdiction impose any tax when a person leaves (for example, an exit tax)? Are there any other consequences of leaving (particularly with regard to individuals domiciled in your jurisdiction)?

An exit occurs when a taxpayer gives up residency in Austria. Merely giving up citizenship will not trigger exit tax. An exit normally means that the state loses its right to tax capital gains on financial products and derivative instruments, in which case a flat exit tax of 25% applies. However, payment of exit tax can be deferred until the assets in Austria are sold (if the taxpayer moves within the EU or to Norway).

 

Temporary residents

4. Does your jurisdiction have any particular tax rules affecting temporary residents?

Generally, a temporary resident may become subject to unlimited income tax liability (see Question 2, Residence). However, a special rule exists for individuals who own a property in Austria. A second home in Austria can be excluded from counting as domicile (see Question 2, Domicile) if both:

  • The taxpayer's centre of vital interests (the state to which the taxpayer's personal and economic relations are closest) has been outside of Austria for more than five years.

  • The dwelling place is used (alone or together with other Austrian dwelling places) for less than 70 days in a year.

 

Taxes on the gains and income of foreign nationals

5. How are gains on real estate or other assets owned by a foreign national taxed? What are the relevant tax rates?

Taxpayers are either subject to unlimited income tax liability on their worldwide income or limited income tax liability, depending on whether their domicile or habitual abode is in Austria (see Question 2). Taxpayers subject to limited income tax liability are only taxable on certain Austrian source income, including:

  • Capital gains on privately held Austrian real estate.

  • Capital gains from shares in Austrian corporations, if the taxpayer has held at least 1% of the shares at any point within a period of five years.

  • Dividends from shares in Austrian corporations.

  • Interest, if the underlying capital claim is secured by Austrian real estate (except for bonds).

  • Rental income from Austrian real estate.

Marginal tax rates of up to 50% apply. However, in respect of investment income (such as capital gains from shares, income from dividends and income from interest) and in respect of capital gains on real estate, a flat rate of 25% is applicable, which is normally levied by way of withholding.

 
6. How is income received by a foreign national taxed? Is there a withholding tax? What are the income tax rates?

Tax rates

Austria has a progressive income tax rate with income of up to EUR11,000 a calendar year being tax free and the portion of income exceeding EUR60,000 a calendar year being taxed at a rate of 50%. This applies to both individuals subject to unlimited and those subject to limited income tax liability. However, when assessing the annual income tax of an individual subject to limited income tax liability, EUR9,000 is added to income. For some types of income, a flat tax rate of 25% applies (see Question 5).

Tax free allowance

Income of up to EUR11,000 a calendar year is tax free (see above).

Exemptions

Income not listed in the Austrian Income Tax Act is not subject to income tax.

Techniques to reduce liability

In the past, frequent use has been made by high income taxpayers of private foundations (which can lead to deferral of tax) (see Question 30).

 

Inheritance tax and lifetime gifts

7. What is the basis of the inheritance tax or gift tax regime (or alternative regime if relevant)?

Currently, neither inheritance tax nor gift tax are being levied. However, the following should be noted:

  • Gratuitous transfers (whether mortis causa (made in expectation of death) or inter vivos (lifetime gifts)) of assets to (Austrian or foreign) private law foundations (similar to a trust, see Question 30) and comparable legal estates are subject to foundation entry tax under the Austrian Foundation Tax Act. Tax is triggered if the transferor and/or the transferee, at the time of transfer, have in Austria their:

    • domicile;

    • habitual abode;

    • legal seat; or

    • place of effective management.

    The tax basis is the fair market value of the assets transferred minus any debts, calculated at the time of transfer. Generally, the tax rate is 2.5%, with a higher rate of 25% applying in special cases. The transfer of real estate is exempt from foundation entry tax. Certain exemptions apply to transfers mortis causa for:

    • bank deposits;

    • publicly placed bonds; and

    • portfolio shares (holdings of less than 1%).

  • A special notification must be made to the competent Austrian tax office for:

    • gifts of money;

    • receivables;

    • shares in corporations;

    • participations in partnerships;

    • businesses;

    • movable tangible assets; and

    • intangibles.

The notification obligation applies if the donor or the donee have a domicile or their habitual abode in Austria. However, not all gifts are covered by the notification obligation. Gifts to certain related parties must exceed a threshold of EUR50,000 per year. In all other cases, a notification must be made if the value of gifts made exceeds EUR15,000 during a period of five years. Intentional violation of the notification obligation may lead to the levying of fines of up to 10% of the fair market value of the assets transferred.

