Taxation in Agriculture

Chapter 5. Austria

Abstract

This chapter contains a description of tax provisions applied to agriculture in 2019, unless otherwise specified. They include taxes on income and profit, property, good and services, environmental taxes, and tax incentives for R&D and innovation.

5.1. Overview

According to the 2016 census there are 161 155 agricultural and forestry businesses in Austria, 90% of which are small scale and family run.

There are separate tax provisions applicable to the agriculture and forestry sectors. Agricultural income is differentiated from other incomes and there are simplified methods for assessing both income and value added tax for small agriculture and forestry enterprises. Taxable income can be calculated based on a full or partial flat rate assessment (lump-sum assessment). In addition, the valuation of the property for property taxes and land transfer tax is not at the market rate. When transferring farms between family members, the land transfer tax is calculated using a lower concessional tax rate.

An important concept in the treatment of agriculture and forestry for tax purposes is the estimation of an assessed value (Einheitswert). The assessed value (Einheitswert), calculated according to law and is set by local tax offices, expresses the productive capacity of agricultural and forestry entities. It represents the capitalised, and sustainably achievable monetary returns. Regional variations exist in the calculation of the assessed value (Einheitswert) due to differences in the natural yield conditions. The assessed value (Einheitswert) is considerably lower than the business’s likely annual income meaning that the majority of farmers in Austria pay very little tax. The Austrian tax legislation is updated on a regular basis, with most recent revisions made in 2018.

5.2. Income taxation

There are progressive personal income tax rates with an entry tax rate of 25% for low income earners and a maximum tax rate of 55% for income earners of more than EUR 1 million (decreasing to 50% after 2020). There are six income brackets.

Accrual accounting is mandatory for agricultural and forestry enterprises with turnover exceeding EUR 550 000 in two consecutive years or an assessed value (Einheitswert) at 1 January of greater than EUR 150 000. Cash basis accounting is permitted for lower income farms.

For certain occupational groups the Austrian tax legislation provides for the possibility of determining taxable income on the basis of flat rates (average rates). These separate tax rules are set out in the Income Tax Act and are stated by the Federal Minister of Finance. The flat rates for farmers and foresters, including those involved in processing of agricultural products, providing agricultural services and some non-agricultural services like tourism on farms, are set in regulation which was last updated in 2015. For eligible cash basis agricultural and forestry businesses, taxable income is calculated using either the full flat rate or the partial flat rate.

Farmers and foresters with an assessed value (Einheitswert) of up to EUR 130 000 and a turnover of less EUR 400 000 in the last two years are able to determine their taxable income using flat rates.

The full flat rate is used for businesses that have an assessed value (Einheitswert) not exceeding EUR 75 000 and a maximum of 60 hectares of cultivated land and 120 livestock units. In this case their taxable income is determined by multiplying their assessed value (Einheitswert) by an average flat rate of 42%. Additional revenue includes for example processing of agricultural products. Additional deductible expenses include interests on debt, rents, and social insurance contributions.

The partial flat rate regulation is used for agricultural and forestry businesses operating on a cash basis with assessed value (Einheitswert) of between EUR 75 000 and EUR 130 000. These businesses may deduct 70% (80% in case of livestock farms) (including VAT) from their taxable income as expenses (Teilpauschalierung).

Making flat rate estimates of income-related expenses and operating expenses allows these expenses to be deducted without documented evidence of the actual expenses paid. The flat rate regulation simplifies the profit calculation thereby reduces accounting compliance costs. Austria’s agricultural sector is characterised as small scale with 90% of farms run as family businesses and managed by a sole proprietor. The majority of farmers and foresters calculate their profit on basis of the flat rate regulation and therefore pay very little income tax.

Corporations are subject to corporate income tax at a flat rate of 25%. Again, different types of taxable income determination are available via accrual or cash-based accounting.

There are also agricultural and forestry co-operatives that are companies with separate legal entities and flexible membership. These are primarily intended to further their members’ businesses. Only a very small group of agricultural co-operatives are partially tax exempt under certain conditions.

Capital gains from the sale of land, enterprises or sub-enterprises are taxed under the income taxation regime. Income from land sales are subject to a special tax rate of 30%, whereas the general tax rate applies to gains from the sales of enterprises.

