Tightening of the Fraud Prevention Act 2025 planned

Towards the end of November, government proposals concerning the Fraud Prevention Act 2025 were introduced, aiming to prevent abusive practices, contribute to tax fairness in Austria, and play a part in the sustainable safeguarding of state revenues (consolidation of the federal budget).

The Fraud Prevention Act 2025 is divided into sections on taxes, social security contributions, and data – selected aspects are presented below in an overview.

No input tax deduction for luxury properties

As a significant tax change, it is planned to abolish the input tax deduction for costs related to the "letting of luxury properties". The letting of luxury properties would then be mandatorily exempt from tax (unecht steuerfrei - effectively tax-exempt in a way that does not allow for input tax deduction) and the landlord would no longer be able to deduct input tax for their ongoing pre-payments (or those associated with the acquisition/construction). Such a luxury property is presumed to exist if the acquisition or construction costs of the property exceed €2 million. The government bill states that the acquisition or construction costs for the property for residential purposes, including ancillary buildings (e.g. garages, garden sheds) and other structures (e.g. swimming pools), are to be taken into account. Furthermore, a temporal connection must be considered – this exists if the acquisition or construction costs arise within a period of 5 years from the acquisition or the commencement of construction. In the case of an apartment building, for instance, which is typically intended for the letting of multiple rental units, the individual rental unit is to be considered. Finally, the tightening in the sense of a mandatorily exempt letting is to apply to all turnovers and other events that are carried out or occur after 31 December 2025. Additionally, it is a prerequisite that the particularly prestigious property for residential purposes was acquired and/or constructed by the landlord (or association of persons) after 31 December 2025.

Tightening of rules for foreign foundations

To more effectively combat tax avoidance through offshore structures, a stricter tax treatment of allocations from foreign foundation-like entities is envisioned. Specifically, this will be achieved by focusing solely on comparability with a "private law foundation" and thus abstractly on the existence of a foundation-like entity (technically, this is done through expanded taxation of such allocations as income from capital assets).

Unjustified losses as a new criminal offence

The intentional declaration of unjustified losses will in future be a criminal offence under financial penalty law. Therefore, tax evasion will occur if losses, which can be offset against income in future assessment periods, are culpably declared incorrectly.

Relief for reduction surcharge

One change that is favourable to taxpayers is the extended scope of application of the underpayment surcharge (Section 30a of the Financial Taxation Act). The current threshold of €33,000 is to be raised to €100,000 – at the same time, the threshold of €33,000 per assessment period is to be established as a limit. This restriction is intended to maintain the distinction between less serious cases within the system of financial criminal law. On the other hand, and in order to do justice to the varying degree of wrongdoing depending on the amount of the additional tax claims, it is proposed to increase the surcharge for additional tax claims exceeding a threshold of €50,000 to 15 % of the total amount of the additional tax claim (in principle, the surcharge amounts to 10 %).

Liability in the construction sector is being extended

Client liability in the construction sector is to be extended to more effectively include cases of labour leasing (temporary work). The aim here is to prevent social security contributions from being evaded through complex arrangements for labour leasing (with the aid of shell companies, etc.). Consequently, clients are to be held more responsible for ensuring that social security contributions are paid correctly by their subcontractors or leasing companies.

We will keep you informed about further legislative developments.

Image: © Adobe Stock - Andrey Popov