Austrian parliament decides on new tax legislation 

Recently, draft legislation to implement an interest limitation rule in Austrian corporate income tax law, as provided by the EU Anti Tax Avoidance Directive and including further COVID-measures was submitted to the Austrian parliament (see here). Meanwhile, the Austrian parliament passed the respective bill in a slightly extended version:

• The interest limitation rule as provided by the EU Anti-Tax Avoidance Directive now also includes an exemption for loans used to fund a long-term public infrastructure project.
• As from 2021, it will be possible to recognize provisions and impairment of receivables on a lump-sum basis provided that the respective provision/impairment is acceptable according to Austrian GAAP for tax purposes. However, for tax purposes these expenses have to be recognized spread over five years.
• Austrian Income Tax Law provides for an exemption for benefits in kind for the participation in company events (such as a Christmas Party) amounting to EUR 365 per person per annum. If the respective amount was not (fully) used in 2020, the employer may grant tax-free gift coupons to the employees amounting to up to EUR 365 until Jan 31, 2021. 
• A negative balance on the tax account resulting from the impact of COVID-19 may be repaid within 36 months based on a “two-phase-model”. 

M. Vaishor

CJEU: The applicability of the VAT exemption for investment funds in the case of mixed use of the service received

In its ruling of 2 July 2020 (C-231/19 Blackrock), the CJEU has decided that the VAT exemption for investment funds is not applicable if the services received are used both for investment funds and for other funds. 

E. Freitag / C. Pollak

CJEU: Input VAT adjustment for subsequently granted discounts

In its ruling of 28 Mai 2020, World Comm Trading Gfz (Case C-684/18) the CJEU deals with the necessity of an adjustment of the input VAT deduction in accordance with Art 185 of the EU VAT Directive in the case of subsequent granting of discounts on taxable supplies of goods.

E. Freitag / D. Turic

Austrian Federal Finance Court: No input tax refund for intra-Community supply

In its verdict of April 27, 2020 (RV/2100043/2020), the Austrian Federal Finance Court denied input tax refunds for intra-community supplies.

E. Freitag / T. Mitterbacher

CJEU on payments in case of premature termination of the contract 

The CJEU decided on June 11th, 2020, C-43/19, Vodafone Portugal, that a payment to be made by the customer in the event of early termination of a service contract must be regarded as consideration for the provision of a service-contract, in particular since the contract provides a minimum commitment period for granting favorable conditions. The premature termination of the contract must be within the sphere of the customer.

E. Freitag / A. Haselwallner

Austrian Federal Finance Court: No denial of input tax deduction if compliant with reasonable care - Purchase of goods below "cost price" is not automatically VAT fraud

The Austrian Federal Finance Court decided on April 6th, 2020 (RV/2100069/2019) in its continued proceedings, that if a prudent businessman exercises due care, the deduction of input tax cannot be denied if the purchase price of goods is (in part) actually lower than the cost price of the seller.

E. Freitag / A. Mühlberger

Austrian Administrative Supreme Court: Import sales tax-exemption and the tax registration in the country of destination

The Austrian Administrative Supreme Court has once again clarified that tax fraud which relates to a transaction downstream of the import does not exclude the exemption of the import with subsequent intra-Community supply.

E. Freitag / T. Mitterbacher

CJEU: Adjustment of input tax deduction in case of cessation of the activity giving rise to the right to deduct input VAT

In its ruling of 9 July 2020 (C‑374/19 Finanzamt Bad Neuenahr-Ahrweiler), the CJEU has decided that an input VAT adjustment is necessary if the taxable person ceases, at his request, the activity which originally entitled him to deduct input tax. 

E. Freitag / C. Pollak

Subsequent change of the declarant in the customs declaration with respect to the reference to an indirect representation

The CJEU decided on July 16th, 2020, C-97/19, Pfeifer & Langen GmbH & Co. KG, that a subsequent change of the declarant in the customs declaration is possible if it can be proven that a power of attorney existed before the customs declaration was submitted. This power of attorney must essentially show that the person giving the power of attorney is aware that he becomes a declarant within the meaning of the Customs Code and that he is obliged to bear all costs. Furthermore, there must be no risk of fraud. 