Gratuitous transfers of Austrian real estate (whether or not mortis causa) are subject to 3.5% real estate transfer tax (2% in case of close relatives, 6% in case of private foundations), plus 1.1% court registration fees, on three times the tax value (Einheitswert) of the real estate. The tax value bears no relation to the fair market value, since it is in general artificially low (in most cases somewhere between 0.1% and 10% of the fair market value). As of 1 January 2013, the basis of the court registration fee will most likely be changed to the fair market value.

 
8. What are the inheritance tax or gift tax rates (or alternative rates if relevant)?

Currently, neither inheritance tax nor gift tax are being levied (see Question 7).

 
9. Does the inheritance tax or gift tax regime apply to foreign owners of real estate and other assets?

Currently neither inheritance tax nor gift tax are being levied (see Question 7).

 
10. Are there any other taxes on death or on lifetime gifts?
 

Taxes on buying real estate and other assets

11. Are there any other taxes that a foreign national must consider when buying real estate and other assets in your jurisdiction?

Purchase and gift taxes

Real estate transfer tax is levied at 3.5% (2% in case of close relatives, 6% in case of private foundations), plus 1.1% court registration fees based on the purchase price. In case of a gift, three times the tax value of the real estate is the basis. The tax value bears no relation to the fair market value, since it is in general, artificially low (in most cases somewhere between 0.1% and 10% of the fair market value). As of 1 January 2013, the basis of the court registration fee will most likely be changed to the fair market value.

In addition, value added tax (VAT) may be due on a sale by an entrepreneur (Unternehmer) opting for a taxable sale.

Wealth taxes

There is no general wealth tax. However, the municipalities levy a recurrent real estate tax (Grundsteuer) on real estate situated in Austria, which resembles a wealth tax on real estate. The tax basis is the tax value of the real estate. The tax rate is calculated by multiplying the general rate (Steuermesszahl) with a multiplier (Hebesatz) determined by the respective municipality. The general rate depends on the type of real estate and is between 0.05% and 0.2%. The multiplier must not exceed 500%, therefore, the tax rate is, in the worst case, 1%.

 
12. What tax-advantageous real estate holding structures are available in your jurisdiction for non-resident individuals?

Austrian real estate is sometimes held through a limited liability company since this offers the possibility of avoiding real estate transfer tax in the case of a sale, but this requires careful planning (for example, the sale of the shares is only tax free if they are sold to two separate purchasers).

 

Taxes on overseas real estate and other assets

13. How are residents in your jurisdiction with real estate or other assets overseas taxed?

Austrian tax residents are taxed on income and capital gains from foreign real estate as they are subject to taxation on worldwide income. However, under most double taxation treaties (see Question 14) only the state where the real estate is situated can tax such income and gains.

 

International tax treaties

14. Is your jurisdiction a party to many double tax treaties with other jurisdictions?

Austria has a comprehensive network of double taxation treaties with more than 80 countries, including almost all EU member states and OECD countries, the majority of which do not contain specific anti-abuse rules.

 

Wills and estate administration

Governing law and formalities

15. Is it essential for an owner of assets in your jurisdiction to make a will in your jurisdiction? Does the will have to be governed by the laws of your jurisdiction?

There is no obligation to make a will but it is considered advisable. Any will must meet the requirements set out in section 578 of the Austrian General Civil Code (see Question 16). If the will does not meet these requirements or if no will has been made, the intestacy rules apply. The will can be registered in the register of wills by a notary's office or a lawyer to ensure that it is not lost.

Under conflict of laws rules, if a will has been made, the law applicable to the will (besides the form) is primarily determined by the law of the testator's country of citizenship. The validity of the form is assessed under the Hague Convention on the Conflict of Laws Relating to the Form of Testamentary Dispositions. Under the Convention, a will is formally valid if the formal requirements of the legal system to which a connecting link (the state of creation, the nationality of the testator or the testator's permanent residence) exists are fulfilled.

Regulation (EU) No 650/2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession (Succession Regulation) triggers significant changes in relation to jurisdiction issues and issues of the applicable law. It is binding for all EU member states except the UK, Ireland and Denmark. It entered into force in August 2012. The Succession Regulation will apply to the succession of persons who die on or after 17 August 2015 (Article 83(1), Succession Regulation). Therefore, for the time being, the existing rules will continue to apply in Austria. Further, the Succession Regulation does not interfere with the substantive succession laws of the EU member states as such.

