English Summary 01/2022

Draft Directive Against the Misuse of Shell Entities Released

On 22 December 2021, the EU Commission released a draft directive against the misuse of shell entities for tax purposes. This draft directive contains substance requirements for companies in the EU. Even though the name of the directive suggests that it is only directed against shell entities, the scope of the draft is more extensive. Given that the proposed directive must be accepted unanimously by the Member States, changes in the further process are possible.

F. Brugger

Model Rules on Global Minimum Tax Regime

On 20 December 2021, the OECD released Pillar Two model rules for domestic implementation of 15 % global minimum tax, the so-called Global Anti-Base Erosion (GloBE) rules. Only two days later, the European Commission presented its proposal for a Directive on ensuring a global minimum level of taxation for multinational groups in the EU, thereby implementing the GloBE rules. The GloBE rules should apply as of 2023 to multinational enterprises (MNEs) with revenue above EUR 750 million. They aim to ensure that MNEs pay an effective tax rate of at least 15 % in each jurisdiction they conduct their business. Since the effective tax rate is relevant, also countries that have a nominal tax rate above 15 %, including Austria, may be covered by the new rules. Thus, from a practical perspective, it makes sense to verify already which countries may potentially lead to an additional top-up tax.

C. Marchgraber

Austrian Federal Finance Court on the qualification of compensation payments for location rights

According to Austrian Income Tax Law a goodwill (which was acquired in the course of a business asset deal) resulting from the acquisition of a trade has to be depreciated over 15 years. According to the Austrian Income Tax Guidelines published by the Austrian Tax Authorities and previous jurisdiction from Austrian tax courts, this provision also applies if several parts of a goodwill (eg, a customer base) are acquired. Recently the Austrian Federal Finance Court qualified compensation payments for location rights which were paid in relation to the acquisition of drink dispensers as a customer base. Thus, the compensation payments have to be capitalized and depreciated over 15 years. 

M. Vaishor / K. Postlmayr

Austrian Administrative Supreme Court on loss trafficking rules

In general, an Austrian company’s tax loss carry-forwards can be carried forward indefinitely. However, according to the loss trafficking rules (“Mantelkauf”), tax loss carry-forwards may be disallowed, if there is a significant (≥ 75 %) change in the direct shareholder structure followed by a change of the organizational and the economic structure of the company.

The Austrian Federal Finance Court decided in a case in which the before mentioned three criteria were obviously fulfilled. In the respective case the whole shareholder structure changed followed by a change of the director. The third requirement, a change of the economic structure was also fulfilled, as the company changed its business from leasing real property and medical equipment to running a X-ray business. As the company changed its business activities in connection with the other two structural changes within a few weeks, the court disallowed tax loss carry-forwards to the Austrian company. Recently the Austrian Administrative Supreme Court followed the opinion of the Austrian Federal Finance Court. 

M. Vaishor / K. Postlmayr

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

In respect of fees paid in 2021 for certain services outside of employment relationships to individuals or partnerships (associations) without legal capacity and for certain outbound payments effected in 2021, 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 28^th Feb 2022.

K. Daxkobler

Tax-free gift vouchers instead of a Christmas party

Between November 1, 2020 and January 31, 2021, it is  possible to use the not fully-consumed tax free amount for Christmas parties for the granting of tax free gift vouchers. 

K. Daxkobler

Tax-free gift vouchers instead of a Christmas party

The rules in respect of Covid19-bonusses to be granted free of taxes and social security contributions up to an amount of EUR 3.000, as well-known from last year, shall also be applicable on bonuses and allowances paid out until February 2022 “for the calendar year 2021”. 

K. Daxkobler

Austrian Federal Finance Court on extended statute of limitation for evaded taxes

In Austria, evaded taxes can still be assessed 10 years after the tax claim has arisen. The standard of proof regarding the statute of limitation for evaded taxes in tax proceedings is discussed controversially: In tax law, a probability of just over 50 % is sufficient for a fact to be considered proven. By contrast, in fiscal criminal law, the full conviction of the judge is necessary. In a recent decision, the Austrian Federal Finance Court stated that it is the standard of proof under fiscal criminal law that matters also for the purpose of mere tax proceedings. Since the tax office did not succeed in proving this in the present case, the income tax was already time-barred after five years.

S. Papst / W. Gurtner

Austrian Administrative Supreme Court on revision proceedings: About EUR 700 needs to be considered as minor threshold amount by the tax office in its discretionary decision

The VwGH decided on 30.06.2021, Ra 2019/15/0125, that the minor threshold amount for administrative discretions concerning resumption proceedings is about EUR 746. In case this amount is exceeded – if the further legal requirements are met – the tax authorities have to start a resumption proceeding and a new official note (Sachbescheid) has to be issued.

C. Endfellner

Unlawful applications for COVID-19-funding: Active Repentance as a tool to gain impunity

As described in our 11-12/2021 Tax News, detailed grant audits are increasingly taking place in the course of follow-up audits of COVID-19 grants. If unlawful COVID-19 grants or omitted corrections of COVID-19 grants are discovered in the course of grant audits, this may result in criminal liability for fraud. By active repentance within the meaning of Art 167 of the Austrian Criminal Code, such criminal liability is subsequently removed.

S. Papst / W. Vötter

Austrian Administrative Supreme Court on foreign capital income: proof of intentional tax evasion based on general life experience

Just because a taxpayer submits a self-disclosure letter to the tax authorities, this does not by itself mean he acted with intent. However, conclusions on the subjective facts can be drawn from the disclosure of these external circumstances (underpayment of tax). In this context, the Austrian Administrative Supreme Court allows concrete facts of the case based on general life experience to be sufficient for proving intent. In order to assess the level of knowledge of a layman in terms of taxes, the media reporting that is in the focus of public attention is of particular importance.

F. Fraberger / S. Papst / S. Rettenbacher

Austrian Federal Finance Court on failure to pay income tax on death benefit payment: accusation of intentional behavior could be invalidated

"A person who commits an offence with knowledge and intent acts intentionally". In the specific case there was a violation of the duty to disclose facts relevant for income taxation to the Austrian tax authorities, since a so-called death benefit payment was not included in the taxpayer’s income tax return. However, it was questionable whether the taxpayer can also be presumed to have acted with intent. In a recent case, Austrian Federal Finance Court was convinced that the taxpayer just made a mistake and did not act intentionally, as specialist knowledge was required to solve the specific tax questions correctly; the taxpayer did not have such specialist knowledge.

S. Papst / L. Schusterbauer

Austrian Administrative Supreme Court on the requirements for capital gains tax on real estate in the case of mixed donations

Pursuant to Art 30 Austrian Income Tax Act capital gains from private sales of real estate is taxable at the special real estate gains tax of 30 %. For this purpose, sales must be distinguished from donations. If the parties involved want to conclude a contract partly against consideration, partly without consideration, the main purpose of the transaction must be determined.

Although in the case of close relatives an intention to donate is presumed in case of doubt, according to the Austrian Administrative Supreme Court a legal transaction is considered as a sale, if the value of the consideration does not deviate by more than 25 % from the value of the real estate and no special circumstances suggest an overall assessment as a donation.

M. Vaishor / E. Rohn