E. Freitag / A. Mühlberger

ECJ on the VAT classification of an extension of a road belonging to a municipality (16.9.2020, C-528/19)

In its decision of 16.9.2020 (Case C-528/19, Mitteldeutsche Hartstein-Industrie AG), the European Court of Justice comes to the conclusion that, for the assessment of the costs of development measures by entrepreneurs for VAT purposes, the actual final consumption must be taken into account. If work received on the input side for the widening of a road has a direct and immediate link with the economic activity of a taxable person giving rise to taxable turnover, those costs which are connected with the road construction works and for which corresponding input tax deduction has been claimed can therefore be regarded as already being included in the output services subject to VAT. However, this removes the scope for the taxation of the transfer to the public ownership in the form of a fictitious supply to avoid untaxed final consumption. It is now up to the Austrian Administrative Court, which is dealing with appeals in a similar case, to determine whether the decision of the ECJ also results in a change of the Austrian case law and thus whether in comparable cases taxation in the form of a fictitious supply (withdrawal-own consumption in the sense of sec 3 (2) (3)  par 2 (3) VAT act) can be waived.

G. Punzhuber / S. Tratlehner

Outbound-dividends to British intermediary holding company after Brexit

The Austrian and the UK tax authorities made a consultation agreement regarding the requirements under which withholding tax can be reduced at source for dividend payments from an Austrian company to a UK intermediary holding-company.

C. Marchgraber

Austria: Refund of withholding tax allowed Canadian pension fund; possible refund opportunities for non-EU entities

The Supreme Administrative Court (VwGH) denied an appeal filed by the tax authorities against a lower court judgment allowing a withholding tax refund to a Canadian pension fund, and therefore granted a full refund of the withholding tax on dividends paid to the Canadian pension fund. (for more information see here -> Link)

U. Zehetner / N. Chiba

OECD Blueprints for "Pillar One" and "Pillar Two"

On the 12th of October 2020 the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS) released the Blueprints for Pillar One and Pillar Two as part of the OECD’s two-pillar approach to address the tax challenges of the digitalization of the economy. The envisaged new ruleset shall only be applicable for large MNEs with consolidated group revenues above the Country-by-Country reporting threshold of EUR 750 Million. The rules regarding a global minimum taxation under pillar two shall be applicable for all industries, whereas the new profit allocation and nexus rules in favor of market-/user jurisdictions shall only apply to “automated digital services” businesses and “consumer-facing” businesses. 

T. Hahn/ T. Rasslagg

Details on Phase 3 of the COVID-19 Short-Time Work and facilitations measures due to the COVID-19-Schutzmaßnahmenverordnung (COVID-19–Safeguard Measures Regulation)

Phase 3 of the COVID-19 Short-Time Work that was introduced on October 1st, 2020, comprises numerous novelties, in particular with regard to the economic reasoning of the application for short-time work, the new “salary dynamic” during short-time work and the obligation of willingness for further training. 

In order to attenuate the economic effect of the (partial) lockdown starting with Nov 3rd, 2020 (COVID-19 – Safeguard Measures Regulation), adaptions to Phase 3 of the COVID-19-short time work modes were negotiated by the social partners. Those adaptions provide for facilitations, above all for enterprises that are directly concerned by the official bans on access.

K. Daxkobler

Family aid and study aid: Threshold for earning increased from TEUR 10 to TEUR 15 for 2020

Recipients of state family or state study aid may earn additional income up to TEUR 15 (rather than TEUR 10) without losing the aids. The increase is applicable for the year 2020 already.

W. Schneider / K. Ivaniuk

Accelerated depreciation of buildings in Austria

In general, the standard annual depreciation rate for buildings for Austrian tax purposes is 1.5% for residential buildings and 2.5% for all other buildings. However, accelerated depreciation was introduced as follows (applicable for buildings that were purchased or constructed after June 30, 2020):

• Depreciation in the first year would be three times the standard rate (7.5% or 4.5%).
• Depreciation in the second year would be two times the standard rate (5% or 3%).
• As from the third year, depreciation would equal the standard rate of either 2.5% or 1.5%.

According to Austrian literature the taxpayer does not have to make use of the highest depreciation rate, i.e. any depreciation rate between 2.5% and 7.5% (or 1.5% and 4.5% respectively) for the first year is possible. However, the proportion of the depreciation rate for the first year in relation to the second year has to be the same (3:2). E.g. if the taxpayer uses a depreciation rate of 5% for the first year (instead of 7.5%), the depreciation rate for the second year is 3,33%. As from the third year the 2.5% standard rate would be applicable. If the taxpayer substantiates a higher depreciation rate through an expert’s opinion, the accelerated depreciation rate is not applicable. Furthermore, the half-year-convention rule is generally not applicable. 

M. Vaishor / K. Postlmayr

Austrian Administrative Supreme Court on overlooked refurbishment costs to be spread over several  financial years

According to Austrian Tax Law, refurbishment costs are, in principle, tax-deductible. However, certain types of refurbishment costs are not fully deductible in the year the costs incurred but rather have to spread over several financial years. Inter alia refurbishment costs for residential buildings not rented to own employees have to be spread over 15 years. Recently, the Austrian Administrative Supreme Court confirmed that the remaining 1/15 amounts may be deducted even if the first 1/15 was overlooked in the first year.

