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Frequently asked questions

7. Does the buyer pay VAT when purchasing an investment apartment? 

10. What taxes do I pay in Austria and what are their rates?

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1. Why should I buy an investment apartment?

Acquiring a buy-to-let property is one of the safest ways how to protect funds from the depreciation of their value.

 

The price of Austrian real estate used for accommodation  is constantly growing at a rate of at least % per year.

The tourist rental then ensures year-round income in the amount of another 3 - 5% of the value of the apartment. The combined income (net income from rental and real estate appreciation) thus reaches around 12% per year, which is an exceptional value for such a stable and conservative investment.

In many cases, it is possible to agree on a guaranteed annual rental income - in this case, it is independent of the financial results of the given accommodation facility and the occupancy of the apartment.

And besides: no other form of investment will give you the feeling of sitting on the balcony of your own apartment and watching the sunset with a glass of Aperol in hand after an amazing day spent skiing or mountain biking.

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2. Am I obliged to rent out my apartment?

Yes, in almost all cases, the rental of an investment apartment for the accommodation purposes is mandatory.

This obligation results from the building plans of the given locality. By the mandatory rental system, Austria tries to ensure high occupancy of accommodation in tourist centers and thus to keep the expansion of accommodation capacities within reasonable limits.

3. How does the administration and operation of an investment apartment work in Austria?

In Austria, the management of the so-called buy-to-let or investment apartment (i.e. real estate for tourist rental) is in the hands of specialised management companies, that are in charge of the complete administration of the accommodation facility, i.e. also of your apartment. It includes:

  • advertising your apartment on accommodation portals (Booking, Trivago, etc.),

  • reservation management,

  • operation of the reception,

  • guest check-in/out,

  • cleaning of the apartment and common areas,

  • repairs,

  • insurance.

 

The owner of the apartment thus concludes an operating contract with the operator, and further has absolutely no worries about

the administration of the apartment.

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4. What advantage do apartments in Austria have compared to real estate in other countries?

In Austria, the professional property management is a long-proven and well-tuned concept the quality of which is at the highest level in Europe. In other countries, the necessary infrastructure for property management is still being developed and is not as reliable.

 

Another advantage of ski property in Austria is its year-round operation. While real estate in Croatia or Bulgaria is rented only in

the summer season, apartments in Austria are used all year round. The annual occupancy of Alpine real estate (i.e. the aspect that has the greatest impact on rental income) normally exceeds 220 days a year.

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5. Am I allowed to use the apartment for my personal use? If so, under what conditions?

In most cases, yes. Most apartments can be used for private purposes, usually for 4 up to 8 weeks per year. The maximum stay is determined differently - depending on each particular project. 

 

The use for private purposes is free of charge - the accommodated owner only pays a fee for cleaning and changing bed linen.

The owner has his/her own key to the apartment - but even then, of course, it is necessary to book the stay in advance. It should also be taken into account that the apartment does not earn any income when used for private purposes - that is why the personal use is usually not planned for the high season (Christmas and New Year holidays, February). Apart from using the apartment themselves - the owners can offer the apartment to their relatives or friends without any restriction.

There are also projects where personal use is excluded. The owners can book the apartment for their own stay, but they pay the regular (or slightly discounted) price for accommodation.

On the other hand, in larger accommodation establishments, it is usual that the owner of the apartment can use for his personal needs not only his own apartment, but any other within the hotel complex that is available at the given time. There is also the possibility of purchasing a smaller apartment (e.g. for 2 people) and spending your vacation either in it or in a larger apartment - depending on how many of you are going on a joint vacation.

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6. What costs are associated with the acquisition of real estate?

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In addition to the price of the property, the investor bears the following costs:

  • property transfer tax  (3.5 % purchase price of the property),

  • registration in the land registry (1.1 % from the purchase price),

  • notary fees (2 % from the purchase price).

 

The purchase price of the property in this case means the price of the apartment including VAT, despite the fact that the sale of apartments for the purposes of tourist accommodation is otherwise exempt from VAT (see next question).

