English Abstracts 06-07/2021

Tax News 06-07/2021

Tax News 06-07/2021


In view of significantly intensified recent audits of the Registration Authority, Ministry of Finance (MoF), filing a so called “Compliance-Package” with the Austrian UBO-Registry according to Article 5a of the Austrian Beneficial Owners Register Act grants key advantages to obliged entities

The preparation and filing of a so called “Compliance-Package (CP)” according to Art. 5a BORA grants the following relevant advantages to obliged Austrian entities and their legal and beneficial owners.

A valid and confirmed CP filed with the Austrian UBO-Registry

  • prevents entirely or reduces the likelihood of a formal UBO-audit conducted by the MoF,
  • extends the validity of the UBO-documentation filed as CP to 12 months (with an option for further 12-months-extensions),
  • satisfies all legal retention requirements, violations of which are severely punished under BORA,
  • provides peace of mind to legal representatives as well as to legal and beneficial owners of the obliged entity with respect to compliance with due diligence and reporting obligations stipulated by BORA. The professional party representative setting up the CP not only reviews and validates the UBO-documentation obtained but also formally confirms that all registered UBOs were identified and verified and that these UBOs and the underlying UBO-documentation filed are valid, up to date and complete, which again means, a CPA must issue an “audit certificate” on the CP, prior to filing it,
  • substantially reduces liability risks for legal representatives as well as for legal and beneficial owners, as the culpable violation of mandatory reporting and retention obligations may lead to severe penal fines according to BORA, also for accessories and contributors (see Art. 15 BORA),
  • saves significantly cost, time and trouble in respect of AML/KYC-reviews performed by banks or other obligated parties with business relations to the entity (routinely or during client on-boarding).
  • For sensitive UBO-relevant documents that UBOs do not want to disclose in full for legitimate reasons an adequate file note may be created and filed as part of the CP by a professional party representative instead of filing the entire original document.

S. Haslinger / C. Edelhauser


Tax transparency and sustainability reporting (ESG reporting)

The proposed EU Corporate Sustainability Reporting Directive includes a wider range of companies that are obliged to inform about their impact on the economy, environment, and society. The Global Reporting Initiative (GRI) is an organization that provides guidance to standardize sustainability reporting for organizations (66 % of the entities in Austria use these standards for their sustainability reporting).

GRI implemented a new tax standard (standard 207 “Tax”) that is effective for sustainability reports published from 1 January 2021 onwards. This standard intends to increase the tax transparency and includes several reporting requirements related to the topic of tax. Entities who prepare the report in accordance with GRI Standards have to include information regarding

  • approach to tax,
  • tax governance, control, and risk management,
  • stakeholder engagement and management of concerns related to tax and
  • Country-by-country reporting

in their sustainability report.

The requirements of a Tax Internal Control System cover a major part of these reporting requirements. An effective Tax Internal Control System can therefore support a successful implementation of the new GRI tax standard and the sustainability reporting.

A. Helnwein / S. Stadik


Interest limitation: Austrian Ministry of Finance publishes draft ordinance on calculation of tax EBITDA

Austria introduced an interest limitation rule according to the EU-Directive laying down rules against tax avoidance practices (“Anti-Tax-Avoidance-Directive”, “ATAD”). In a nutshell, exceeding borrowing costs are only tax-deductible up to 30 % of the EDITDA for tax purposes. However, based on the Austrian implementation, exceeding borrowing costs of EUR 3 Million are always deductible. Recently, the Austrian Ministry of Finance published a draft of the ordinance on how to calculate the EBITDA for tax purposes.

F. Brugger / M. Vaishor / H. Zöchling


Austrian Federal Finance Court on foreign Austrian tax group member leaving the group

In general, the Austrian group taxation regime offers the possibility to also include foreign companies in the Austrian tax group. As a result foreign losses can be utilized within the Austrian tax group. However, at the time the tax group is dissolved or the respective foreign group member leaves the tax group, the respective losses are clawed back. Furthermore, the law provides for a claw-back if the group member formally stays in the group but “economically left” e.g. by significantly reducing or shifting its business activities. Recently, the Austrian Federal Finance Court dealt with such case.

F. Kleemann / A. Kirisits


Cross-border Home Office: Income and Wage tax consequences

After the Corona crisis, numerous companies will be confronted with requests of their employees to maintain their home offices.

Whereas the question where employees perform their work (also due to the technological solutions) often has no influence on the quality of work performed, cross-border home office solutions can have serious tax consequences.

It is therefore of great importance to be aware of these consequences before offering cross-border home office solutions to employees.

Not only the employee's income is (partially) subject to taxation in the home office country, but the company could also be subject to taxation on part of its profits in that country, if a permanent establishment is assumed by the local tax authorities. In addition, payroll tax withholding obligations and social security obligations may arise for the employer.

K. Daxkobler / R. Willinger


Update of the Austro-German Double Tax Treaty

Germany is Austria’s main trade partner. Accordingly, the double tax treaty that provides for the distributive rules and shall avoid double taxation is very important. The Austrian Ministry of Finance has recently published an update to many interpretation issues connected with the treaty. This update is relevant for the application of the treaty in daily practice.

F. Rosenberger


CJEU: Letting immovable property without staff does not establish a fixed establishment for VAT purposes

In its ruling of 3 June 2021, Titanium (case C-931/19) the CJEU dealt with the establishment of a fixed establishment for VAT purposes of a foreign entrepreneur who lets immovable property in Austria.

