Germany and Austria announce tax regulation changes for 2027

New tax regulations are set to take effect in early 2027, impacting both public institutions in Germany and business owners in Austria.

In Germany, the transitional period for new VAT rules regarding public law legal entities will end on December 31, 2026. Starting January 1, 2027, the revised system under Section 2b of the VAT Act will apply to federal, state, and municipal authorities, as well as public foundations, chambers, and guilds. Under these rules, public entities will not be considered entrepreneurs when performing tasks within the scope of public authority, provided no significant market distortions occur. This change implements an EU directive and requires administrations to audit their activities by the end of 2026.

In Austria, a new tax amendment law is expected to be passed in December to provide relief for older entrepreneurs selling their businesses. Starting January 1, 2027, business owners over the age of 60 will be eligible for a half-rate income tax on profits from business sales or closures, even if they continue to work. Previously, this benefit required the near-total cessation of professional activity. The measure aims to retain experience and productivity in the labor market.