Austria Abolished Inheritance Tax Over Unfair Valuations

This is an English translation of our Japanese article. Rules and figures may change; the Japanese version and official sources are authoritative. For individual matters, consult a tax office or a licensed tax accountant (zeirishi).

Series: Unique Tax & Social Insurance Systems Around the World #25

Austria has no inheritance tax. It lapsed on 1 August 2008, triggered by a Constitutional Court ruling of 7 March 2007. The issue at stake was neither the tax rate nor tax revenue, but that real estate valuations had drifted far from actual market prices, so the tax owed on property of equal value differed from person to person[Austrian Constitutional Court, press release, 7 March 2007 (in German)]. In October 2026, this story gathered over 1,000 likes on X, paired with the question, "What about Japan's roadside land values and tower-condo valuations?"

Read the ruling itself, though, and it differs slightly from the popular story. The Court held that "inheritance tax itself is constitutional" and left it to the legislature to fix the valuation method. It was parliament that chose abolition. Germany, which received an unconstitutionality ruling the same year for the same reason, fixed its valuation instead of abolishing the tax. Japan is now moving to narrow the gap between valuation and market price. We trace where the three countries' paths diverged, using primary sources.

What was ruled unconstitutional: a tax base that simply tripled a 1973 valuation

Austria's inheritance and gift tax valued real estate using the "unit value (Einheitswert)." The problem was the base year for that valuation: the last nationwide assessment was 1988 for farmland and forest land, and 1973 for all other real estate, and the tax base was simply that value multiplied by a flat factor of three.

Item	Details
Ruling	7 March 2007 (inheritance tax; Case Nos. G 54/06 and others), 15 June 2007 (gift tax; G 23/07 and others)
Provision ruled unconstitutional	Sections 1(1)(1) (tax on acquisition on death) and 1(1)(2) (tax on lifetime gifts) of the Inheritance and Gift Tax Act
Reason	Multiplying a decades-old valuation by a flat factor of three does not reflect movements in land prices. The gap from market value varies by region and property, which violates the principle of equality
What the Court upheld as constitutional	Inheritance tax as a tax category itself, and the method of valuing real estate using the unit value (Einheitswert) itself
Deadline	31 July 2008. Unless the law was fixed by then, taxation would become impossible from 1 August

The Court reasoned that simply striking the valuation provision would tax real estate on the same basis as financial assets, creating a different unfairness, so it struck down the entire taxing provision instead. It then left the question of "whether to fix it" to parliament[Austrian Constitutional Court, press release on the gift tax ruling (in German)].

Why abolition was chosen: 0.24% of national revenue, and 30 people for a quarter of it

The grand coalition of the SPÖ (Social Democrats) and ÖVP (People's Party) did not bring a bill to fix the valuation, but instead one to "stop collecting the tax from 1 August 2008," which parliament passed on 6 June 2008. The two governing parties voted in favor; the Greens, FPÖ (Freedom Party) and the Alliance for the Future of Austria voted against[Austrian Parliament, legislative history of the 2008 Gift Reporting Act (in German)].

Revenue was small: in 2007, inheritance and gift tax revenue was EUR 155.2 million, just 0.24% of the country's total tax revenue of EUR 64.6952 billion[Austrian Ministry of Finance, 2007 tax revenue results (in German)].
The burden was skewed: of roughly 80,000 inheritances in 2006, 97% were under EUR 73,000, and this group paid 44% of the tax revenue. One analysis (a paper by an economic-institute researcher) found that just 30 people who inherited more than EUR 1 million accounted for about a quarter of the revenue.
The government's explanation: "Even fixing the law would not remove the obstacles to business succession, and constitutional doubts could remain"; "abolition increases the country's appeal as a location for small and medium-sized businesses"[Austrian Parliament, government bill explanatory materials (in German)].

Abolition was expected to reduce annual revenue by EUR 80 million from inheritance tax and EUR 60 million from gift tax. Three mechanisms were introduced in its place.

