Tax Advantages for Entrepreneurs

 

In Austria, entrepreneurs can reduce their assessment basis and therefore the income tax they need to pay by making use of the Gewinnfreibetrag (eng. tax allowance for profits). It can be deducted from profit after comparing income to expenses as a kind of fictional expense.

 

The Gewinnfreibetrag is therefore a part of profit that is made tax-free by investing in certain sectors, which are called begünstigte Wirtschaftsgüter (eng.: “preferential economic assets”). Important note: The money must be kept invested in these sectors for at least four years.

 

 

How Much Is the Gewinnfreibetrag?

 

The basic allowance (= Grundfreibetrag) is automatically taken into account by your tax advisor. In addition to that, you can make an investment, which reduces your yearly profit accordingly. 

 

 

You can use this calculation tool created by the Austrian Federal Ministry of Finance to calculate your tax allowance for profits.

 

As an entrepreneur, you are often under time pressure at the end of the year to make an investment as quickly as possible to profit from this tax effect. In such cases, it might feel like you don't have the time to pay attention to the quality of the investment. Our recommendation is: Don't just go for the first product that is recommended to you, but pay attention to the quality of the investment. The goal is not only to be able to write off the amount invested, but also to receive a return on investment. It might even be the case that after four years you decide against taking your money out of the investment. 

 

 

Which Kinds of Investments are begünstigte Wirtschaftsgüter?

 

Begünstigte Wirtschaftsgüter are also often called §14-investments. In most cases, they are investment funds based on bonds, which pose a higher risk in the current economic situation.

 

Apart from this, tangible assets, like buildings, can also count as §14-investments. Experience shows that tangible assets offer more security than monetary assets.