E. Freitag / D. Turic


Update: German Federal Fiscal Court follows up on ECJ Mitteldeutsche Hartstein-Industrie case

As already comprehensively explained in the Tax News of 14 December 2020, in its decision of 16 September 2020 (Case C-528/19, Mitteldeutsche Hartstein-Industrie AG), the ECJ concludes that for the VAT assessment of the costs of development measures by entrepreneurs, the taxation of the actual final consumption has to be taken into account. The decision of the ECJ was based on a submission by the German Federal Fiscal Court. In the recently published follow-up decision, the German Federal Fiscal Court has now abandoned its earlier case law and concludes, among other things, that no fictitious supply (withdrawal of own-consumption) is taxable as long as there is no threat of untaxed final consumption.

K. Oberhuber / S. Tratlehner


Amendment to the Austrian Act to Fight Wage and Social Dumping

On September 1, 2021, an amendment to the Austrian Act to Fight Wage and Social Dumping (in German: Lohn- und Sozialdumping-Bekämpfungsgesetz, LSD-BG) will enter into force with the scope to adapt to the European Union's Posted Workers Directive. In addition, the penal provisions will be revised and the accumulation of penalties (punishment "per employee"), which has been recognized as disproportionate by the highest courts, will be eliminated.

K. Daxkobler


Large extension of the preferential assumption of costs for public transport tickets by the employer

On July 1, a more far-reaching preferential treatment of public transport tickets entered into force, covering all weekly, monthly or annual tickets for mass transportation valid at least at the place of residence or place of work. The tax exemption applies not only to the purchase of a ticket ("job ticket"), but also to cost contributions for tickets purchased by employees. Requirements are amongst others a verification (ticket invoice) and that the ticket was purchased or extended no earlier than July 1, 2021.

K. Daxkobler


Alignment of period of notice and date of notice for blue-collar workers postponed again (from 1.7.2021 to 1.10.2021)

The new (longer) periods and dates of notice for blue-collar employees, which were adapted to the legal situation of white-collar workers, will not be applicable as of July 1, 2021, but only as of October 1, 2021. Sectors with predominantly seasonal businesses are excluded, although clarification is still required in individual cases. If collective bargaining agreements for blue-collar employees don’t determine an extension of the quarterly termination to further dates (15th and last of the month), it can be determined by individual agreements. The legislative process for the new postponement of the effective date has been completed just before July 1, 2021.

K. Daxkobler


Update on Short Time Work: Phase 5 in two versions

In this update, an overview of the most important points of Phase 5 of the Covid19-Short Time work starting with 1.7.2021 is provided.

K. Daxkobler


Exemption of capital gains from the sale of real property derived by individuals: Austrian Federal Finance Court on the requirement applying the exemption

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 – Dec 31, 2015) or 30 % (Jan 1, 2016 – present) respectively. However, there are two important tax exemptions. An exemption applies, if the property had been the seller’s principal home two years from the acquisition/construction and prior to the sale or for at least five years during the last 10 years. In addition, the seller´s principal home has to be abandoned. The idea behind this exemption is that capital gains are typically used to finance the seller´s new home, so the capital gains should not be reduced by a tax. According to the Austrian Tax Authorities the exemption only applies if there is a maximum time period of one year between the time of sale and the time of giving up the seller´s principal home. The Austrian Federal Finance Court, however, decided (again), that this period could also be longer, if the seller has already intended to change his principal home at the time of sale. This decision is in line with the of the jurisprudence of the Austrian Administrative Supreme Court. 

M. Vaishor / K. Postlmayr


Austrian Federal Finance Court on standard (car) consumption tax for company cars

In a recent decision, the Austrian Federal Finance Court concluded that under certain conditions, the provision of a vehicle to domestic field staff by a foreign company is to be attributed to the foreign company's registered office despite the existence of a domestic permanent establishment within the meaning of Art 29 Federal General Fiscal Tax Code (that is: no permanent location of the vehicle in Austria). If the vehicle is used in Austria for a continuous period of less than one year (the one-year period begins anew each time after leaving the territory of Austria), there is therefore no obligation to pay standard (car) consumption tax in Austria.

C. Halwachs / P. Mayr / S. Tratlehner


Austrian Administrative Supreme Court: revision proceedings cannot be started by the tax payer due to tax returns prepared after the income/earnings have been assessed by the tax office based on an estimation

If a taxpayer applies for a revision of the proceedings for income tax or VAT purposes (Art 303 Austrian General Federal Fiscal Code) on the basis of tax returns prepared after the final assessment by way of an estimation of the income/earnings, the application is to be dismissed. According to the case law of the Austrian Administrative Supreme Court there is neither a newly emerged fact nor newly emerged evidence.

S. Papst / S. Rettenbacher


Austrian Administrative Supreme Court: Inspection of files after control by Financial Police

Even if a control by the Financial Police has not led to any actions by the tax office for tax law purposes, the taxpayer is in principle entitled to an inspection of files. If the tax office refuses the inspection of files in such a case, it must issue a formal assessment on the denial of access to the files. The taxpayer may then file an appeal against this assessment.

S. Papst / W. Vötter


Practical insights into Austrian Financial Criminal Law: Consequences of a financial criminal conviction

A financial criminal conviction can cause far-reaching consequences including inter alia liabilities for taxes, the loss of permissions/rights to exercise trade, problems in terms of official tender procedures and last but not least the registration in the financial criminal register.  

S. Papst / N. Plank