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Effective January 1, 2026, Austria increased the low-taxation threshold for corporate income tax purposes from 10% to 15% for interest and royalty expense deductibility, and from 12.5% to 15% for profit distributions from international participations. Additionally, effective July 1, 2026, a new option allows taxpayers to reduce motor vehicle registration tax (NoVA) at the time of vehicle registration, alongside the existing reimbursement system for vehicles transferred abroad after temporary use (maximum 48 months). The legislation also implements new crypto asset reporting requirements, extends EU mandatory disclosure rules aligned with CJEU rulings, and codifies OECD Pillar Two simplifications including new safe harbors effective 2026-2027.
Effective January 1, 2026, Austria has increased the low-taxation threshold for corporate income tax purposes from 10% to 15% for interest and royalty expense deductibility, and from 12.5% to 15% for profit distributions from international participations. Additionally, starting July 1, 2026, a new option allows taxpayers to reduce motor vehicle registration tax (NoVA) at the time of vehicle registration, alongside the existing reimbursement system for vehicles transferred abroad after temporary use.
Who is affected
These changes affect Austrian corporations that pay interest or royalty expenses to affiliated foreign corporations, as well as Austrian companies receiving profit distributions from international intercompany participations. The motor vehicle registration tax changes apply to all taxpayers who register vehicles in Austria and subsequently transfer or supply them abroad within 48 months of initial registration. Companies with cross-border operations and international group structures will need to reassess their tax planning and compliance procedures.
What's changing
Corporate income tax low-taxation thresholds:
| Rule | Previous threshold | New threshold | Effective date |
|---|---|---|---|
| Interest and royalty expense deductibility | 10% | 15% | January 1, 2026 |
| Profit distributions from international participations | 12.5% | 15% | Fiscal years beginning after December 31, 2025 |
Interest and royalty expenses paid by Austrian corporations to affiliated foreign corporations are now non-deductible if the foreign recipient's tax rate is below 15%. For profit distributions from international intercompany participations, low taxation now means a foreign tax burden below 15%.
Motor vehicle registration tax (NoVA):
The existing NoVA reimbursement system remains in place, but a new option allows taxpayers to reduce NoVA at the time of vehicle registration. Under revised Section 12a of the Motor Vehicle Registration Tax Act, NoVA paid in the past may be reimbursed if the vehicle is transferred or supplied abroad after temporary use in Austria (maximum 48 months from initial registration) and no reduced NoVA was paid at registration. The vehicle must be deregistered in Austria at the time of application. Reimbursement is based on fair market value at deregistration; if the reimbursement exceeds EUR 5,000, an expert opinion is required. Applications must be submitted within five years of the reimbursement event.
What NEO partners and clients should do
- Review intercompany agreements by March 31, 2026: Assess all interest, royalty, and profit distribution arrangements with foreign affiliates to determine if the new 15% threshold affects deductibility or tax treatment.
- Update transfer pricing documentation: Ensure documentation reflects the new low-taxation thresholds for fiscal years beginning after December 31, 2025.
- Evaluate NoVA planning for vehicle registrations after July 1, 2026: Determine whether to use the new reduction option at registration or the existing reimbursement system for vehicles that may be transferred abroad.
- Implement crypto asset reporting procedures by January 1, 2026: Ensure compliance with the new Crypto Mandatory Reporting Act Implementation Regulation for documentation and electronic transmission requirements.