5.3. Property taxation

Domestic property is subject to an annual property tax. The tax for agricultural and forestry land is calculated on the basis of their assessed value (Einheitswert). This also includes buildings, machinery and livestock. A base value for taxation is determined by multiplying the assessed value (Einheitswert) by a specific tax figure. For the first EUR 3 650 of the assessed value (Einheitswert) a tax rate of 1.6% is applied, while 2% is applied for the remainder. The property tax and its supplements are calculated using multipliers of minimum 2 125%. The following example illustrates the tax calculation for a farm with an assessed tax value (Einheitswert) of EUR 15 000:

EUR 3 650 x 0.16% = EUR 5.84

EUR 11 350 x 0.2% = EUR 22.70

Base value for taxation: EUR 5.84 + EUR 22.70 = EUR 28.54

Property tax: EUR 28.54 x 2 125% = EUR 606.48

An additional property tax in Austria is the land value levy for undeveloped sites considered for construction purposes. The federal tax is 1% of the assessed value (Einheitswert) (mainly for real estate), if the assessed value is higher than EUR 14 600. Farmers and foresters have to pay the land value levy for undeveloped sites, if those sites are considered for construction purposes in the near future and the land is not sustainably used for agriculture or forestry. Again, the assessed value (Einheitswert) is used to calculate the tax.

Since the abolition of the inheritance and gift tax in 2008, donations, inheritances and sales of property are subject to a land transfer tax. To support the continuation of family farm enterprises, transfers within the family benefit from concessional tax rates. The tax for an agricultural or forestry property transferred to a family member is calculated on the basis of the assessed tax value (Einheitswert) with a concessional tax rate of 2%.

5.4. Tax on goods and services

The standard Value Added Tax (VAT) rate in Austria is 20% with reduced rates of 13% (charged on agricultural supplies and wine production and supply, etc.) and 10% (charged on foodstuff amongst other things) and a special tax rate for certain geographic regions of 19%.

The Austrian VAT Act, amended as part of the 2015/16 tax reform, includes a flat rate system for agricultural producers. The approach is based on the provisions of the Council Directive 2006/112/EC of 11 November 2006 on the Common System of Value Added Tax. The flat rate compensation percentage is determined using macro-economic data from the last three years. Cash basis taxpaying farmers can either use the flat rate option or the normal VAT regime. By opting for the flat rate system farmers pay VAT at an average of 10% on both inputs and outputs. There is not record keeping required and no assessment is made by the tax office.

A rate of 13% applies between businesses. For example, a farmer who sells cattle to a cattle dealer has to invoice the transaction at a rate of 13% which may then be offset by the dealer against their tax payable.

Since 2013, Austria charges the agricultural sector the regular mineral oil tax and is one of only a handful of EU Member States to take such an approach.

Motor vehicles only used on farms are exempt from the Motor Vehicles Tax.

Austria collects an excise tax for sparkling wine (reintroduced in 2014) and an alcohol tax.

5.5. Environmental taxes

Austria does not apply any environmental taxes and instead uses payments under its Agri-Environmental Programme (ÖPUL) for the promotion of an environmentally sound, extensive and natural habitat protecting agriculture.

5.6. Tax incentives for R&D and innovation

Since 1 January 2018, all Austrian companies can claim back 14% of their expenses on research and experimental development (previously only 12% of expenses could be claimed). Both the company’s own research as well as commissioned research, are eligible for this support. The support is not taxable (no operating income) and it is delivered via a tax credit for income tax or corporate tax. An evaluation from 2012 shows that there is a small number of supported research and development projects from the agriculture, forestry, fisheries and food industries.

5.7. Other taxes

In agriculture, the same employment taxes and social security contributions apply as to the rest of the economy. Family workers are integrated in the social security system for (self-employed) farmers and foresters. Farmers social security contributions are levied on the basis of the assessed value (Einheitswert) which is computed into a month contribution basis.

Austria provides preferential treatment to agriculture in the insurance tax scheme. In general, the assessment basis for the insurance tax is the insurance fee, the tax rate is 11%. There are various exceptions from this general provision, including exceptions for the agricultural sector. For hail insurance the assessment basis is the insured amount for each year of insurance and the tax rate is 0.2. Since 2019 this rule also applies to other agricultural insurances against natural hazards.