Concerning the applicable law as to the form of a will, Article 27 of the Succession Regulation provides for a regime, which is very similar to the Hague Convention. The possible connecting links of the will to a certain jurisdiction are:

  • The place where the will was made.

  • The testator's domicile.

  • Habitual residence.

  • Concerning immovable property, the state in which the property is located.

A will with respect to a person dying on or after 17 August 2015, which was made before the application of the Succession Regulation (that is, before 17 August 2015) is valid as regards form, if it (Article 83(3), Succession Regulation):

  • Meets the formal requirements of Article 27 of the Succession Regulation.

  • Meets the requirements of the applicable existing rules of private international law, when the will was made either in:

    • the state, where the deceased had his habitual residence;

    • any state, whose nationality he possessed or in the member state of the authority dealing with the succession.

 
16. What are the formalities for making a will in your jurisdiction? Do they vary depending on the nationality, residence and/or domicile of the testator?

In general, a will must fulfil the formal requirements of one of the jurisdictions listed in the Hague Convention or the Succession Regulation (see Question 15). A will is valid under Austrian law if it complies with the requirements set out in sections 578 et seq. of the Austrian General Civil Code. These sections distinguish between private and public forms of wills.

Private forms of wills. This kind of will is drawn up extra-judicially and can be made by way of:

  • Holographic will (eigenhändiges Testament) which must be:

    • handwritten; and

    • signed by the testator.

  • Non-holographic will (fremdhändiges Testament) which is normally written or typed by a third person and:

    • must be signed by the testator and three witnesses, of whom two have to be present at the same time;

    • the witnesses must state that the testator declared that the signed document represents his will and they are acting as witnesses (Zeugenzusatz).

      Close relatives (such as spouses, children, parents and siblings), heirs or beneficiaries according to the will, infants and persons who have a custodian are prohibited by law from acting as witnesses.

  • Oral will (subject to applicable requirements), if the will was drawn up before 31 December 2004.

Public forms of wills. These kinds of wills have to be drawn up in court or before a notary public and cover:

  • Judicial wills.

  • Notarial wills.

 

Redirecting entitlements

17. What rules apply if beneficiaries redirect their entitlements?

A beneficiary can redirect his entitlements in the following ways:

  • Renouncement of inheritance. A beneficiary can relinquish his inheritance by making a renouncement of inheritance in court. If a beneficiary specifies the person to receive the rejected estate, this waiver must fulfil the requirements as for a purchase of inheritance (see below). If these requirements are not satisfied, the next heir can make a declaration of inheritance.

  • Purchase of inheritance. Between the death of the testator and termination of the inheritance proceedings, the heir can sell or donate their inheritance to another party by drawing up a notarial deed or concluding a contract in court.

  • Settlement of the estate. Before or after issuing the certificate of inheritance, the heirs have the option to distribute the estate among themselves in a different way to what was provided for in the will, either by a judicial or extra-judicial unanimous agreement. If one of the heirs is an infant, the competent guardian's court must approve the agreement.

 

Validity of foreign wills and foreign grants of probate

18. To what extent are wills made in another jurisdiction recognised as valid/enforced in your jurisdiction? Does your jurisdiction recognise a foreign grant of probate (or its equivalent) or are further formalities required?

Validity of foreign wills

A will is valid if it is made in accordance with the laws of the country it was drawn up in (Hague Convention on the Conflict of Laws Relating to the Form of Testamentary Dispositions and Article 27(1) (a), Succession Regulation) (see Question 15).

Validity of foreign grants of probate

Austrian law does not have general rules regarding the recognition of foreign grants of probate. In practice, the courts assess foreign documents on a case-by-case basis. This flexible approach was implemented under section 150 of the Austrian Non-Contentious Proceedings Act, under which the probate court will hand over movable property (which is not subject to the jurisdiction of the Austrian courts) to an applicant who presents a declaration issued by the authority of the deceased's residence showing his entitlement to take delivery of such property.

The Succession Regulation provides for the general mutual recognition and enforcement of decisions related to succession law matters (Article 39, and following). Further, the Succession Regulation introduces a European Certificate of Succession (Article 62, and following), which has the purpose of demonstrating:

  • The status and the rights of each heir or legatee mentioned in the Certificate and their respective shares of the estate.

  • The attribution of assets forming part of the estate to the heirs or legatees mentioned in the Certificate.

The powers of the person mentioned in the Certificate to execute the will or administer the estate. The use of the Certificate will not be mandatory and will not replace documents used for similar purposes in the member states.