In some cases, our intermediary commission is paid, the amount of which depends on the range of services requested and provided (see question no. 8).

7. Does the buyer pay VAT when purchasing an apartment? 

The acquisition of an investment apartment, which is further rented out to third parties for accommodation purposes, is exempt from VAT 

  • either in full or

  • to the extent that corresponds to the ratio of the use of the apartment for tourist rental versus use for personal purposes during the year (in this case, 90 - 95% of the total amount is usually exempted VAT from the price of the apartment)

Despite the VAT exemption, it is sometimes required that the price of the apartment is paid to the notary's escrow account with the VAT, whereas after the registration of the change of owner in the Austrian Land Registry, the tax office returns the VAT to the buyer.

Sometimes, it is possible to agree with the seller on a VAT set-off (so-called Überrechnung) - in such a case, only the purchase price without VAT is paid to the notary escrow account.

The VAT payment mechanism (deposit and subsequent refund vs. a VAT set-off) and the extent of VAT exemption vary depending on the particular federal state and the specific project.

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8. In what cases is our brokerage commission of SUR REAL Investments charged?

For most development projects, the seller pays the intermediary (that is, our company) a commission for the intermediation of the sale. In such case, our company provides free consultations and administrative services related to the purchase of an apartment, and charges only the provision of extra services (e.g. accompaniment during an inspection visit of the property

In case of other projects, it is the buyer who pays the commission for our mediation and consulting services. Its amount corresponds to the scope of the provided services and ranges from to 2.5% of the purchase price.

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9. What are my accounting and tax obligations related to renting an apartment?

The management company in charge of the administration of the apartments prepares regular (monthly, quarterly or annual) surveys of revenues. After the deduction of operating costs and its commission, it sends the net revenue to the bank account of the owner.

 

Since this is income achieved on the territory of Austria, the owner (whether a natural person or a legal entity) is obliged to register for income tax and VAT in Austria, and to submit tax returns.

 

The preparation of financial statements and filing of tax returns is a simple and inexpensive service offered by Austrian accounting firms. Most of these companies communicate in English. If necessary, we are also happy to recommend a company with Czech-speaking accounting and tax specialists.

Rental income also usually becomes part of the owner's worldwide income in his/her tax resident country. Depending on whether the owner is resident in the Czech Republic, Slovakia or another European country, it is possible

  • to deduct the income tax that was paid in Austria from his/her calculated worldwide income tax, or  

  • to completely exclude the income earned (and taxed) in Austria from his/her worldwide income.

Accounting and tax issues related to the acquisition and operation of the apartment are a regular part of the consultations we provide to our clients. 

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10. What taxes do I pay in Austria and in what amount?

At the moment of purchase of the apartment, the buyer pays the property transfer tax in the amount of 3.5% p.a. from the price of the apartment (incl. VAT). In some Austrian federal states, the buyer pays value added tax (20%) from the proportional part of the apartment price that corresponds to the amount of use for personal purposes. 

Both the accommodation income received by the apartment owner and the operating and administrative costs deducted from it include VAT. The owner is thus obliged to register for VAT and submit quarterly tax returns. The amount of VAT paid by the apartment owner is already taken into account in the presented ROI calculations.

If the owner of the apartment is a Czech or Slovak natural or legal person, it pays the Austrian income tax from income generated on Austrian territory (i.e. rental income), namely:

  •  in the case of a corporate owner in the amount 24% (minimum EUR 437.50),

  • in the case of an individual, it is a progressive tax with several bands, whereas the income up to EUR 11,700 is exempt from tax and for an income in the range of EUR 11,700 – 19,100 rate, the income tax with a rate of 20% applies.

In addition to operating costs and remuneration of the management company, the tax deductible costs include accounting/tax consultancy costs and especially the depreciation of property amounting to 1.5% per year.

Thanks to the application of tax-deductible costs (or due to partial exemption for natural persons), the effective taxation by the Austrian income tax is very low, and the tax base and payable tax are often insignificant.

