English Summary 02-03/2022

Tax and accounting issues in the implementation of SAP S/4HANA 

The implementation of SAP S/4HANA is often associated with high costs for the license and customizing. This raises the question of whether these costs represent current expenses or whether they should be capitalized, especially with regard to tax and accounting (local GAP) treatment. Depending on whether the SAP license is leased or purchased, there are different questions and aspects that need to be considered, especially in connection with the costs for customizing.

In the case of purchased SAP licenses and the associated customizing, the question of whether it is an acquisition transaction or a production transaction is of central importance. In the case of leased SAP licenses, the question is whether the customizing can be capitalized as a separate asset. It is also necessary to take a closer look at the question of useful life and the start of depreciation.

In order to be able to recognize the expenses related to the implementation of SAP S/4HANA correctly for tax and accounting purposes, the relevant criteria should be examined and documented in detail. If the expenses incurred should be capitalized in order to enable a useful life-related distribution of the costs, which are usually not insignificant, it is recommended to deal with the requirements for capitalization already at the beginning of the project. 

L. Andreaus / A. Reiter

Transfer of excess borrowing costs and unused interest capacity in reorganizations – draft provisions

The Austrian Ministry of Finance has published draft provisions for the transfer of excess borrowing costs and unused interest capacity in reorganizations.

F. Brugger

Taxable capital gain in case of negative acquisition costs after deletion of the company

Due to a negative transfer capital, the transferor (contributor) may incur negative acquisition costs for the shares received in the event of a reorganization with book value continuation under the Austrian Reorganization Tax Act. If no new shares are granted, the acquisition costs of the existing shares must be reduced in the amount of the negative transfer capital, which may result in negative acquisition costs overall. In its ruling, the Austrian Federal Finance Court (BFG) has now confirmed (contrary to parts of the literature) the view of the Austrian tax authorities, according to which positive income arises in the case of a liquidation without an actual inflow to the shareholder. In this case, taxation is levied in the amount of the negative acquisition costs.

L. Andreaus / J. Derflinger

Current Developments regarding Global Minimum Tax

At the end of December 2021 the OECD model regulations and the EU directive proposal for a global minimum taxation regime (Pillar 2) were published. In the last few days, there have been some significant developments in this regard. In particular, the guideline shall only be applicable for financial years starting as from Dec 31, 2023.

C. Marchgraber

OECD published transfer pricing guidelines

The OECD recently published the new transfer pricing guidelines 2022 which will replace the guidelines 2017. 

W. Rosar

United Arab Emirates introduce a Corporate Income Tax in 2023 

On January 31, 2022, the finance minister of the United Arab Emirates announced the introduction of a corporate income tax. The corporation tax is scheduled to come into force in June 2023. The general tax rate will be 9%. Companies with profits below AED 370,000 (currently equivalent to approx. EUR 93 thousand) continue to pay no corporate tax. Entities belonging to a group of entities with a consolidated turnover of more than EUR 750 million will be subject to a higher tax rate. This tax rate is expected to be 15%.

G. Gottholmseder

BREXIT: Austrian and German Courts rule tax issues for UK Ltds having their administrative seat in the EU

BREXIT had adverse legal and potentially tax effects on UK Ltds having their central place of management within the EU. Austrian and German Courts have recently issued their first rulings on the potential tax issues.

M. Petritz

Austrian Federal Finance Court on the requirements for the Austrian VAT exemption for the administration of “Sondervermögen”

Pursuant to the decision of the CJEU dated June 17, 2021, C-59/20 DBKAG, the Austrian Federal Finance Court recently ruled on the requirements for the Austrian VAT exemption for the administration of “Sondervermögen” according to Art 6 sec 1 subsec 8 lit i Austrian VAT Act in case of outsourcing.

S. Haslinger / V. Kumer

New wage tax exemption in respect of profit participations

As part of the ecosocial tax reform, a new wage tax exemption in respect of profit participations in the amount of up to EUR 3.000 per calendar year for active employees was introduced. The new exemption is already applicable for payments starting with 1st January 2022.