 

Death of foreign nationals

19. Are there any relevant practical estate administration issues if foreign nationals die in your jurisdiction?

There are no practical estate administration issues that arise when a foreign national dies in Austria (see Questions 26 and 27).

 

Administering the estate

20. Who is responsible for administering the estate and in whom does it initially vest?

Responsibility for administering

The heirs who have proved their right of succession are entitled to jointly administer the estate. This means that the heirs must decide unanimously unless they agree otherwise. For extraordinary transactions, the heirs need the consent of the probate court (section 810, Austrian General Civil Code).

During the probate proceedings, a notary is appointed as a representative of the court (Court Commissioner). The notary deals with tasks such as:

  • Inviting the heirs to make their declarations of inheritance.

  • Issuing a certificate under which a person is entitled to administer the estate.

If conflicting declarations of inheritance are submitted, or co-heirs disagree, the probate court must appoint a curator to administer the estate.

A testamentary appointment of an executor is possible, but of little importance, since the heirs are not bound by the appointment and are entitled to dismiss the executor at any time. The only possibility for a testator to force his heirs to accept an executor is to specify in the will that they will lose all rights to the inheritance if they do not accept the executor.

The limited functions of an executor are to carry out the will's provisions or supervise the administration of the suspended succession.

Vesting

After a person dies, his estate does not pass directly to his heirs. Instead, the competent probate court conducts probate proceedings, which leads to a certificate of inheritance. Meanwhile, the estate is in suspended succession and holds the rights and duties that derive from the decedent, under the principle of indirect acquisition of the estate.

 
21. What is the procedure on death in your jurisdiction for tax and other purposes in relation to:
  • Establishing title and gathering in assets (including any particular considerations for non-resident executors)?

  • Paying taxes?

  • Distributing?

Establishing title and gathering in assets

The heirs are invited to make their declarations of inheritance by the Court Commissioner (see Question 20, Responsibility for administering). A distinction is made between:

  • Unconditional declaration of inheritance. This declaration leads to the unlimited liability of the heir for the testator's obligations.

  • Conditional declaration of inheritance. This declaration leads to the limited liability of the heir for the testator's obligations. The limitation is the value of the assets the heir inherits. Therefore, the Court Commissioner must draw up an inventory of the estate.

After this inventory is completely drawn up and the identity of all heirs is known, the probate proceedings are terminated and the probate court is able to issue a certificate of inheritance.

Procedure for paying taxes

Under Austrian law, no inheritance tax is levied against the estates of testators who pass away after 1 August 2008 (see Question 7).

Distributing the estate

As soon as the certificate of inheritance is legally binding without any further possibility of legal recourse, the heirs are entitled to their inheritance.

 
22. Are there any time limits/restrictions/valuation issues that are particularly relevant to an estate with an element in another jurisdiction?

There are no specific time limits, restrictions or valuation issues that are relevant to an estate with an element in another jurisdiction.

 
23. Is it possible for a beneficiary to challenge a will/the executors/the administrators?

Challenging a will. It is possible to challenge a will if, for example:

  • The testator made his will in error.

  • The testator was not of sound mind to make a valid will.

If contradicting declarations of inheritance are made, section 160 of the Austrian Non-Contentious Proceedings Act requires an attempt by the Court Commissioner to reach an agreement between the potential heirs. If this fails, the Court Commissioner sends the probate file to the court, which then decides on the contradictory positions of the involved parties after conducting an oral hearing, which includes the discovery of relevant evidence.

Any challenge is part of the probate proceedings. If an interested party intends to challenge a will after the conclusion of the probate proceedings, he can do so through a separate court action.

Challenging the executor. The heirs are able to dismiss the executor at any time (see Question 20, Responsibility for administering).

Challenging the administrator. In general, heirs are entitled to jointly administer the estate. Only in cases in which contradicting declarations of inheritance or disputes between co-heirs exist must a curator be appointed by the probate court to administer the estate. The curator may be dismissed by the probate court, if he acts contrary to the interests of the estate.

 

Succession regimes

24. What is the succession regime in your jurisdiction (for example, is there a forced heirship regime)?

Two types of succession regimes exist:

  • Testamentary succession.

  • Legal succession.

Full testamentary freedom is limited by the right to a statutory share for the testator's spouse and descendants (section 762, Austrian General Civil Code) (see Question 25).

 

Forced heirship regimes

25. What are the main characteristics of the forced heirship regime, if any, in your jurisdiction?
  • Can be avoided (for example, by buying assets through an offshore or other entity and/or holding assets in joint names).