Mechanism since 2008	Details (current)
Real estate transfer tax (Grunderwerbsteuer)	Also applies to real estate received through inheritance or gift. Family and gratuitous transfers are taxed at graduated rates: 0.5% up to EUR 250,000, 2% on the next EUR 150,000, and 3.5% above EUR 400,000. Since 2016 the tax base has been the "land value" (a simplified formula, 71.25% of the average statistical price, or one of three appraisal methods)[Austrian Ministry of Finance, real estate transfer tax rates (in German)]
Duty to report gifts	Gifts between relatives exceeding a total of EUR 50,000 within one year, or between non-relatives exceeding a total of EUR 15,000 within five years, must be reported to the tax authority (no tax is due)
Tax on establishing a foundation	2.5% when assets are placed into a private foundation, rising to 3.5% from 2026

Result: not revived after 18 years. A February 2026 motion to revive it was also rejected

In 2023 the SPÖ proposed reviving the tax with a lifetime exemption of EUR 1 million, a 25% rate from EUR 1-5 million, and 35% from EUR 5-10 million, but it was not included in the 2025 coalition agreement among the ÖVP, SPÖ and NEOS after the 2024 general election.
On 25 February 2026, a revival motion from the Greens was rejected in the National Council. No other party supported it, and the finance minister (SPÖ) said that "if this bears fruit, it will be in the next term"[Austrian Parliament, parliamentary correspondence, 25 February 2026 (in German)].
According to the OECD, 24 member countries tax inheritance. Countries that have abolished it include Australia (1979), Canada (1972), New Zealand (1992), Sweden (2004), Austria (2008), Norway (2014) and the Czech Republic (2014). Even in countries that still tax it, revenue averages 0.5% of total tax revenue[OECD, Inheritance Taxation in OECD Countries, 2021, summary].

We cover the global picture of inheritance taxes in Comparing inheritance tax around the world.

Germany got the same ruling and "fixed it": an unconstitutionality ruling doesn't mean abolition

On 7 November 2006, the German Federal Constitutional Court ruled that the inheritance tax law violated Article 3(1) of the Basic Law (the principle of equality). The reasoning was the same as in Austria: the valuation of business assets, real estate and agricultural/forestry assets had diverged from market value, so the burden varied by asset type. The Court ordered a reform by 31 December 2008, and Germany brought valuations closer to market value through an amended law that took effect on 1 January 2009[German Federal Constitutional Court, press release, 31 January 2007 (in German)].

On 17 December 2014, the Court again found the law unconstitutional, this time because the preferential treatment of business assets was too broad, and Germany again responded with a 2016 amendment[German Federal Constitutional Court, press release, 17 December 2014 (in German)].

Three answers to the same problem: abolition, reform, and administrative rules (chart based on each country's court rulings, legislation and National Tax Agency rules)

Back to Japan: the gap splits into a "by design" part and an "uneven" part

In Japan too, inheritance tax values land not at market price but at the roadside land value (路線価). The National Tax Agency sets this each year at roughly 80% of the publicly announced land price, while the fixed-asset-tax valuation targets about 70%[National Tax Agency, 2025 roadside land values (in Japanese)]. This 20-point gap is a nationwide, uniform design, which is a different kind of issue from Austria's "tripling a 1973 valuation."

What has become a problem is the part where the gap varies from property to property.

Asset	Gap between valuation and market price (figures from primary sources)	Government response
Condominiums	Market price averages 2.34 times the valuation (2018). For about 65% of properties, the valuation was half of market price or less[National Tax Agency, actual valuation gap, 2023 (in Japanese)]	From January 2024, corrected using a "valuation divergence ratio," raising the floor to 60% of market price[National Tax Agency, valuation of residential condominium units (in Japanese)]
High-value real estate bought with borrowed funds	In a case with a purchase price of 1.387 billion yen, a circular-based valuation of 333.7 million yen and a reported tax of zero, the tax authority reassessed the value at 1.273 billion yen based on an appraisal	The Supreme Court finalized the tax authority's win on 19 April 2022[Supreme Court, ruling of 19 April 2022 (in Japanese)]. A gap between the circular valuation and market price is not enough on its own; if it creates "a disparity with other taxpayers that cannot be overlooked," Article 6 of the general provisions of the valuation circular (総則6項) allows valuation at market price
Rental real estate	The practice of buying property shortly before inheritance to lower its valuation continued	For inheritances from January 2027, rental real estate purchased within five years of death will be valued at its ordinary transaction price (80% of acquisition cost is also allowed)[Outline of the FY2026 Tax Reform (in Japanese)]
Unlisted shares	The median comparable-industry value is 27.2% of net asset value (the Board of Audit examined 1,600 cases)	The National Tax Agency set up an expert panel in April 2026 to examine how to resolve the valuation "cliff" and its arbitrariness and manipulability[National Tax Agency, Expert Panel on Valuation of Unlisted Shares, 1st meeting materials (in Japanese)]

