New rules for small businesses in Austria from 2025

Vienna, 20th March 2025

Significant changes to the rules for small businesses in Austria came into force on 1 January 2025, which particularly benefit the self-employed and small companies. The aim of this reform is to simplify the tax framework and strengthen the domestic market.

The small business regulation is a tax relief under which companies whose sales do not exceed a certain limit are exempt from VAT. It is not possible to deduct input tax under the small business regulation.

With the reform, the turnover limit for the application of the small business regulation has now been increased to 55,000 euros per year. Previously, this limit was 35,000 euros. In addition, the option of maintaining the tax exemption even if the turnover limit of 55,000 euros is exceeded by up to 10 percent in the current year has been introduced. These changes mean that more companies now have the opportunity to benefit from tax exemption. This leads to a noticeable reduction in administrative costs for companies, as they do not have to collect or pay VAT.

For growth-oriented companies that are planning investments or have high input tax amounts, the input tax deduction can often be more advantageous than the VAT exemption under the small business regulation. In view of this, it is now also possible to waive the small business regulation and switch to standard taxation.

As a result of the reform, companies based in other EU member states can only request the small business regulation if they meet the following requirement: their total turnover must not exceed €100,000 in both the previous year and the current financial year. In addition, the turnover in Austria must not exceed a maximum of 55,000 euros per year in order to be able to claim the cross-border application of the small business regulation and thus the VAT exemption. This change is aimed at harmonising the competitive conditions between domestic and foreign companies.

Despite the increase in the turnover limit, some administrative obligations remain. For example, companies still have to report their turnover annually. If the turnover limit is exceeded, companies are obliged to react and make the necessary tax adjustments within 15 working days.

The reform of the small business regulation from 2025 marks a significant step towards tax relief for many small businesses and at the same time strengthens competition within the EU. Nevertheless, it is essential for entrepreneurs to familiarise themselves with the new provisions in order to make informed decisions and to make the best possible use of the potential offered by the reform.

Authors: Kristina Maria Steflitsch, Johannes Zink, hba Rechtsanwälte GmbH, Vienna, Austria