Government program 2025 – 2029 published! (Part 1 - Tax)

Overview

As of March 3, 2025, the coalition between the ÖVP, SPÖ, and NEOS has been inaugurated. The three coalition parties presented their joint government program on February 27, 2025. Below, we provide an overview of selected tax-related changes found in the published government program in the chapter on Taxes/Finances as well as in other sections.

Tax policies aim at improving efficiency, simplification, and reducing bureaucracy, while also creating tax incentives to strengthen the economy and implementing budgetary measures.

The following sections present selected key points from the government program regarding taxation and corporate law.

Income Tax Law

A comprehensive package of measures is planned to simplify the Income Tax Act (new codification), payroll accounting, and employee taxation (e.g., review of assessment allowances, income-related lump-sum expenses, and reform of extraordinary expenses).

• To incentivize performance and increase working hours, overtime and bonuses will receive tax benefits starting in 2027 (subject to budgetary constraints).
• From January 1, 2026, new regulations for supplementary income for retirees will apply, including an exemption from social security contributions and a final tax rate of 25% on additional earnings. Employers will only need to pay half of the pension and health insurance contributions.
• For 2025 and 2026, an improved tax-free employee bonus of up to EUR 1,000 will be introduced, with a possible extension based on evaluation.
• The basic flat-rate tax, including input tax allowance, will increase to EUR 320,000 and 13.5% in 2025, and to EUR 420,000 and 15% in 2026.
• From 2027, the (tax-related) luxury threshold for vehicles will rise to EUR 55,000, with a further increase towards EUR 65,000 being considered (subject to budgetary constraints).
• Special depreciation rules will be evaluated, focusing on actual asset usage periods, and minimizing potential abuse, with particular attention to equipment and building renovation investments.
• The basic exemption for profit (profit exemption allowance) will increase to 15% on profits up to EUR 50,000 from January 1, 2027 (previously 15% on profits up to EUR 33,000), subject to budgetary feasibility. 
• The top income tax rate of 55% will be extended for another four years.
• One-third of the inflation adjustment for the income tax tariff (cold progression) will be suspended.
• The current tax-free allowance of EUR 620 for special payments (13th and 14th salaries) will be increased.
• The tax-free amount for employer contributions to employees (e.g., corporate events, tax-free vouchers) will be evaluated.
• For business transfers, the tax-free allowance on capital gains will increase from EUR 7,300 to EUR 45,000 from January 1, 2027, and the employment ban for the half-tax rate will be abolished.
• Real estate capital gains tax will be adjusted in 2025 to more effectively tax rezoning profits, affecting all legal and individuals, including associations, public corporations, and local authorities.
• To improve competitiveness, the intention is to reduce labor-related costs (energy costs, bureaucracy costs, and wage-related costs). Initial steps will include lowering labor-related costs by 2027, with further gradual reductions of the FLAF (family burden compensation fund) depending on budgetary developments. 

Efficiency Improvements and Simplifications in the Tax System

• The government will provide sufficient resources (staff, digitization, AI) and improve working and training conditions in the financial administration.
• The obligation to issue receipts for amounts up to EUR 35 will be abolished, along with simplifications for purchase registers, goods receipt books, and "cold hands" regulations.
• The EU-FASTER directive will be swiftly implemented to simplify withholding tax refunds in cross-border cases.
• Coordinated and legally secure framework conditions for cross-border home offices will be promoted internationally (OECD, EU).
• At the EU level, efforts will be made to bring forward the abolition of the customs exemption limit to ensure fair competition.

Capital Market and Tax Adjustments

• Employee participation programs will be further enhanced.
• Options for financial planning for young people, including securities (e.g., ETF savings plans), will be examined.
• The social partner agreement to strengthen company pensions (particularly the general pension fund contract) will be implemented promptly. 
• The annual tax-free allowance for employer contributions to private pensions will be increased (subject to budget feasibility).

