Tax News: English Summary 10/2019
English Summary 10/2019
English Summary of Newsletter
Austrian parliament passes new tax laws
Shortly before the elections, the Austrian parliament passed several new tax laws, inter alia a new law on digital services tax (see our report below). For details please refer to our reports on the respective discussion drafts.
Ferdinand Kleemann / Markus Vaishor
Austrian Digital Tax Act 2020 introduces digital services tax
The Austrian parliament recently passed the bill on introducing a digital services tax (Austrian Digital Tax Act 2020) according to which a tax on digital advertising will be imposed as from Jan 1, 2020. The main corner stones of the new Austrian Digital Tax Act are as follows:
In general the Digital Tax Act provides for a digital tax to be imposed at a rate of 5% on the turnover from advertising services rendered by service providers in Austria. According to Art 1 Sec 1 Digital Tax Act a digital advertising service is deemed to be rendered in Austria if the digital advertisement is received on a device with an Austrian IP-Address and if the advertisement (also) addresses Austrian users. The main terms of the before mentioned object of taxation are defined as follows:
- Digital advertising service: A digital advertising service is defined as an advertisement on a digital interface, e.g. banner advertisements, search engine advertisements and comparable advertising services. The latter (i.e. “comparable advertising services”) may be specified in a separate ordinance. Advertising services which fall under the provisions of the (ordinary) Austrian Advertising Act 2000 are not covered.
- Service provider: There are in particular two thresholds a service provider has to meet to be qualified as a digital advertisement service provider within the meaning of Art 1 Sec 1 Digital Tax Act:
- A global turnover of a least EUR 750 million and
- a turnover in Austria (form online advertising services) of at least EUR 25 million
- User: A user is defined as an individual or legal person which has access to a digital interface with a device.
- Digital interface” is defined as any kind of software including websites or part of websites as well as mobile applications.
The tax base for the digital tax is in general the consideration the service provider receives for the provided services from the purchaser. The tax rate is 5%. The person liable to the digital tax is the service provider. The latter is obliged to calculate the digital tax and to pay it to the competent tax office on the 15th day of the second month followed by the month in which the tax liability arises. The tax liability arises at the end of that month in which the taxable service has been provided.
Furthermore, the service provider has to file an annual digital tax return within three months after the end of the service providers’ financial year.
There are concerns that the new Austrian Digital Tax Act may violate current EU law as it may constitute a state aid. According to the new law, EUR 15 million resulting from the digital service tax shall be used for supporting the digital transformation of Austrian media companies. Furthermore, due to the cornerstones of the law, obviously (almost) only foreign companies will be subject to digital services tax. Therefore, further developments need to be awaited.
Markus Vaishor / Werner Rosar / Katrin Postlmayr
Unsettled liabilities at the end of liquidation cannot be qualified as taxable income
In contrast to the opinion of the Austrian Federal Finance Court and the Austrian Ministry of Finance, the Austrian Administrative Supreme Court recently ruled that liabilities not settled until the end of a liquidation procedure cannot be qualified as taxable income at the level of the dissolved company. However, the Administrative Supreme Court also came to the conclusion that a member of an Austrian tax group leaves the tax group when the liquidation is commenced.
Lukas Andreaus / Markus Vaishor / Norbert Ungar
The Austrian Administrative Supreme Court confirmed the decision of the Federal Finance Court regarding the spin-off of a business unit together with a debt-financed participation
The Austrian Administrative Supreme Court confirmed the Federal Finance Court’s view that the right to choose, whether a qualified interest of over 25% in a participation and relating debt is transferred together or not in course of a spin-off only applies, if the participation is transferred stand-alone. If, however, the participation is transferred together with a business unit or part of a business unit, the general rule regarding the separation of assets and relating debt applies, regardless of the amount of the participation.
Lukas Andreaus / Clemens Prinz
CJEU: Reduction of the VAT base due to non-payment of instalments of a terminated leasing contract
In its ruling of 3 July 2019, the CJEU dealt with the subsequent adjustment of the VAT base.
