Contributions of Real Property to Partnerships

Since the introduction of the Real Estate Income Tax (ImmoESt) in 2012, the tax authorities have assessed contributions to partnerships as follows: It must be determined to what extent the contributor is economically participating in the partnership after the contribution ("equity ratio"). The participation of the other partners is referred to as the "third-party ratio."

The transfer of an asset to the partnership constitutes a tax-neutral contribution only to the extent of the equity ratio. To the extent of the third-party ratio, the transaction is considered a taxable transaction (barter).

In the case of contributing real estate from private assets, the portion corresponding to the third-party ratio is treated as a taxable real estate sale; thus, the preferential treatment as "old assets" (Altvermögen) is lost to that extent (if previously applicable).

With the 2023 Tax Amendment Act (AbgÄG 2023), this practice was codified into law (effective from July 21, 2023). The following consequences arise:

Partner sells property from private assets to a partnership

To the extent of the third-party ratio, a taxable sale is deemed to have occurred.

To the extent of the equity ratio, the contribution remains tax-neutral.

Partner contributes property from private assets in return for an increase in their variable capital account

Again, generally, a taxable sale is assumed to the extent of the third-party ratio.

Only the equity ratio portion remains a tax-neutral contribution.

Special case:

If the co-partners are close relatives of the contributing partner and the contribution results in an increase of all partners’ variable capital accounts proportionally to their substantive participation, the transfer of the third-party ratio is considered a gift (rather than a sale) according to the Income Tax Guidelines.

In this case, the entire contribution is tax-neutral.

Partner contributes property from private assets in return for an increase in their partnership interest (increase of the fixed capital account)

To the extent of the third-party ratio, a taxable sale (deemed as a barter transaction) is assumed.The fair market value of the third-party portion of the contributed asset is regarded as consideration.To the extent of the equity ratio, a tax-neutral contribution occurs.

This transaction can also be structured as a merger under Article IV of the Reorganization Tax Act (UmgrStG).

Note: § 32 (3) of the Austrian Income Tax Act (EStG) generally requires, with regard to the equity ratio of contributed assets, that measures be taken to ensure that no transfer of hidden reserves — and thus no shifting of the tax burden to other partners — occurs.Such precautionary measures can, for example, be implemented through the preparation of a supplementary balance sheet or by documenting and allocating the hidden reserves appropriately.However, failure to meet this precautionary requirement does not result in the disclosure and immediate taxation of the hidden reserves. It merely constitutes a defect in the proper keeping of accounts.

Please note:
This is the translation of the article "Einlagen von Grundstücken in Personengesellschaften" dated December 15, 2023. The legal provisions as of December 15, 2023 apply. This article does not reflect any legal amendments made after that date.

The English translation was generated automatically. While we strive for quality, the German version remains the authoritative reference in case of any uncertainties.

Managing Director | Steuerberater