A. Shubshitzky

Real estate transfer tax in case of acquisition of undeveloped real property

In principle, all costs incurred for the acquisition of a real property in addition to the actual purchase price have to be considered for the tax base for real estate transfer tax purposes.

The Austrian Federal Finance Court recently ruled that the tax base for real estate transfer tax for the acquisition of undeveloped real property also includes the building costs of a planned building provided that there is a sufficient connection between the acquisition of the real property and the construction of the planned building. In the case at hand the requirements were met as the vendor of the real property also conducted the planning and the construction of the building and the purchaser was obliged to the construction of the building by the contract for the undeveloped real property (although there was a separate contract for the construction itself).

M. Vaishor / F. Popl

Capital gains from the sale of real property derived by individuals: Austrian Federal Finance Court on the definition of the seller’s principal home for 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 30 %. 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 (applies for both cases). The Austrian Federal Finance Court recently decided again regarding the definition of the seller’s principal home: If the tax payer has several domiciles the principal home for tax purposes is the one that can be deemed as the center of vital interests. If appropriate evidence regarding the principal home of the sold real property can be demonstrated for the duration of the required period (and if all other requirements applying the exemption are met), capital gains from the sale of the respective property derived by individuals are exempted, provided that all other requirements for the application of the exemption are fulfilled. 

M. Vaishor / K. Postlmayr

Assessment of late payment fess: gross negligence in case of IT problems?

The Austrian Administrative Supreme Court annulled a decision of the Austrian Federal Finance Court on late payment fees due to the late payment of VAT. The Austrian Federal Finance took the opinion that the arranged control system was not sufficient due to a lack of control of the actual delivery of the e-mail to the taxpayer and declined the reduction of the late payment fees. However, the Austrian Federal Finance Court did not consider that the taxpayer has paid all tax debts on time in the past. According to the Austrian Administrative Supreme Court the assumption of gross negligence was therefore not sufficiently justified. 

S. Papst / S. Stadik

Payor of Capital Gains Tax and Director’s Liability

The liability according to Art 9 Austrian General Federal Fiscal Code (“BAO”) is a liability only in case of non-payment by other persons (“Ausfallshaftung”). In case a Ltd does not have sufficient funds to pay the Capital Gains Tax (“KESt”), the liquidator is not liable according to Art 9 BAO, if he fulfilled his obligations correctly. However, according to a recent decision of the Austrian Federal Finance Court, the tax authorities shall demand the payment of the KESt from the recipient of the income according to Art 95 sec 4 Income Tax Act. KESt is in this case paid by the debtor of the tax and not by a person who is liable.

C. Endfellner

Austrian Supreme Administrative Court again on foreign capital income: Even the payment of 35 % Swiss withholding tax does not exclude intent

In its recent decision, the Austrian Administrative Supreme Court confirms its case law from early December 2021, according to which evidence based on general life experience is sufficient for proofing intent. Even the payment of withholding tax on capital income does not exclude intent, even if the foreign tax is higher than the Austrian capital gains tax level (VwGH 17.12.2021, Ra 2019/13/0038).

This recent decision worsens the defense situation for taxpayers with foreign capital income once again. It is even more important to provide reliable evidence in the specific individual case and to focus on the principle of doubt under financial criminal law and the presumption of innocence in order to be able to rebut the accusation of intent.

F. Fraberger / S.  Papst / S. Rettenbacher

SWIFT block: Tax office payments no longer possible to account holders of certain branches of Sberbank

According to the Austrian tax administration, the termination of SWIFT payments with Russia also affects an Austrian and a Hungarian branch of Sberbank with the following SWIFT abbreviations:

• SABRATWW
• MAVOHUHB

If you have disclosed an account with one of these branches to the tax office, the tax administration is currently unable to make any transfers to these accounts. The tax administration therefore asks those affected to provide a new, valid account number as soon as possible.

The fastest way to do this is via your FinanzOnline access. Alternatively you can send your new account details in writing, stating your name, address and tax number, to the following address:

Finanzamt Österreich
Postfach 260
1000 Wien

Important: Information sent electronically via e-mail cannot be accepted due to the lack of clear proof of identification!

F. Kleemann / F. Popl