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possibly be used to avoid real estate transfer tax. The share
deal, however, may entail higher costs for the due diligence of
the target company and a broader range of potential risks.
Foreign acquisition/acquisition of agricultural land
• The possibility to transfer real property is limited by the
Austrian Land Transfer Acts regulating the transfer of
agricultural and forestry land and the acquisition of real estate
by foreigners or by companies where a foreigner is a majority
shareholder. EU/EEA citi-zens are treated equally to Austrian
citizens. For others, however, the acquisition of real property
is subject to approval by the local land transfer authority. The
foreigner must prove an economic, social or political interest
for Austria in him acquiring the real estate (the most common
interest being a job creating investment in Austria).
Acquisition process
The typical acquisition structure comprises the following steps:
• Usually the acquisition process commences with the
signature of a preliminary agreement (letter of intent, heads
of terms or memorandum of understanding) fixing the
key parameters of the transaction and granting the buyer
exclusivity for a certain period of time. In general, such
preliminary agreements are – with the exception of provisions
regarding confidentiality and exclusivity – non binding. They
are usually executed in simple written form.
• As a second step the buyer often performs a legal (possibly
also tax and technical) due diligence by reviewing the
documentation disclosed by the seller in a virtual or physical
data room.
• Based on the results of the due diligence exercise, the parties
are drafting and negotiating the purchase contract.
• Once an agreement is reached between the parties, the
contract is signed in compliance with the applicable formal
requirements (see below). Upon fulfilment of all conditions
precedent (if any), the transaction is closed.
Formalities
• The transfer of real properties in Austria via asset deal is
subject to a two-tier process: (i) the contract creating the
right (referred to as title) and (ii) the registration in the land
registry. The land registry is operated and administered by
the Austrian district courts. It is available to the public and
its information can be accessed online. It is only following
registration that the purchaser becomes legal owner of the
property. As long as a legal transaction involving real estate
is not registered, it is not effective to third parties. The title
needs to be certified by a notary public or a district court and
has to contain the seller’s formal approval to the registration
of the buyer as new owner of the property in the land registry
(Aufsandungserklärung).
• In case of the sale of shares in a property holding limited liability
company (Gesellschaft mit beschränkter Haftung – GmbH)
notarisation of the signatures to the agreement is not sufficient.
The agreement must be in the form of a notarial deed.
COMMERCIAL LEASES
• Lease agreements for the use of commercial premises
are governed by the Austrian Civil Code and the Austrian
Tenancy Act (Mietrechtsgesetz, MRG) which – depending on
the type of leased premise – is applicable in full, partly (e.g.
for business parks or premises located in a building newly
established without public funds based on a building permit
issued after 30 June 1953) or not at all (warehouses, holiday
homes, parking garages, etc.). The Austrian Civil Code applies
when the MRG is not applicable. The MRG is highly restrictive
and mainly intends to protect the tenant’s interests. Most
of its provisions are mandatory and – with few exceptions –
cannot be waived or otherwise modified to the disadvantage
of the lessee.
–– Length of term/restrictions on termination: Lease
agreements can be concluded for an indefinite or for a
definite term. Under the MRG (partly or fully applicable),
lease agreements concluded for an indefinite term can
only be terminated by the landlord for good cause. The
lessee, on the other hand, may terminate such lease
agreement at any time without specific reason.
–– Rent increase: Most lease agreements provide for an
index, usually in accordance with CPI. Furthermore,
within the full scope of the MRG the landlord of business
premises is entitled to increase the rent to market level in
cases of substantial changes in the tenant’s enterprise or
ownership structure.
–– Right to sublease: The tenant is entitled to sublet or assign
unless otherwise agreed.
–– Maintenance and repair: Pursuant to the MRG, the tenant
is obliged to provide and pay for any maintenance works
and repairs except for maintenance/repair works that
become necessary due to serious damages affecting the
substance of the building. Furthermore, unless agreed
otherwise, the Austrian Civil Code provides for the
landlord to keep the leased premises in good condition.
However, it is very common to exclude this obligation of
the landlord or to limit it to structural damage.
• There is no obligation to register lease agreements in the land
registry. In case of such registration, the lease right becomes a
right in rem and is thus valid vis-à-vis third parties. According
to section 1120 of the Austrian Civil Code, when a property
is sold, any lease agreements automatically pass over to
the purchaser who becomes the new lessor. The new lessor
however is not bound by the provisions regarding term and
termination or by any unusual provisions (unless he knew or
should have known them). Thus, the lease agreement runs the
risk of being terminated earlier in the event of a sale.
• A written lease agreement triggers stamp duty of 1 % of the
rent over the whole term of the lease (max 18 years) or over
the three years’ rent (in case of a lease for an indefinite term).
TAX
• The transfer of ownership in real properties triggers real
estate transfer tax (Grunderwerbssteuer) in the amount of
(generally) 3.5 %. Furthermore, a registration fee of 1.1 % for
the registration in the land registry accrues. The consideration
for the real property (purchase price) serves as a tax base.
Both the seller and the purchaser are jointly and severally
liable towards the tax and revenue office for payment of the
transfer tax and the registration fee, irrespective of what is
stated in the transfer agreement.
• Sale proceeds on real estate within the meaning of the VAT
Act 1994 are exempt from VAT. However, entrepreneurs can
treat transactions concerning real estate as taxable (opting-
in). If so, input taxes are deductible. VAT is paid by the buyer
to the seller, and the seller must pay the VAT to the tax
authority. The current VAT rate is 20% of the pur-chase price.
12 Investors Guide to Europe 2015