  • Takes into account assets received by beneficiaries in other jurisdictions.

  • Rights are mandatory on the forced heir or whether the forced heir can agree to a different distribution during the testator's lifetime.

Under the forced heirship regime, the spouse and descendants receive one-half of the amount that they would have received under applicable intestacy rules. This means that the testator may freely distribute one-half of his assets.

For example, if a woman dies leaving a husband and three children, under the intestacy rules, the widower would receive one-third of the estate and each of the three children would receive one-third of the remaining two-thirds (two-ninths) of the estate. So if the widower and children are only entitled to their forced heirship inheritance, the widower would receive one-half of one-third (one-sixth) and each child would receive one-half of two-ninths (one-ninth).

If the testator has not specifically addressed forced heirship rights in his last will, forced heirship rights can be claimed in cash only. If a testator has no descendants, ascendants are entitled to inherit under the rules of legal succession.

Avoiding the regime

The provisions regarding statutory shares are mandatory and cannot be avoided. When calculating statutory shares, foreign assets are included in the net estate. In principle, forced heirship rights do not apply to legal entities separate from the testator's assets. These assets are assessed in light of the right (if any) that the testator held over the assets. For assets that are held jointly, the Court Commissioner needs to determine whether either:

  • The assets are held in co-ownership (in which case only the testator's share is relevant).

  • The testator is the sole owner and simply wanted to ensure access to the assets by others (for example with a bank account that is held jointly).

The value of all gifts made by the deceased in the two years before death needs to be taken into account. If a gift was given to an individual who is also entitled to a statutory share, the value of the gift is included in the estate without any time limit. If the assets of the net estate are not sufficient to cover the statutory shares, the recipients of the gifts must pay compensation (in equal parts) or return the gifts received.

If the deceased founded a private foundation and donated assets to it, these assets are no longer part of the founder's assets and are not part of the net estate, provided:

  • The assets were donated more than two years before the founder's death.

  • The founder had given up his rights to alter or revoke the foundation two years before he died.

Assets received by beneficiaries in other jurisdictions

When calculating statutory shares, foreign assets are included in the net estate.

Mandatory or variable

Every potential heir has the option to renounce his inheritance while the testator is still alive. If an individual entitled to a statutory share decides to renounce a statutory share, a waiver must be made by notarial deed.

 

Real estate or other assets owned by foreign nationals

26. Are real estate or other assets owned by a foreign national subject to your succession laws or the laws of the foreign national's original country?

There is a distinction between applicable jurisdiction and the applicable law. If an Austrian court has jurisdiction and a foreign law is applicable, the Austrian court must apply the foreign law.

  • Applicable jurisdiction. Austrian courts have jurisdiction regarding probate proceedings in the following cases:

    • for Austrian real property, probate proceedings have to take place in Austria;

    • for movable property located in Austria, in principle, the Austrian probate court will assume jurisdiction if the deceased was an Austrian citizen or a foreign national resident in Austria;

    • for movable property outside of Austria, in principle, Austrian courts are only competent to deal with the probate procedure if the deceased was both Austrian and resident in Austria;

    • for foreign citizens who were not resident in Austria, the Austrian courts assume jurisdiction for a procedure limited to handing over movable assets located in Austria to the entitled applicant.

    From the date of application of the Succession Regulation, that is, for a person dying on or after 17 August 2015, the general rule will be that the courts of the member state in which the deceased had his habitual residence at the time of death will have jurisdiction to rule on the succession as a whole (Article 4, Succession Regulation). If the deceased had chosen the law applicable to the succession (see below), the parties concerned may agree that a court or the courts of that member state will have exclusive jurisdiction to rule on the succession (Article 5, Succession Regulation). If the deceased had no habitual residence in a member state, the courts of a Member State, where assets of the deceased are located will have to assume jurisdiction, if either:

    • the deceased had the nationality of that member state;

    • he had his habitual residence there earlier (provided that the change of residence is no longer than five years ago from the time the courts of that member state are seised).

    Where no court in a member state has jurisdiction according to this rule, the courts of the Member State in which assets of the estate are located will have jurisdiction to rule on those assets (Article 10, Succession Regulation).

  • Applicable law. The law of the deceased's country of citizenship governs the succession irrespective of the deceased's residence (section 28, Austrian Act on Private International Law). This general rule applies, for example, to the accrual of an inheritance, the extent of an estate, intestacy rules and the right to a statutory share. Reference to the law of the deceased's country of citizenship includes applicable conflict of laws rules. Consequently, it is possible that this law will refer to the law of another jurisdiction or refer back to Austrian law. It is not possible to choose the law applicable to a succession.

