Austria scraps inheritance tax on August 1

Austria will scrap its inheritance tax on August 1, after the constitutional court ruled last year that there was a discrepancy between duties on inherited wealth and inherited property.

The new rules, which enter into force on Friday after the ruling conservatives – in power with the Social Democrats – decided against amending the legislation, will represent an estimated loss of about €100 million (Dh575 million) to the federal budget, according to the finance ministry.

As of August 1, individuals and families will no longer have to pay a duty on inherited wealth.

But they will have to declare any inheritance or donations from family members to the finance ministry if they amount to €50,000 or more over five years.

In the case of bequests from non-family members, the same rule will apply to total donations of €15,000 euros.

The procedure can be completed with a simple estimate of the value of the donation, without notarised documents, and notification will be possible over the ministry's website.

But heirs will have one year to make a declaration or they may face a fine amounting to 10 per cent of their inheritance, according to the ministry.

Meanwhile, estate taxes will remain in force.

Taxes on donations to private foundations will also be halved to 2.5 per cent, from 5 per cent at present.

Vice-Chancellor and Finance Minister Wilhelm Molterer has estimated the new rules could deprive the government of €100 million in revenue.

Austria was already one of the countries with the lowest inheritance taxes in the OECD, with 1.4 per cent of its taxes coming from inheritances and donations.

This compared to an average 5.5 per cent in the 15 pre-2004 European Union members. No figure was available for the 25-member current bloc.