Subsidy system

• A subsidy task force will be established, and existing measures will be evaluated for effectiveness and precision. New subsidies will generally be introduced on a temporary basis, with extensions considered based on evaluation results.
• Immediate subsidy reform measures in the government package include:
  • Reductions in subsidies and lower subsidy rates.
  • The climate bonus will be abolished, with partial compensation for commuters in the form of a tax credit starting January 1, 2026.
  • The existing education leave system (“Bildungskarenz”) will be abolished, replaced by a more targeted succession regulation from January 1, 2026.
• The craftsman’s bonus will continue in 2025, with an evaluation scheduled. 

Location contributions of the banks and energy industry

• The stability levy (bank levy) will be adjusted with the aim of achieving additional levies of EUR 500 million in 2025 and 2026 and EUR 200 million in subsequent years.
• The energy crisis contribution for electricity and fossil energy will be extended with the aim of generating EUR 200 million of contributions in 2025 and subsequent years.

Gambling area

In the gambling sector, measures are to be taken in the coming years to successively increase the tax revenues to around EUR 240 million in 2031.

• For 2025, the additional tax revenues from the increase in the betting fee and the administrative fee is expected to amount to EUR 50 million.
• From 1 January 2016, betting fees are to rise towards 5%, with a first increase as early as 2025.
• The gambling tax is to be increased by 10%. 

Corporate Law (UGB) Amendments

• The option to revalue land to fair market value while preserving creditor protection will be examined.
• Start-ups will be supported by allowing the capitalization of self-created intangible assets, with creditor protection ensured through distribution restrictions or other appropriate measures.

Real estate transfer tax

• From July 1, 2025, stricter rules will apply to share deals, potentially generating an additional EUR 200 million in real estate transfer tax (e.g., by consolidating related purchasers or increasing tax rates, as reported by media).
• The abolition of state-related fees and real estate transfer tax for first-time home buyers will be considered.

Private foundations

• The foundation entrance tax and equivalent tax will be increased to 3.5% (currently 2.5%), and the interim tax to 27.5% (currently 25%). 

Anti-fraud measures

• The VAT deduction for luxury real estate will be abolished, and the reverse-charge system will be extended to properties.
• Exit taxation regulations will be more effectively designed.
• New data sources, such as automatic information exchange on crypto accounts, will be effectively utilized.

Other adjustments and reforms in the tax system

• Adjustments will be made to the digital tax, with potential extensions to other platforms.
• The mileage allowance for bicycles and motorcycles will be reduced to 25 cents/km.
• For small trucks (registration class "N1"), an exemption from the NoVA will be introduced from 1.7.2025. 
• The zero VAT rate for PV systems will be abolished prematurely.
• From 2026, feminine hygiene products and related products will be exempt from VAT.
• The motor-related insurance tax is also to be extended to electric vehicles.
• The tobacco tax will be increased and extended to alternative products.
• There will be a re-valorization of the federal fees.
• Compulsory health insurance for marginal employment will be implemented.
• Health insurance contributions for pensioners art to be raised to 6% from 01.06.2025. This is to be cushioned by freezing the prescription fee in 2026 and lowering the pharmaceutical costs to 1.5% of net income.
• The tax regulations on gratuity lump sums including TRONC systems are to be evaluated and made more practical.
• The rules for benefits in kind for employee housing, as well as tax advantages for childcare services and employee discounts, will be reviewed and improved for practical use.
• The agricultural diesel scheme will continue in accordance with the budgetary stipulations, whereby a new regulation via NEHG or MÖST is to be examined. 

Art and culture

• The tax incentives for greater support for art and culture by private individuals and companies are to be examined. 
  • There is the intention to revise VAT for the art sector and art sales.
  • Tax incentives are to be created for art acquisition, such as tax deductibility.
  • The VAT on artworks, tickets and books will be reduced in line with VAT rates in other EU countries to avoid competitive disadvantages.
• The VAT regulations for the temporary use of buildings by non-profit art and cultural associations will be reviewed.
• The tax deductibility of monument preservation measures will be examined, while maintaining existing funding channels.  

Conclusion

The government program outlines the key points of the planned adjustments in the tax area of the coalition partners. The legislative implementation of the government program remains to be seen, but concrete draft laws are expected before the summer. We will inform on specific legislative initiatives as soon as they are available.