Buyers Guide: How to buy a ski property in the Austrian Alps

Buying a ski chalet or apartment in the Austrian Alps is a luxury lifestyle choice and an exciting time for you and your family and friends. It also requires knowledge of the intricacies of the market, purchasing process and costs involved and we are here to guide you all of the way.

Our comprehensive Buyer’s Guide on how to buy a ski property in the Austrian Alps will give you an insight to the different buying scenarios, taxation & VAT benefits, rental structures and a whole range of essential information you will need before buying your dream home in the Austrian Alps.

Here is our Buyers Guide which you can also download at the bottom of the page:

Who Can Buy?

Austria has been a member of the EU since 1995. Although EU-citizens are allowed to buy and live permanently in any house they wish in Austria, these rules do not apply when it comes to buying a holiday home. Austria is divided into nine self-governing Federal Provinces and each of these Provinces has their own rules when it comes to buying a holiday home:

EU-Citizens:

EU citizens can buy a holiday property in any of Austria’s nine Provinces and the process is very straightforward.

If you own an EU company it is also possible to buy in the company’s name.

Non EU-Citizens:

There are two ways a non-EU citizen can buy in Austria: Firstly, If you want to buy in your own name then you would have to buy a property with a ‘second home’ status. It is rare to find property of this type, but we have some very exciting projects with this rare status which we can offer you – please contact us and we can send them to you!

Alternatively, you can buy in the name of an EU-company. In this way you can buy any property in Austria and there is no requirement for the shareholder to be an EU citizen.

Purchase Procedure

The notary, who is a semi-public official, will act on behalf of both the purchaser and the vendor, he will draw up the deed of sale and all the documents required to transfer the legal ownership. The notary has a duty to protect the interests of both parties. When buying a property, both the purchaser and the vendor are required to attend the notary’s office to sign the deed of sale in his presence. Alternatively both parties can sign a power of attorney authorising one of the secretaries working in the notary’s office to sign the sales deed on their behalf. In this case the buyer will receive from the notary a copy of the deed of sale in German and a professional English translation along with a power of attorney (also in English) which authorises the notary’s secretary to sign on their behalf.

The buyer will need to take the power of attorney to either a Notary Public (not a solicitor) in their country of residence to have their signature witnessed and (in the UK) the Notary Public will send the document off to the foreign office to have it ‘legalised’. Alternatively, documents can be signed and legalised at the same time if taken to the Austrian Embassy. If preferred, buyers can hop on a plane and sign in person at the notary’s office!

 

What are the Purchase Costs?

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Purchase costs for buying a property in Austria work out about 6.6% of the gross purchase price. The purchaser will be required to pay the notary fees after the contract of sale has been signed.

Fees are calculated as follows:
Purchase Tax ‘Stamp Duty’ – 3.5% of the gross price
Registration in the Land Registry – 1.1% of gross price
Notary’s fees – between 1.5 and 2% of gross price
Court costs, administration fees – approx. 150 euros

Financing your Purchase

Austrian banks will fund up to 60% of the purchase price and usually the loan period will be between 15 and 25 years. Some banks charge a set-up fee and this is usually around 2% of the value of the loan. They will also charge an appraisal fee of 0.5% and you will need to pay the notary a fee of 1.5% of the amount of the mortgage to register the mortgage in the land registry. Variable interest rates are currently at around 3% and banks can also offer one year fixed rate or five year fixed mortgages at very competitive rates. We have several banks we can recommend. Please contact us for further details.

Stage Payments

New build properties are paid for in stages and all payments are made through the notary who acts as trustee for your money. The instalments are made into a client account and the payments for each stage are only released from the client account when an independent surveyor has inspected each stage and officially signed it off with the notary. This gives everyone security as the developer knows not to start building until the client’s monies are in the notary’s client account and likewise, buyers know that no monies will leave the account until works have been completed.

