This content is from: Local Insights


A draft government bill for a new act on real estate investment funds (Immobilien-Investmentfondsgesetz) aims to establish a new type of investment fund in Austria, namely, the real estate investment fund.

There has been a legal basis for investment funds in Austria since 1963, although only with respect to securities. Due to foreign real estate investment funds entering the Austrian market and Austrian investors increasingly demanding investment products suitable as pension funds and secure long term investment opportunities in real property, there was a definite need to establish a legal framework for domestic real estate investment funds.

A real estate investment fund is a separate estate consisting predominantly of real estate, each investor having a pro rata interest in the property, represented by investment certificates. The assets of a real estate investment fund are owned by the real estate investment company, which holds them in trust for the investor.

The value of an interest is calculated by dividing the aggregate value of the real estate investment fund, including the proceeds, by the number of shares. The depository bank ascertains the aggregate value. Two independent experts evaluate the real estate at least annually.

Only real estate investment companies may administer real estate investment funds. They are deemed banks and are thus subject to the regulations of the Banking Act and to the supervision of the Financial Market Supervision Authority (Finanzmarktaufsichtsbehörde).

For the protection of investors the management of a real estate investment company has to appoint a depository bank, which issues and redeems the investment certificates and administers the assets and the accounts of the real estate investment funds. Furthermore, the real estate investment company may buy, sell or encumber real estate and interests in real estate companies only with the consent of the depository bank. Any disposal without such consent is not effective towards investors.

The bill stipulates a minimum diversification of at least ten properties per funds. The value of a property must not exceed 20% of the value of the funds at the time of acquisition.

The real estate investment fund must distribute its profits unless the fund's articles provide for retention of all or part of the profits. When required by the investor his share in the real estate investment funds is to be redeemed against return of the investment certificate, whereby the redemption price is determined by the value of the interest ascertained by the depository bank.

In principle, tax treatment of a real estate investment fund is roughly similar to tax treatment of security investment funds. The fund itself is not itself subject to tax but is treated as transparent. There is a 25 % withholding tax for distributions, which is final for private investors. Retained earnings are deemed distributed and also trigger withholding tax. Taxable earnings include revaluation gains on the basis of the annual revaluation. Foreign income tax is credited to domestic income tax. Capital gains taxation is the same as for other securities, ie they are exempt if the securities are held by a private investor for more than one year. The transfer of investment certificates is exempt from real estate transfer tax.

The bill is expected to be enacted by July 2002.

Gerhard Rettenbacher and Peter Simo

© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.

Instant access to all of our content. Membership Options | 30 Day Trial