EUROPE - The Austrian government has announced plans to raise €3bn over the next five years by increasing the withholding tax on profits from sales of privately owned property to 25%.

Up to now, capital gains were only taxable if the seller divested the property within 10 years of its acquisition.

The new rules will remove the so-called speculation period - a move PwC said would likely result in lower returns on investment.

Gains on properties acquired after March 2002 will be taxed at 25%, while 'old' assets - those acquired before that date - will be taxed at 15%, with an annual inflation deduction of 2% after 10 years.

Property tax changes come as part of a fiscal stability package the government hopes will raise €26.5bn over a five-year period, €7.5bn of it in tax revenues.

They are subject to a parliamentary vote and expected to come into force on 1 April.

The rules will also affect partnerships holding Austrian real estate, even where one or more of the owners are domiciled outside the market.

Meanwhile, Germany has tightened exceptions to withholding tax on dividends paid to a non-listed, non-German parent company.

New rules that include an income test based on foreign companies' global receipts are designed to limit claims to relief from tax paid on dividends from German subsidiaries.

Themselves a response to an infringement procedure instigated by the EU, the new rules - which will affect private property companies but exempt REITs and funds - "are widely estimated by German professional tax literature to infringe EU law", according to PwC.

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