On the one hand, the CJEU ruled that a legally binding VAT assessment does not prevent the subsequent adjustment of the VAT base. On the other hand, the CJEU held that the non-payment of a tax liability must be final in order to adjust the tax base even if the member state concerned has exercised the option of non-adjustment in the event of (partial) non-payment according to Art 90 para 2 EU VAT Directive.
Esther Freitag / Christina Maria Pollak
Opinion of Advocate General Kokott on the ascription of the transport to one supply within a supply chain
In her Opinion of October 3rd, 2019 on the CJEU case C-401/18, Herst, s.r.o., Advocate General Juliane Kokott proposed that the ascription of the transport to one supply within a supply chain should be made primarily based on who bears the risk of the accidental loss of the goods.
Esther Freitag / Alfred Mühlberger
CJEU: Subsidy as consideration from third party
In its judgement of 9 October 2019, C GmbH & Co. KG, C-eG (joined cases C-573/18 und C-574/18), the CJEU held that where goods are supplied by a producer organisation to its members, where the members pay only part of the purchase price of the goods and the remainder of the purchase price is paid by an operational fund, the amount paid by the operational fund is part of the consideration for the supply and qualifies as a subsidy from third parties directly linked to the price.
Esther Freitag / Draga Turic
Austrian Ministry of Finance publishes draft on 2019 update to VAT guidelines
The Austrian Ministry of Finance recently published a draft of the 2019 update to the VAT guidelines.
Esther Freitag / Markus Vaishor
Outbound dividends: profit distributions to insubstantial EU holding companies – (not) a problem?
If profits earned by Austrian resident subsidiaries are distributed to EU resident parent companies, the latter have to prove a certain degree of substance. If this is not possible, evidence of substance may be provided at the level of another EU company behind the direct shareholder instead.
Changes to Austrian Withholding Tax Refunds
As of 2019, the refund procedure for Austrian withholding tax was revised. It needs to be considered that an application for withholding tax refund cannot be filed before the end of the calendar year in which withholding tax was withheld. Furthermore, based on the General Fiscal Code a two-step procedure needs to be followed.
Furthermore, based on a decree issued by the Austrian Ministry of Finance, the application for refund can be filed up to five years following the year of withholding. However, the Ministry of Finance recently revised its view insofar as this is limited to double tax treaties concluded before April 19, 1980. In case a more recent double tax treaty is in place, which may provide for a different and shorter application period, this period would be applicable (eg 4 years according to the double taxation treaty between Austria and Germany). Therefore, the relevant period for filing a refund application needs to be considered separately for each case.
Florian Kleemann / Flora Endel
Amendments to Austrian Wage Tax Law
Before the elections, several amendments and changes to Austrian wage tax law to be applied from 2020 onward were decided by the Austrian Parliament.
Especially the amendment to the taxation of irregular (extraordinary) salaries is worth mentioning: At the last payment of the regular (monthly) salaries, the employer will have to check, whether the irregular (extraordinary) salaries that were taxed under the favorable tax regime for extraordinary salaries account for more than the sixth part of the total regular salaries paid out during the calendar year. Insofar as extraordinary salaries surpass the sixth of the annual regular salaries, they have to be (retroactively) taxed at the progressive wage tax rate of the month of payment.
Moreover, employers, albeit not disposing of a permanent establishment for wage tax purposes in Austria, will have to withhold wage taxes in respect of their employees who are under unlimited tax liability in Austria. In respect of employees who are under limited tax liability in Austria, they may voluntarily withhold wage taxes.
Tatjana Schrefl / Katharina Daxkobler
Changes to the basis for the calculation of the real estate value of building rights according to Art 2 of the ordinance on the calculation of the real estate value
In reaction to the latest jurisdiction by the Austrian Administrative Supreme Court (see also here) the ordinance on the calculation of the real estate value was changed. The land value (as part of the real estate value) of building rights has to be calculated dependent on the remaining time of the building right (if less than 50 years). Hence a similar result to the previously rejected legal opinion of the Ministry’s information is achieved.
Markus Vaishor / Florian Popl
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Ferdinand Kleemann / Markus Vaishor
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Stefan Haslinger / Philipp Rümmele / Christiane Edelhauser