Purchase payments will typically be something like this:
15% at start of building works
35% on completion of the shell and roof
20% on completion of plumbing and electrical installations
12% on completion of the façade & windows
12% on completion of the property
4% on hand over of keys
2% after three years (or after developer providing a bank guarantee or insurance to the purchaser)

Construction Schedule

Construction in the Alps takes place in the summer months, as during the winter months the ground is frozen and covered in snow so construction is put on hold. Because of this, Alpine developers optimise their build schedule and usually build and complete an apartment building or several chalets in one summer season. The advantage to buyers is that during the winter they can sign their purchase contract to secure their property but will not have to start making stage payments until construction starts in the spring.

Building Guarantees

All new build Austrian property are covered by a 30 year building guarantee against all building defects, and developers will usually guarantee building fixtures for two years.

Furnishing your Property

Some of the properties we have available to buy have all the furnishings included in the price. The developers in these projects offer a ‘turn key’ service which means they provide every comfort for owners so that their property is completely ready to occupy. Where furnishings are not already included in the purchase price it is possible to purchase optional furniture packages to enable buyers to move in to their chalet with everything complete and in place. We work closely with these developers and interior designers to provide an extensive choice to suit every taste ranging from the ultra-modern to romantic traditional styles. These furniture options are extremely flexible and affordable and include everything you will need such as sofas, wardrobes, beds, cutlery, crockery, and linen etc. For more information on which properties already include the cost of furniture packages please either contact us or see individual property brochures.

Please note that although the cost of the furniture packages is included in some of the properties, for mortgage purposes this cost must be deducted as banks will not lend on furniture. Most of our chalets and apartments are built either to-order or ‘unfitted’ enabling you to personalise your property with a tailor-made finish which is included in the price. You can choose from an extensive range of kitchens, bathroom fittings, flooring, and wall tiles etc.

Running Costs

The expenses of a development of chalets or an apartment building are usually divided up proportionately between the owners, according to the size of their property. As a rough guide the running costs for a property usually work out about 3-5 euros per m2/month and this charge would cover everything apart from your own personal usage of heating and electricity. It would cover snow clearance, rubbish removal, cleaning and lighting of the communal areas, and maintenance of the gardens etc. These expenses include building insurance and local property taxes.

Investment Opportunity

Austrian property offers superb rental potential for buyers who are interested in making their chalet or apartment available to holiday-makers. Most of our buyers are keen to rent their property when they are not using it so that it can be earning an income. There are always lots of exciting things to do or see for owners and their guests in the mountains, whether it is Polo in the snow in Kitzbühel, Jazz concerts on the piste in Bad Gastein, Mozart evenings in Salzburg or simply enjoying live music in a beer garden in the summertime. We work very closely with all the Austrian alpine tourist boards to produce a twice-yearly diary of events for owners and their guests outlining the exciting things to do. For more information on this please contact us. One of the great benefits of buying in the Austrian Alps is that it offers two high-seasons in a year: winter for ski holidays and summer for hiking, cycling and swimming in the warm lakes.

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Depending on which property you buy you have two rental options. One option is using a large professionally managed tour operator who will efficiently handle all your rentals when you are not using your property and then pay you a quarterly income from the rentals as well as handle all your bookkeeping. Alternatively you can rent your property yourself with the help of a local tour operator or perhaps even make your own website to advertise your property. Whichever option you decide we have lots of contacts and advice we can offer you regarding the rental of your property. There are also plenty of dedicated management companies we can put you in touch with to deal with the hand-over of keys for your guests and the laundering and cleaning of your property when guests have departed.

Flexible Rental Choices

The tourism industry forms an important part of Austria’s economy accounting for over 15% of its GDP and as a result Austria endeavours to take good care of its guests offering exciting Alpine events virtually every week in the villages throughout the year and enjoys undoubtedly the best après-ski in the world. It is because of this important tourism industry that the Austrian government does not want owners of chalets to leave their properties empty for large parts of the year. Owners who do not live permanently in the mountains are encouraged to make sure that their property is regularly visited by holidaymakers as it is important for the infrastructure of the villages to have a good flow of tourism. It is also important for the charm and beauty of the Alpine regions that these chalets are occupied. Locals and tourists alike enjoy seeing chalets with flowers in the window-boxes in summertime and the ski pistes busy and buzzing throughout the winter. The advantage to owners is that they can benefit from their property earning an income for them when they are not using it.