    From the date of application of the Succession Regulation, the law applicable to the succession as a whole will be the law of the state in which the deceased had his habitual residence at the time of death, unless, at the time of death, the deceased was more closely connected with a state other than the state of habitual residence (Article 21, Succesion Regulation). The new regime of the Succession Regulation will therefore be significantly different from the existing one in Austria (referring to the citizenship of the deceased only). Further, a person has the possibility to choose the law, whose nationality he possesses, as the governing law for his succession (Article 22, Succession Regulation). This choice of law must be made in the form of a last will.

 
27. Do your courts apply the doctrine of renvoi in relation to succession to immovable property?

The Austrian courts always assume jurisdiction over immovable property located in Austria, but they do not assume jurisdiction over foreign real property. The Succession Regulation does not provide for specific rules on the jurisdiction regarding immovable property (see Question 26).

 

Intestacy

28. What different succession rules, if any, apply to the intestate?

If the testator dies intestate, the intestacy rules of section 727 and following of the Austrian General Civil Code apply. These provisions determine that the spouse and closest relatives (children, parents and siblings) are entitled to inherit the estate. A system of succession per stirpes applies. This means that shares are distributed by kinship level, or stirpes and the heirs of a closer stirps exclude the heirs of a subsequent stirps. Four stirps of heirs exist:

  • The descendants of the deceased (the first degree of kinship) inherit two-thirds and the spouse inherits one-third of the estate.

  • The parents of the deceased and their descendants (the second degree of kinship) inherit one-third and the spouse inherits two-thirds of the estate.

  • The grandparents of the deceased and their descendants (the third degree of kinship) inherit one-third and the spouse of the deceased inherits two-thirds and part of the pre-deceased's grandparents' portion of the estate.

  • The great-grandparents but without their descendants (the fourth degree of kinship) inherit one-third and the spouse of the deceased inherits two-thirds.

If the deceased dies without leaving a spouse or any relatives within the four stirpes, the inheritance falls to the state (Heimfallsrecht). More distant relatives have no right to inherit.

The spouse of the deceased always receives a preferential legacy of the right to live in the marital home and take possession of the movable property within it.

 
29. Is it possible for beneficiaries to challenge the adequacy of their provision under the intestacy rules?

Beneficiaries cannot challenge the adequacy of their provision under the intestacy rules.

 

Trusts

30. Are trusts (or an alternative structure) recognised in your jurisdiction?

Trusts are not recognised. However the equivalent structure to trusts in Austria is the private foundation. The Austrian Private Foundation Act (Privatstiftungsgesetz) came into force on 1 September 1993 and was intended to provide a legal form for non-charitable purposes. Foundations were granted numerous tax benefits to provide an incentive to repatriate assets that had been transferred to foreign foundations, trusts and similar institutions (in particular in Liechtenstein).

The private foundation serves a similar purpose to a trust, however, it is a body corporate and therefore a different type of entity. While the private foundation is typically used as a private wealth vehicle for liquid assets, it is also often used for holding shares in family businesses.

Austrian private foundations that are non-charitable and that have the aim of benefiting individuals can only be set up for a maximum period of 100 years. After this time, the beneficiaries can decide whether they want to continue the private foundation for another 100 years or not.

Beneficiaries of an Austrian private foundation have certain statutory information rights which cannot be curtailed in the deed of foundation.

 
31. Does your jurisdiction recognise trusts that are governed by another jurisdiction's laws and are created for foreign persons?

Little case law exists in Austria on the tax treatment of foreign (in particular, Anglo-Saxon) trusts and their trustees. Austria has not ratified the Hague Convention on the Law Applicable to Trusts and on their Recognition.

In general, trusts can either be transparent (in which case all of the assets and the income of the trust are attributed for Austrian income tax purposes to the grantor) or opaque (in which case the trust is treated as a separate entity, with the beneficiaries only being taxed on income received from the trust). Transparent treatment applies if the grantor is able to influence the decisions of the trust regarding investment and payments to beneficiaries.

 
32. What are the tax consequences of trustees (for example, of an English trust) becoming resident in/leaving your jurisdiction?

This could possibly lead to the foreign trust becoming subject to unlimited corporate income tax liability.

 
33. If your jurisdiction has its own trust law:
  • Does the law provide specifically for the creation of non-charitable purpose trusts?

