Tax Internal Control System – amendment of the ordinance regarding Tax Internal Control Systems (“Steuerkontrollsysteme”)

In December 2020 the Austrian Ministry of Finance issued an amendment of the ordinance regarding Tax Internal Control Systems which provides clarifications in relation with the documentation and the evaluation of a Tax Internal Control System, especially with regard to an integration of an entity as an additional member of a group.

Briefly summarized, the amendment includes the following points:

• flexibility regarding the number of Tax Internal Control Systems to be implemented within a group,
• clarification: a group can only provide one certificate including all Tax Internal Control Systems of their group members even if there are several separate Tax Internal Control Systems set up for the entities of the group
• clarification: a supplementary certificate (issued due to the integration of an additional entity in a group) is not qualified as a follow-up audit and thus, only includes an audit regarding the concept and the implementation of the Tax Internal Control System
• adjustment: necessary statements that have to be included in a supplementary certificate

An effective Tax Internal Control System reduces risks (fiscal criminal and reputation) and offers practical benefits (simplifies administration, can ensure reliable planning, supports process optimization and the digitization of the tax function). Thus, the implementation of a Tax Internal Control System should be considered even if a participation in the Horizontal Monitoring is not planned. We are happy to support you in all stages of this project.

A. Helnwein / S. Stadik

Austrian Constitutional Supreme Court: Different discount rates for long term provisions and provisions for anniversary bonuses do not violate the constitution 

According to the Austrian Income Tax Act law long-term provisions in relation to uncertain payments and imminent losses from pending transactions have to be discounted with 3.5 % for income tax purposes. In contrast, however, long term provisions in relation to retirement payments and anniversary bonuses have to be discounted with 6.0 % for income tax purposes. The Austrian Constitutional Supreme Court ruled that there is an objective justification for that difference in discount rates.

M. Vaishor / A. Lunzer

Austrian Federal Finance Court on extraordinary depreciation of real estate

In its decision of August 26, 2020 (RV / 5101409/2019), the Austrian Federal Finance Court permitted the depreciation of 2 difficult-to-sell apartments in a new development project, due to their unfavorable location within the building and external influencing factors (e.g. noise), which also existed at the start of the construction work. This could also imply that the usual allocation of construction costs to individual apartments based on the proportions of the usable space does not always lead to an appropriate result and in individual cases a breakdown according to other criteria, e.g. market values may be more reasonable. 

M. Vaishor / A. Lunzer
 

Input VAT deduction for holding companies

In its ruling of 2 November 2020 (C‑42/19 Sonaecom), the CJEU has decided that holding companies are entitled to deduct input VAT on purchased services, even without realization of the intended investment.

E. Freitag / C. Pollak

Refusal of input tax deduction for special services in connection with the sale of a dwelling that is tax-exempt

In a recent decision, the Austrian Federal Finance Court has decided that special services in connection with an apartment sale may not be qualified as taxable supplies, which are taxed with the standard rate of 20%. Consequently, the court decided that the purchaser is not entitled to an input tax deduction in this connection.

E. Freitag

CJEU: Request for information in input tax refund proceedings

In its judgment of November 18, 2020 (C-371/19 Commission/Germany), the CJEU mostly upheld the European Commission's action for rejection of VAT refund claims by foreign companies.

E. Freitag / C. Pollak

BFG: The use of a VAT-ID other than that of the country of destination leads to an additional ic-acquisition according to Art 3 sec 8 2nd sentence Austrian VAT Act

In a recent decision, the Austrian Federal Finance Court ruled that a deemed intra-Community acquisition in the country of dispatch by the use of the VAT-ID number of the mentioned country according to Art 3 sec 8 2nd sentence Austrian VAT Act takes place.

E. Freitag / T. Mitterbacher

Software provided to a third country may be added to the customs value at importation

In its judgment of September 10th, 2020, C-509/19, BMW Bayrische Motorenwerke AG, the CJEU had to deal with the question of adding "software" to the customs value.

E. Freitag / A. Mühlberger
 

Good tax behavior as prerequisite for the future granting of COVID-19 subsidies

The future granting of COVID-19 subsidies is not only tied to the requirements of the individual subsidy, but also require “good tax behavior” which is defined in a respective new law. Companies that are granted a COVID-19 pandemic subsidy must behave in a tax-efficient manner (e.g. no tax abuse, application of CFC-taxation or fiscal penalties of more than EUR 10.000,00 for intent) for five years before the application for the subsidy until the subsidy has been granted (final invoice). If there is no good tax behavior, applications for funding are rejected or the funding has to be repaid with interest (4.5 % above the base rate).

M. Vaishor / A. Lunzer

News on investment premium

In the wake of COVID-19, Austria introduced an investment premium resulting in a 7 % or 14 % grant on the acquisition costs of certain investments. Recently, the AWS (Austria Wirtschaftsservice) handling the applications for the premium informed about certain practical issues. 

