Tax Advantages for Entrepreneurs
In Austria, entrepreneurs can reduce their assessment basis and therefore the income tax they need to pay by making use of the Gewinnfreibetrag (eng. tax allowance for profits). It can be deducted from profit after comparing income to expenses as a kind of fictional expense.
The Gewinnfreibetrag is therefore a part of profit that is made tax-free by investing in certain sectors, which are called begünstigte Wirtschaftsgüter (eng.: “preferential economic assets”). Important note: The money must be kept invested in these sectors for at least four years.
How Much Is the Gewinnfreibetrag?
The Gewinnfreibetrag consists of the basic allowance and an investment-related allowance. The basic allowance accounts for 15% of profits up to €33,000, which means it can amount to a maximum of €4,950.
For profits over €33,000, the investment-related allowance can be requested by your tax advisor. The amount of this investment-related allowance must be invested in begünstigte Wirtschaftsgüter.
Percentages
- Basic allowance: 15% of profit up to €33,000 (claimed automatically)
- 13% for the next €145,000 of profit
- 7% for the next €178,000 of profit
- 4,5% for the next €230,000 of profit
This tax allowance cannot be applied to profits over €580,000. This means that the maximum amount of the Gewinnfreibetrag is €45,950 (As of 2024, source).
Which Kinds of Investments are begünstigte Wirtschaftsgüter?
Begünstigte Wirtschaftsgüter are also often called §14-investments. In most cases, they are investment funds based on bonds, which pose a higher risk in the current economic situation.
Apart from this, tangible assets, like buildings, can also count as §14-investments. Experience shows that tangible assets offer more security than monetary assets.
