No half-rate tax concession on resumption of business activity

The half-rate tax concession on the disposal or cessation of a business can be claimed under certain conditions, such as when the disposal of the business is caused by the death of the taxpayer or if there is incapacity to work due to physical or mental disability. Furthermore, the concession pursuant to § 37(5) of the Income Tax Act (EStG) can be applied if the taxpayer has reached the age of 60 and has (permanently) ceased business activity (and seven years have elapsed since the opening or the last disposal for consideration).

The Federal Finance Court (GZ RV/5100320/2024 of 18.08.2025) had to deal with a 65-year-old taxpayer who had ceased trading in medical products at the end of June 2021, retired, and wished to claim the half-tax rate concession (half average rate) on the transitional and disposal gain. However, this was disputed as he had become active as a consultant shortly after ceasing operations, albeit only until the end of 2023.

In its decision-making, the BFG specifically considered the "cessation of gainful employment" as a prerequisite for tax relief. Gainful employment does not exist if the total turnover from activities carried out after the disposal of the business does not exceed €22,000 and the total income from the activities carried out does not exceed €730 per calendar year. Gainful employment is considered to be any activity that constitutes active participation in professional life (i.e., including business and non-self-employed income, excluding pension benefits). Therefore, consultancy work commenced after the cessation of business – even if it has no connection to previous activities – also constitutes such gainful employment that would jeopardise the tax relief.

In the second half of the year of business cessation, initial income was already generated from consultancy activities, but the income threshold of €730 was not exceeded. The strict wording of the law for the favourable provision argues against resuming an activity. However, following the prevailing legal opinion, resuming gainful employment "after a considerable period" following business cessation should be possible without jeopardising the half-rate tax applied. The BFG – also referencing prevailing case law – emphasised that the cessation of gainful employment must be intended for a certain (longer-term) duration, extending beyond the tax year. Furthermore, resuming gainful employment must not have been planned from the outset, in order not to jeopardise the benefit on the capital gain. Since, in the specific case, the income threshold was exceeded not in the year of business cessation, but (already) in the following year, the benefit for business cessation cannot be applied according to the BFG. Only the tax-free allowance of €730 will be granted favourably.

Image: © Adobe Stock - Svyatoslav Lypynskyy