M. Vaishor

Timing of real estate transfer tax liability in case of down-stream merger

In Austria, the unification of at least 95% of the shares in a real estate owning company is subject to real estate transfer tax. In the course of a down-stream merger, the transferring company ceases to exist and as a consequence, the shares (previously owned by the transferring company) in the absorbing company are allocated to the parent company of the transferring company. Consequently, if the absorbing company owns real estate, real estate transfer tax from the unification of shares may be triggered. The Austrian Federal Finance Court recently ruled that only the properties held by the absorbing company at the time of registration of the merger in the Austrian companies’ register are subject to real estate transfer tax.

L. Andreaus / M. Vaishor

Capital gains from the sale of real property derived by individuals: Austrian Administrative Supreme Court rules on rights equivalent to real property

Capital gains from the sale of real property derived by individuals as from April 1, 2012 are subject to tax with a flat tax rate of 25 % (April 1, 2012 – December 31, 2015) or 30 % (January 1, 2016 – present).

Also in scope of this preferential taxation is the sale of rights equivalent to real property. The Austrian Administrative Supreme Court recently clarified that only building rights are rights equivalent to real property excluding certain hunting and fishing rights.

M. Vaishor / F. Popl

Austrian Administrative Supreme Court: Exemption from stamp duty for donation of real property with retained usufruct right

In Austria agreements granting usufruct rights are, in principle, subject to a 2% stamp duty if a document of the contract is set up.

In the case of a donation of real property whereby the donor retained a usufruct right, the Austrian Administrative Supreme Court recently ruled that the two legal acts have to be considered as one uniform legal act. Therefore, the exemption from stamp duty that was applicable to the donation also was applicable to the retained usufruct right which would have otherwise been subject to the 2% duty.

M. Vaishor / F. Popl

Austrian Administrative Supreme Court on stamp duty for registration in land register for non-profit purchases of apartments

The Austrian Administrative Supreme Court had to deal with a purchase of an apartment sold by a entity subject to a special law for non-profit purchases of apartments (“Wohnungsgemeinnützigkeitsgesetz”). The purchase price (which was below market price) was determined by that law. 

The court ruled that the stamp duty for the registration of the purchase in the land register cannot be calculated by the statutory determined purchase price but by the (usual higher) fair market price of the sold apartment.

M. Vaishor / F. Popl

Extension of time limit for appeal: Austrian Supreme Administrative Court clarifies open issues on the calculation of the time limit

The time limit for appeal is one month and can be extended by application. By filing an application for extension the running time limit for appeal is stopped. After delivery of the (rejecting) decision the remaining time limit is continued. In literature and case law there were different opinions regarding the calculation of the time limit in cases of an extension. The Austrian Administrative Supreme Court resolved the existing uncertainties (5.3.2020, Ro 2019/15/0008): The date of application for extension of the time limit and the date of delivery of the rejecting decision are both included in the suspensive effect. If a taxpayer files an application for extension on the last day of the time limit for appeal, the remaining time limit is one day. This is the day after the delivery of the rejecting decision.

S. Papst / W. Gurtner

Austrian Federal Finance Court: Actual use has an indicative effect for an adequate housing quality of a dwelling in the sense of Art 26 General Federal Fiscal Code

The effects of the actual length of stay on the determination of the existence of a domicile for Austrian income tax purposes are regularly subject of litigation. In a current decision (13.8.2020, RV/5101384/2015) the Austrian Federal Finance Court had to deal with the preceding question, whether the premises are suitable for living or not. According to the Court, the actual use of the premises for 1-2 weeks (approximately 5 times a year) indicates that the they are suitable for living. If premises provide an adequate housing quality and the taxpayer has the power of disposal, the actual length of stay is not decisive any more for determining the existence of a domicile for Austrian income tax purposes.

S. Papst / W. Gurtner

Austrian Federal Finance Court: No tax evasion in case of sale of securities on the last day of speculation period

In case of a voluntary self-disclosure of foreign capital income, the tax authorities and tax court assume regularly that the extended ten-year limitation period concerning intentionally evaded taxes is applicable. Therefore, the assessment of the income tax is possible up to ten years after realization of the profit.

If a taxpayer sells securities on the last day of speculation period and does not declare this sale in his tax return, according to the latest case law this is not a case of intentional tax evasion. So, the extended ten-year limitation period is not applicable.

S. Papst / W. Gurtner