The Supreme Court's 2022 ruling recognized the principle of equality as "a right not to be valued higher than the circular allows," while carving out an exception for cases where a purchase made for tax-saving purposes creates a disparity with other taxpayers. Article 6 has actually been applied in only 27 cases for the 2015-2024 tax years (13 involving real estate, 14 involving shares). At the same time, the associations of tax accountants and certified public accountants have called for securing "predictability for taxpayers" about when the exception will be used.

In other words, Japan is heading in the opposite direction from Austria: it is trying to preserve fairness by narrowing the gap between valuation and market price, and abolition has not even come up as an agenda item at the Government Tax Commission. The share of estates subject to inheritance tax was 10.4% for 2024, and revenue of roughly JPY 3.5 trillion a year accounts for just over 4% of the country's tax revenue. That is two orders of magnitude away from Austria's 0.24%[National Tax Agency, overview of 2024 inheritance tax filing results (in Japanese)][Ministry of Finance, explanation of FY2025 supplementary budget tax and stamp revenue (in Japanese)].

What this means for readers in Japan: the room to save tax through valuation "gaps" narrows every year

High floors of tower condominiums: for inheritances from 2024, valuations have been raised to 60% of market price, so the old "one-third valuation" no longer works. We track this mechanism in A chronicle of vanished tax-saving schemes.
Buying real estate shortly before an inheritance: from January 2027 a five-year rule applies. Even before then, if a loan and purchase are seen as made for tax-saving purposes, they fall under Article 6. We cover how wealthy households' methods work in How wealthy households plan for inheritance tax.
Shares in one's own company: a review of the valuation method is under way, and if the method changes, the tax amount could move by several times. See Taxes on acquiring and valuing unlisted shares for how it currently works.
Land: see Roadside land values 2026 for how to read them, and Fixed-asset tax revaluation 2027 for the fixed-asset-tax side.

What Austria's ruling established was the principle that "a tax whose valuation varies unevenly is not fair." What came after that — abolition or reform — was decided by each country's politics. In Japan, reforms and administrative rules have continued at a pace of about one a year. It is safer to plan inheritance measures around the rules expected two or three years from now, not the current ones.

Summary

In 2007, Austria's Constitutional Court ruled that valuing real estate by simply tripling a 1973 valuation violated the principle of equality, and gave lawmakers until 31 July 2008 to fix it
Inheritance tax itself was ruled constitutional, but parliament chose to let it lapse rather than fix it. It accounted for just 0.24% of national tax revenue, and 30 people who inherited over EUR 1 million made up about a quarter of that revenue
Even after abolition, inherited real estate is still subject to a real estate transfer tax (0.5-3.5%), and a February 2026 motion to revive the tax was also rejected
Germany, which faced an unconstitutionality ruling for the same reason, reformed its valuations in 2009 and 2016 and kept its inheritance tax
Japan is moving to narrow the gap through a 60% floor on condominium valuations (2024), the Supreme Court's Article 6 ruling (2022), and market-value assessment of rental real estate (2027). With a 10.4% taxation rate and JPY 3.5 trillion in revenue, abolition is not on the agenda in Japan

Sources

*Figures on the number of Austrian taxpayers and the distribution of the burden come from a 2007 paper by an economics researcher and have not been confirmed against official statistics. This article presents each country's system based on facts and does not evaluate the merits of any system or policy. For individual inheritance tax matters, please consult a tax accountant or tax office.