Green investments in Austria: new tax allowance introduced effective 2023
Tax compliance
Green investments in Austria: new tax allowance introduced effective 2023
Mon 13 Nov 2023
When the Austrian government – a coalition between the conservative People’s Party and the Green Party – presented their government program for 2020-2024, an “eco-social tax reform” was one of the key elements. The most recent measure has been the introduction of an investment allowance that especially incentivises “green investments”.
The two main pillars of the “eco-social tax reform” announced by the Austrian government back in December 2019 are (i) tax incentive measures towards “green taxation” and (ii) tax relief for taxpayers with small and medium income.
Previously implemented measures towards green taxation in Austria (Level 1 heading)
The government program included several tax initiatives to be taken. So far, in particular the following “green” tax measures have been implemented:
Tax allowance for “green investments” effective 2023 (Level 1 heading)
As part of the “eco-social tax reform”, the Austrian government introduced an “investment allowance” (Investitionsfreibetrag, IFB) effective from 1 January 2023 as an incentive for entrepreneurs and companies acquiring or producing qualifying business assets.
The investment allowance is an additional business expense for tax purposes, resulting in a reduction of the (corporate) income tax base. Therefore, the actual tax effect depends on the applicable tax rate which is up to 55% for individuals (top tax rate for portions of income exceeding EUR 1m) and 24% for corporates (23% from 2024 onwards). Taxpayers in a tax loss position do not benefit immediately but have higher tax loss carry forwards available for utilisation in future years.
Tax allowance for investments – general requirements (Level 2 heading)
The regular allowance is 10% and increases to 15% in the case of “green investments” on qualifying investments of up to €1m per company.
- and health/life science
- serving the extraction, transportation, or storage of fossil fuels as well as plants that use fossil fuels directly (e.g., tractors, trucks)
Green investments – requirements for 15% allowance (Level 2 heading)
In a recently published decree, the Austrian Ministry of Finance has specified which investments qualify as green investments and are therefore entitled to the 15% allowance. For instance, the following investments are covered:
Green heating systems now also benefit from the allowance (Level 2)
Heating systems were previously excluded from this benefit. However, the Austrian Parliament changed the law, extending the investment allowance to “climate-friendly” heating systems effective from April 2023.
Due to this expected change in the law, the 15% allowance for green investments will be available also for heat pumps, biomass boilers, district heating or cooling exchangers, district heating and cooling transfer stations, and micronets.
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Florian Würth Tax Partner - Austria
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