In the case of the sale of the apartment, the profit (difference between the purchase and sale price) is subject to the capital gains tax amounting up to 30%.

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11. Is it more advantageous to own an apartment as an individual or through a holding company?

This question does not have a simple reply - it always depends on the circumstances of the given case and on the needs or preferences of the buyer.

In general, it can be recommended that the apartment is not directly owned by a natural or legal person whose assets can be exposed to business or personal risks. From this perspective, the most suitable alternative is the purchase of an apartment

through a holding company, which does not carry out any other commercial activity.

 

Purchasing the apartment through a company brings the following additional benefits:

  • that information about the real owner of the property does not have to be publicly available (see query below),

  • potentially lower effective taxation of the capital gains in case of the sale of the apartments.

 

On the other hand, it need to take into account that

  • the formation, management and accounting of a holding company incurs additional costs,

  • a company (unlike a natural person) is not subject to the tax exemption of the income below EUR 11,700.

Our company is ready to provide expert consultation and, depending on the client's situation, propose a suitable option regarding ownership of the property. If you are interested, we are ready to provide a comprehensive service related to the incorporation and management of a holding company, bookkeeping, preparation of tax returns and meeting of due diligence obligations

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The owner of the property is changed by a signature of a purchase contract and by the insertion of the ownership right in

the Austrian Land Register (Grundbuch). The information on the owner of the apartment is then available to the public, also online

(for a fee). The person looking for this information must know the cadastral number of the particular building or housing unit.

If the buyer prefers that that his/her identity is not publicly available, it is appropriate to acquire it through a company, after a careful consideration of its legal form, and the suitable country of its registrationSUR REAL is ready to provide necessary consulting as well as corporate services related to the establishment and management of such a holding company, bookkeeping, preparation/filing of tax return and the assistance with fulfillment of all due diligence obligations. 

N.B.: Thanks to the use of a legal entity, the identity of the beneficial owner can be made publicly unavailable. Yet, he/she must be identified by all entities:

- that are obliged to identify and carry out due diligence according to Austrian and European AML legislation and

- with which the property holding company entered into a relationship.

These include in particular the bank where the company has an account, the legal firm in charge of the registration in the Land Register, the  notary public into whose custody the purchase price was deposited, the accounting firm / tax advisors etc.

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13.  What if I decide to sell the apartment? Does SUR REAL provide the assistance with the sale?

Selling an investment apartment is not complicated at all. The administration of the apartment as well as its equipment are practically independent of the owner, so there is no need to worry about moving, selling the furnishings, etc. 

If the owner decides to sell the apartment, our company is ready to provide cooperation, i.e.:

  • to agree with one of the local real estate agencies to include the apartment into their portfolio,

  • to provide consultation services and assistance to the owner of the apartment for the time necessary to complete the sale.

As mentioned above, the difference between the sale price and the purchase price is subject to income tax in Austria with the rate being up to 30%. Due to this tax obligation and the costs paid during the acquisition of real estate (see query above), it is generally recommended to hold an investment apartment for at least 5 years.

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14. What if I don't have time or I can't find a suitable apartment on the website of SUR REAL Investments?

In such a case, there is no problem at all if you write us your general requirements or ideas in the email / contact form, or let us them know by phone.

We will then prepare an offer with projects/apartments, matching your entry criteria. Based on your subsequent feedback, we can refine and supplement the offer.

For the purpose of creating an offer, it is always helpful to us if your requirements include the following information:

- the budget for the investment (i.e. in what price range should the apartment be),

- favourite region / location,

- layout or size of the apartment (number of beds etc.),

- preferred scope of use for personal purposes.

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15. What if I am interested in a project or an apartment that is not offered by SUR REAL Investments?

Even in this case, do not hesitate to contact us. We can get int touch with the developer and find out all the necessary information for you. If we do not find any hidden defect, and you decide to proceed with the purchase, we will guide you through the process of sale and provide all accompanying services - as if the apartment was included in the portfolio of projects presented by us.

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