  • Does the law restrict the perpetuity period within which gifts in trusts must vest, or the period during which income may be accumulated?

  • Can the trust document restrict the beneficiaries' rights to information about the trust?

Trusts are not generally recognised in Austria. See Question 30 for details of private foundations which are an equivalent structure.

 
34. Does the law in your jurisdiction recognise claims against trust assets by the spouse/civil partner of a settlor or beneficiary on the dissolution of the marriage/partnership?

A private foundation (see Question 30) is normally protected against claims stemming from the dissolution of a marriage or partnership if the founder has transferred assets to the private foundation more than two years before filing for divorce and has provided that no rights of revocation and amendment of the private foundation exist.

 
35. To what extent does the law of your jurisdiction allow trusts to be used to shelter assets from the creditors of a settlor or beneficiary?

If the deceased founded a private foundation and donated assets to it, these assets are no longer part of the founder's assets and are not part of the net estate, provided:

  • The assets were donated more than two years before the founder's death.

  • The founder had given up his rights to alter or revoke the foundation two years before he died.

 

Ownership and familial relationships

Co-ownership

36. What are the laws regarding co-ownership and how do they impact on taxes, succession and estate administration?

Austrian law recognises co-ownership. The rights and duties of co-owners are specified in section 825 and following of the Austrian General Civil Code. Co-ownership arises either:

  • By law (for example, between several legal heirs).

  • By will.

  • By contract.

The right of ownership is divided into fractions (individual shares). Each co-owner can dispose of (sell, give away or bequeath) his fraction individually.

Co-ownership in residential property is commonly subject to the Austrian Condominium Act. When a co-owner dies, special succession rights apply.

Although several heirs constitute a community of co-heirs (each heir has a share based on the extent of his inheritance share), this community is of little importance in Austrian succession law because of the individual legal personality of the estate.

On transfer of the estate to the heirs (Einantwortung), formally ordered by the probate court in the inheritance certificate, the heirs become co-owners of the physical estate according to their inheritance shares. The general rules of co-ownership apply. Claims on the estate become partial claims and, in case of indivisibility, the heirs become joint owners of the respective claim (Gesamthandgläubigerschaft).

The co-ownership ends with the distribution of the estate, which can be requested by any heir before or after the inheritance certificate is issued by the court. In both cases, the distribution becomes effective through issuance of the inheritance certificate.

In addition, the distribution of the estate can also be subject to a judicial or non-judicial agreement, which requires unanimity among the heirs. In the event of the involvement of a minor, the settlement must be authorised by the guardianship court. If no agreement is reached by the co-heirs, each co-heir can enforce the distribution by filing an inheritance division claim before or after the inheritance certificate is issued.

 

Familial relationships

37. What matrimonial regimes in trust or succession law exist in your jurisdiction? Are the rights of cohabitees/civil partners in real estate or other assets protected by law?

The statutory matrimonial property regime is the separation of property (section 1233, and following, Austrian General Civil Code). Spouses are sole owners of those assets that they bring into the marriage and remain sole owners of those assets that they bring into it during the marriage.

A married couple is free to agree on another matrimonial property regime, such as a:

  • Community of property during their lifetime (where the couple receives co-ownership in the community property unless otherwise agreed).

  • Community of property on death only (where the separation of property remains during life).

  • Community of surplus (where property is separated, but gains on property are shared between the spouses equally).

Any agreement must be notarised. These principles also apply to same-sex couples who are registered partners under the Registered Partnership Act (see Question 38).

Co-habitees do not have the same legal status as married couples (for example, they have no statutory right of intestate succession). Since co-ownership of residential property according to the Austrian Condominium Act is available for any two natural persons, co-habitees also can become co-owners of residential property and can agree on succession rights in case of death.

 
38. Is there a form of recognised relationship for same-sex couples and how are they treated for tax and succession purposes?

On 1 January 2010, the Registered Partnership Act (Eingetragene Partnerschaft-Gesetz) entered into force. Under this law, same-sex couples are entitled to register a partnership with mutual rights and duties, provided that both partners are:

  • Of full age.

  • Legally competent.

  • Not closely related to each other.

  • Unmarried.

  • Not already living in a registered partnership.

In relation to succession issues, registered partners have the same rights as spouses.

 
39. How are the following terms defined in law:
  • Married?

  • Divorced?

  • Adopted?

  • Legitimate?

  • Civil partnership?

Married

A marriage happens under a marriage contract, where two persons of different sexes legally declare their resolution to live together in an inseparable community, to raise and educate children and mutually assist one another.

