Austria Inheritance and Gift Tax Guide (Abolished 2008)

Austria abolished its inheritance tax (Erbschaftssteuer) and gift tax (Schenkungssteuer) on August 1, 2008. Since then, there is no tax on inheritances or lifetime gifts in Austria. The only tax exposure arises when the beneficiary later sells inherited assets — income tax on realised gains may apply. This makes Austria one of the most favourable European jurisdictions for inheritance and gift planning. All amounts in EUR (de-AT locale).

The abolition of inheritance and gift tax was enacted by the Budget Begleitgesetz 2007 and took effect on August 1, 2008, retroactively invalidating the Erbschafts- und Schenkungssteuergesetz (ErbStG) 1955. The abolition was prompted by a constitutional court ruling (VfGH 2007) that found the tax rates (up to 60%) and the outdated valuation system (Einheitswerte) unconstitutional. For related reading, see our Wealth Tax Guide → and Capital Gains Guide →.

The 2008 Abolition in Detail

Constitutional court ruling (VfGH 2007): The Austrian Constitutional Court (Verfassungsgerichtshof) ruled that the inheritance and gift tax law was unconstitutional. The key issue was the valuation method — the law used different valuation bases for different asset types (Einheitswerte for real estate vs. market values for financial assets), violating the principle of equal treatment. The court gave the legislature until July 31, 2008, to fix the law. Instead of amending it, the government chose to abolish the tax entirely.
Effective date: The tax was abolished for all inheritances and gifts made after July 31, 2008. For estates of persons who died before that date, the old law continued to apply. The abolition was comprehensive — there is no inheritance tax, no gift tax, and no generation-skipping transfer tax. There is also no concept of a deemed gift (Schenkung auf den Todesfall) for tax purposes.
No replacement tax: Unlike some countries that replaced inheritance tax with a different regime (e.g., income tax on inheritances), Austria did not introduce any replacement. There is no estate tax, no inheritance tax, and no gift tax. The only tax exposure is the universal income tax on asset transfers (described below).

Current Situation — Income Tax on Realised Gains

No tax on the inheritance or gift itself: Receiving an inheritance or gift is not a taxable event. The beneficiary receives the assets at the deceased's/donor's tax book value (the so-called "footstep principle" or Fußstapfenprinzip — the beneficiary steps into the tax position of the deceased/donor).
Income tax on later sale — the universal approach: When the beneficiary sells inherited assets, capital gains tax (KESt) or income tax applies on the full gain from the original acquisition by the deceased/donor. The beneficiary cannot use a step-up in basis (unlike the US, where inherited assets receive a basis equal to the fair market value at the date of death). Instead, the beneficiary inherits the original cost basis of the deceased/donor. This means significant latent tax liabilities can exist, especially for assets held for a long time with low acquisition costs (shares, real estate, businesses).
Practical examples: (a) Shares purchased by the deceased in 1995 for €10,000, worth €100,000 at death. The beneficiary inherits them tax-free. If the beneficiary sells them later for €100,000, KESt at 27.5% is due on the gain of €90,000 = €24,750. (b) Real estate purchased in 2000 for €200,000, worth €500,000 at inheritance. If the beneficiary sells within 10 years, ImmoESt at 30% on €300,000 gain = €90,000. Outside the 10-year period, no tax is due on the real estate gain (private holding).
Real estate and the 10-year holding period: For real estate inherited by the beneficiary, the holding period of the deceased/donor is added to the beneficiary's holding period. If the deceased held the property for more than 10 years before death, and the beneficiary sells it after any additional period, the total holding period exceeds 10 years — no ImmoESt is due. This is a significant advantage of the Austrian inheritance system for real estate.

Notification and Compliance

Meldeverordnung (notification requirement): Even though no tax is due, gifts and inheritances must be reported to the Finanzamt if they involve real estate, businesses, or shares in a corporation (GmbH, AG) or partnership. The notification is filed through FinanzOnline using Form E 1 (for gifts) or Form E 2 (for inheritances). The notification is for information purposes only — no tax assessment is issued.
Exemptions from notification: Gifts of cash, movable personal property (household goods, cars, jewellery), and bank accounts below certain thresholds generally do not need to be reported. However, if the total value of gifts from the same donor within 5 years exceeds €50,000, notification is required.
Real estate register (Grundbuch) implications: When real estate is transferred by way of gift or inheritance, the notification must be submitted to the Finanzamt before the Grundbuch entry can be made. The notary (Notar) or lawyer handling the transfer will typically file the notification. The Grundbuch entry itself incurs a registration fee (Eintragungsgebühr) of approximately 1.1% of the assessed value — this is not a tax but a court fee.
Grunderwerbsteuer exemption: As noted in our Property Tax Guide →, real estate transfers by inheritance or gift are exempt from Grunderwerbsteuer. This is a direct result of the 2008 abolition — since there is no inheritance/gift tax, the related GrESt exemption was introduced to avoid double taxation.