GERMANY/AUSTRIA - Real estate investments made by German pension funds in Austria will be tax-free from now, placing them on an equal footing with their Austrian counterparts, an Austrian financial tribunal has ruled.
Until now, various German pension vehicles - Pensionskassen, Versorgungswerke and Zusatzversorgungskassen - had to pay 25% tax on their profits from Austrian real estate investments, even if they were exempt from corporate and capital gains taxes in Germany.
But the Austrian independent financial tribunal Unabhängiger Finanzsenat, part of the finance ministry, has now ruled in three separate cases that this contravenes EU laws on tax equality, as Austrian Pensionskassen and other retirement vehicles are exempt from such taxes on profits from their domestic real estate investments.
Henning Klöppelt, chief executive of German Warburg-Henderson KAG, said both rental income and profits of non-realised value increases, as well as profits from sales, were now tax-free.
This regulation will apply to all retirement vehicles comparable with Austrian Pensionskassen.
For German Pensionskassen, the tax-exemption has already been passed into national law in Austria.
Versorgungswerke, which are funded first-pillar vehicles for certain professions in Germany, as well as Zusatzversorgungswerke, have to show they are comparable with Austrian funded retirement vehicles.
Klöppelt said: "We recommend German tax-exempt retirement vehicles get a legal opinion on their comparability with their Austrian counterparts, with which they can get a binding opinion from the fiscal authorities on their tax-exemption.
"So far, taxation in Austria narrowed profits for German tax-exempt retirement vehicles, but the new legal situation makes the market even more attractive for these investors."