M. Petritz / O. Mavher
 

Reorganization of the Austrian tax administration: Accurate submission of applications

At the beginning of the year, the reorganized tax administration started its operations. The former tax offices have been replaced by the Austrian Tax Office (FAÖ), the Tax Office for Large Companies (FAG) and the Anti-Fraud department (ABB). Taxpayers are now faced with the question, where they can submit their applications effectively and within the prescribed period. In order to make the transition from the old to the new system as smooth as possible, the legislator has created transitional provisions.

S.  Papst / W. Gurtner

Austrian tax authorities: the new Anti-Fraud Department

The reorganization of the Austrian tax administration also resulted in far-reaching innovations with regard to combating tax fraud: There are now only two financial criminal authorities with nationwide jurisdiction, the newly created Anti-Fraud Department (ABB) and the Customs Office Austria (ZAÖ). The ABB’s newly created “operational department” is intended to meet the increased challenges in financial criminal proceedings. In order to ensure an approximately equal utilization of the work teams, the allocation of cases to the teams within the ABB is designed flexibly.

S. Papst / W. Gurtner

Notifications according to Art 109a and Art 109b Austrian Income Tax Act until 28th February

In respect of fees paid in 2020 for certain services outside of employment relationships to individuals or partnerships (associations) without legal capacity and for certain outbound payments effected in 2020, entrepreneurs as well as corporations under public and under private law have to submit a notification according to Art 109a Austrian Income Tax Act (“ITA”) or Art 109b ITA respectively to the tax office by way of electronic data transmission until 28th Feb 2021. 

K. Daxkobler

New Home-office Act under review

Since February 15th, 2021, draft legislation in order to regulate working from homeoffice (in short: Homeoffice Act) has been circulated for review. 

K. Daxkobler / V. Kalnein / A. Shubshizky / C. Vogt  E. Wasinger

Deductibility of business expenses for voluntary severance payments and social plan payments

In a recent decision, the Austrian Administrative Supreme Court ruled that the provision of non-deductibility of business expenses for golden handshakes also applies to all voluntary severance payments, including those that are paid as part of social plans. Voluntary severance payments to employees who are subject to the new severance payment system are not entirely covered by the deduction prohibition, but only in so far as they exceed the limits defined in Art 67 sec 6 Austrian Income Tax Act (EStG) for the preferential wage taxation of voluntary severance payments. In this regard, the regulation is only relevant for the purpose of deducting business expenses, but not for the purpose of preferential wage taxation at 6 %. 

K. Daxkobler

BREXIT - New regulations for the coordination of social security provisions as well as residence and access to the labor market

The Trade and Cooperation Agreement between the EU and the United Kingdom (partnership agreement), concluded on December 24, 2020 and applicable since January 1, 2021, also contains comprehensive provisions on the coordination of social law. BREXIT also affects immigration law and labor market access.

K. Daxkobler

Regulations and values in social security, labor and income tax law applicable in 2021

For 2021, certain values in social security, labor and income tax law were adjusted.

K. Daxkobler

Amendments regarding the “Control-Sixth” (Kontrollsechstel) and wage tax withholding for foreign employers

The provision concerning the “Control Sixth” (Kontrollsechstel) were adapted by the COVID-19-Tax Measures Act (COVID-19-Steuermaßnahmengesetz). As of 2021, there are numerous exceptions from the obligation to apply the “Control-Sixth”; furthermore, the retroactive payroll run (Aufrollung) in regard of the “Control Sixth” at the end of the year can also be done in favour of the employee. Additionally, the obligation to withhold wage taxes in regard of employees with unlimited tax liability in Austria for employers without wage-tax-PE in Austria has been abolished retroactively, after having been in force sonly since 01/2020. 

K. Daxkobler

Update on Labor and Social Law in connection with COVID-19 

The persistence of the COVID-19-pandemic and the new restrictive measures have led to numerous new legislative provisions in personnel law. 

K. Daxkobler

Tax-free gift vouchers instead of a Christmas party

As from November 1, 2020 till January 31, 2021, it was possible to use not fully-used tax free amounts for Christmas parties for the granting of tax free gift vouchers.

K. Daxkobler
 

Austrian Federal Finance Court: First-time granting of a building lease leads to income from letting of property

In a recent decision, the Austrian Federal Finance Court ruled that the first-time granting of a building lease leads to income from letting of property, which is taxed with the standard progressive tax rate according to the Austrian Income Tax Act. Only the resale of an existing building lease by the right-holder of the building lease leads to income from capital gains from the sale of real property to a flat rate of 30 % applies.

M. Vaishor / A. Lunzer

Austrian Administrative Supreme Court on renting (high-end) real property to shareholders 

In Austria the construction or acquisition of (luxury) real property through an Austrian corporation with subsequent renting for residential purposes to the shareholder of the corporation may constitute a tax advantage from a VAT point of view, as renting for residential purposes is subject to 10 % VAT in Austria and input VAT may consequently be deducted. However, several requirements have to be considered for tax approval (concluding a rent which is at arm’s length is one of the major requirements). Recently, the Austrian Administrative Supreme Court summarized and specified its jurisprudence concerning this matter, which is relevant for Austrian income tax as well as for VAT purposes.  