Divorced

Divorce is a legal decision by a court leading to the termination of a marriage. Among other grounds for divorce, a spouse can apply for a divorce where there has been misconduct in the marriage committed by the other spouse which leads to a disruption of the marriage. Divorce can also be requested by both spouses (divorce by mutual agreement).

Adopted

Adoption is the legal creation of a parent-child relationship between the adopter and the adopted child, regardless of parentage. An adoption is created by a written contract between the adopting party and the adopted party and needs approval by the court on request of one of the contracting parties.

Legitimate

A child is legitimate if they are born to parents in wedlock. However, a child born out of wedlock can achieve the same legal status as if he or she had been born in wedlock through legitimation (for example, if the child's parents get married). The legal regime for an illegitimate child is largely the same as for legitimate children with the exception that an illegitimate child bears the surname of the mother (not the family or father's name). There is no differentiation in terms of succession law.

Civil partnership

Civil partnership is only recognised in the case of same sex-couples registered according to the provisions of the Registered Partnership Act (see Question 38).

 

Minority

40. What rules apply during the period when an heir is a minor? Can a minor own assets and who can deal with those assets on the minor's behalf?

Under Austrian law, a minor is a person under the age of 18 years. Minors can own assets. However, parents have the right and duty to legally represent the child and administer the minor's property. Each parent can represent the child on his own although in cases of exceptional measures (such as the sale or encumbrance of the minor's real estate), the consent of the other parent, as well as the explicit approval of the guardianship court, is required.

Minors are entitled to inherit and the usual probate procedure applies, although the minor must be represented by at least one of his parents as legal representative. The consent of the other parent and the approval of the guardianship court are needed if an unconditional inheritance declaration is submitted or the succession is refused.

The inheritance of a company by a minor requires the consultation of the parents and the approval of the probate court. The same applies for the settlement of an inheritance (see Question 36). In the event of a conflict of interest (for example, if the minor and his parents are heirs of the same deceased), it may be necessary to appoint a curator to represent the minor's interests.

If a minor is a beneficiary of a statutory share, the court must compile an inventory of the estate. The legal consequence of the inventory is the limitation of liability for all heirs involved in the probate proceedings (see Question 21, Establishing title).

 

Capacity and power of attorney

41. What procedures apply when a person loses capacity? Does your jurisdiction recognise powers of attorney (or their equivalent) made under the law of other jurisdictions?

If a person loses capacity, a custodian is appointed who has the legal authority (and the corresponding duty) to care for the incapable person's personal and property interests, supervised by the court.

In order to prevent the appointment of a custodian by the court, Austrian law offers the opportunity to grant a special power of attorney (Vorsorgevollmacht) whereby a person can decide for himself who he wants to be represented by in case of loss of capacity. The special power of attorney only becomes effective on the person's incapacity. The power of attorney must comply with certain formalities and be either:

  • Holographic (see Question 16).

  • Non-holographic with witnesses.

  • Through legalisation by notary.

Austrian law recognises powers of attorneys made under the law of other jurisdictions, if the power of attorney has been made in accordance with a law applicable under Austrian conflict of laws rules.  

 

Proposals for reform

42. Are there any proposals to reform private client law in your jurisdiction?

Reforms to inheritance law have been considered, in particular regarding forced heirship (see Question 25). The original welfare function of the forced heirship regime has been largely lost over the last decades. Reform suggestions range from complete abolition, to a forced heirship model depending on the individual needs of the family members.

Other reforms under consideration include:

  • The extension of reasons for disinheritance (disinheritance is highly restrictive).

  • The introduction of a deferral or instalment plan for payment of the statutory share (the statutory share is currently payable immediately).

  • Simplifications regarding the taking into account of gifts made during the deceased's lifetime for the calculation of the statutory share.

 

Online resources

The Legal Information System of the Republic of Austria

W www.ris.bka.gv.at

The Legal Information System of the Republic of Austria (RIS) is an electronic database operated by the Federal Chancellery. It is regularly updated and serves the promulgation of the legal provisions to be published in the Federal Law Gazette and is a source of information on the laws of Austria. The Austrian Civil Law Code is not available in English (Allgemeines Bürgerliches Gesetzbuch) (ABGB), which is the primary source of Austrian inheritance law. Procedural law can be found in the Act on Jurisdiction (Jurisdiktionsnorm) (JN) but there is no English translation available.

EUR-Lex

W http://eur-lex.europa.eu

Access to EU law (for example, the Succession Regulation).


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