The majority of properties available to overseas buyers are classified as “rental homes” as opposed to “second homes” and are therefore obliged to be available for rental when owners are not using them. Although these properties have rental obligations, many of them have the flexibility to be rented privately just through friends and family if they wish. Owners can even spend up to six months a year there. In some other projects the developer’s have made arrangements for owners to maximise their income potential and these properties are rented out through a professional tour operator so everything is taken care of for the owner. You simply need to book-out the weeks for your own private use and the rest of the time your property is being advertised and professionally rented. As an owner you can relax in the knowledge that your property is earning an income for everything is being taken care of by a dedicated management company. There can be some great tax advantages to purchasing in this way. Please see the chapter below for more details.

If you prefer not to rent your property, we are delighted to be able to offer some properties which have a rare “second home” permission. This means you can keep your property as a private residence with no obligation to rent.

Tax Advantages

Buying a “rental property” has tax benefits which could save you up to 20% on the build cost of your property. To be eligible for some or all of the VAT discount on your purchase you would be expected to rent your property professionally when you are not using it. In order to become eligible for a VAT refund on your purchase you will need to rent your property ‘professionally’ and you will need to show an overall profit over a period of 20 years. To claim back the tax you need to register for VAT (we can recommend a tax advisors to assist you with this). In some cases to claim the tax back you need to initially pay the gross price and then claim the tax back through your tax advisor which usually takes two to three months and it is possible to obtain a bridging-loan for this purpose. However, in some of the property we sell this is not necessary as the developers will have pre-arranged everything for you so you will only need to pay the net price.

Buyers have a choice either to claim back all or part of the VAT. You are permitted to claim back all the VAT, the full 20%, if you rent your property commercially and do not use it yourself. If you declare in advance that you will be using the property partly for your own private use then the amount of VAT you may reclaim depends on the ratio of personal use to rental use. If you would like further information on this subject please contact us and we will email you our specific Tax-Back Fact Sheet.

Income Tax & VAT

If you decide to take advantage of the VAT rebate and rent your property to holiday-makers you will be required to pay income tax on your rental income. Much of these taxes can be offset and there are a number of ways to reduce the tax you pay on your rental income. For example, the interest you pay on your mortgage can be written off against rental income profits and you can also write off 10% of the costs of your furniture package as depreciation against your rental income. If you rent your property to holiday-makers and pay the income tax for these rentals in Austria then there is an 11,000 euro income tax exemption per person per year, so if two people purchase a property together there is a tax free allowance of up to 22,000 euros per year. If you claim the VAT back on your purchase you will also be required to become VAT registered with the tax authorities for 20 years, but after this time you can de-register and will no longer be required to make annual tax returns. You will need to charge VAT at a rate of 10% on your rentals which can then be reclaimed each quarter upon the filing of accounts. We always recommend a choice of local tax advisors to help with your tax returns. The tax advisor will charge a one off fee to set up your registration (please contact advisors directly for prices) and annual tax returns will cost in the region of 300 – 500 euros per year.

Tourism Tax
When you rent your chalet or apartment you will need to charge your guests tourism tax for the nights they spend in your property. These rate of tax varies from resort to resort bus as a rough guide it is somewhere between 80 cents and 3 euros per night per person for each guest over the age of 14 years old

Capital Gains Tax
The housing market in Austria has been subject to a number of controls in order to keep house prices within reach of locals, especially in the tourist areas. Capital Gains Tax of 25% will apply to any profits you have made on your property (effective since April 1, 2012).

Inheritance Tax
Inheritance tax has been abolished in Austria (effective since August 1, 2008)

Useful Links

Open Tax Services

Owning property abroad not only gives rise to tax issues in that country but also in the UK. Open Tax Services can provide you with the advice and guidance to help you meet your UK tax obligations. They can help you keep your annual UK tax bill down to a minimum whilst planning to reduce any longer term taxable gain.

To learn more about how their services can benefit you please contact Peter Owen on 07740 923333 or peter.owen@opentaxservices.co.uk

 

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