M. Vaishor / K. Postlmayr
 

Austrian Federal Finance Court on failure to report a gift: NO intent by the taxpayer, if the advisor overlooked the obligation to report

Punishment under financial criminal law requires almost complete certainty of the fulfilment of the objective and subjective elements of the offense. If doubts remain, they have to be considered in favour of the defendant. If there is doubt about the intent (subjective elements of the offense), punishment for a premeditated crime is not allowed. If a gift is "disclosed" in the enclosures to the income tax return and the tax advisor of the taxpayer admits to having overlooked the obligation to separately report the gift, it cannot be assumed that the taxpayer acted with intent in the absence of any valid indications to the contrary according to a recent decision by the Austrian Federal Finance Court.

S. Papst / W. Gurtner

Austrian Federal Finance Court on relief of payment for fines according to the Austrian Act on Tax Offences (FinStrG)

Payment relief for fines due to the Austrian Act on Tax Offences (FinStrG) can only be granted, if the outstanding amount is recoverable and there is considerable severity. In addition, the decision on the admissibility of relief of payment also depends on whether the purpose of the penalty is properly achieved despite the payment relief: If the granting of a payment relief frustrates the purpose of the penalty with regard to a quick payment of the fine, the payment relief must not be approved. If the fine proves to be irrecoverable, an imprisonment can be omitted by providing community service. In appeal proceedings, payment relief can no longer be enforced, if the arrears on the penalty account have been deleted in the meantime according to a recent decision by the Austrian Federal Finance Court.

S. Papst / W. Gurtner
 

Amendments to the Austrian Beneficial-Owner-Registry-Act – BORA became effective November 10, 2020 and new amendments issued January 22, 2021 will be enforced April 1, 2021

The following amendments to BORA became effective as of November 10, 2020:

• Introduction of the electronic Compliance-Package (CP) to be filed with the UBO-Registry
• Changes to the electronic forms for UBO-Reporting
• Changes to the excerpts of the UBO-Registry
• Changes to the electronic BORA-Management-System for assigning new user rights
• Update of the guidance issued by the registration authority (MoF) to support the due application of BORA

These changes based on recently issued amendments to BORA will enter into force April 1, 2021:

• Reference to already registered CPs will newly be allowed with respect to any superordinated Austrian entity, this way CPs may also be used for subsidiary UBO-Reporting of senior managing officials
• Reporting requirements under BORA will be extended to a new category of entities, namely foreign entities incorporated in third countries outside of EU/EWR, in case these entities engage to acquire property in Austria
• New requirements subject to BORA for registration, due diligence and UBO-reporting will have to be fulfilled by the new category of foreign entities (foreign corporate entities, foundations and similar legal entities) as well as by notaries that are involved in the property transaction in Austria 

S. Haslinger / C. Edelhauser

Austrian legislation implementing i.a. the 5th AML-Directive (EU) 2018/843 by amending the Austrian Account-Registry-Act (Kontenregister- und Konteneinschaugesetz) notably expands the amount of reportable data and the number of authorities with access to account information. The amendment already became effective as of January 23, 2021 

The Austrian legislation implementing i.a. Art 32a of the the 5th AML-Directive (EU) 2018/843 by amending the Austrian Account-Registry-Act notably expands the objectives of the Austrian Account Registry, the amount of reportable data and the number of entities with reporting obligations as well as the number of international and local authorities with access to banking and payment account information. The amendments to the law already became effective as of January 23, 2021.

Based on the amendments also payment accounts offering credit facilities, payment accounts of payment service providers (PSP) and safe-deposit boxes became reportable when maintained on behalf of customers as of January 1, 2021.

The new legislation gives rise to major constitutional concerns that legitimate interests of tax payers during certain tax audit proceedings with respect to income, corporate and value added tax may be compromised.

S. Haslinger / C. Edelhauser

Austrian Administrative Court – Treatment of Foreign Corporate Funds as tax transparent pursuant to § 188 InvFG (in the version up to 2013) violates free movement of capital – focus bank claims available

• It is a violation of the free movement of capital, if a domestic corporation is favored in comparison with a foreign corporation, because the former is treated as an entity subject to corporate income tax and the latter is treated as tax transparent.
  
• If an Austrian corporation is treated as the recipient of capital income whereas a comparable foreign trust is in effect denied this status because § 188 InvFG requires the foreign trust to be treated as tax transparent, then this treatment of the foreign organism is in violation of the freedom of movement of capital
• The AIFMG law in Austria amended the Austrian tax rules for foreign investment funds in a way that foreign organisms are no longer treated worse than domestic organisms; this applies for all fund financial years starting after July 21st, 2013.

P. Rümmele