English Summary 07-09/2022

Austria intends to abolish the so-called cold progression by next year

In Austria, the draft law on the inflation relief package Part II was recently adopted in the Council of Ministers. The aim of the planned amendment to the Austrian Income Tax Act is to ensure inflation-neutral income taxation and thereby abolish "cold progression" (i.e. to avoid tax brackets which are not adjusted for inflation). 

M. Vaishor / K. Postlmayr

CO₂ Steuer und Neuerungen im EMCS Verfahren iZm Transporten von verbrauchsteuerpflichtigen Waren

On October 1^sth, 2022, the National Emissions Certificates Trading Act “Nationales Emissionszertifikatehandelsgesetz 2022 (NEHG 2022)” will come into force in Austria and therefore trading participants will have to register for national emission allowance trading. Without such registration it is not possible to place fossil fuels on the market without penalty. Furthermore, as from February 13^th, 2023, the Excise Movement and Control System must also be used for goods for which excise duties have been paid in the country of departure and therefore EMCS completely replaces the paper-based procedure for the movement of excisable goods in free circulation between EU Member States.

K. Nadlinger / A. Mühlberger

Deadline September 30, 2022: Application for a refund of input VAT from other EU-countries of the year 2021 and review of (corporate) income tax advance payments

Since the deadline for applying for a reduction of preliminary tax payments for 2022 ends on September 30, 2022, and interest will be charged on tax arrears for the assessment year 2021 as of 01.10.2022, it is advisable to review the tax situation and the expected tax burden for the years 2021 and 2022 by October 1, 2022. Furthermore, the application for a refund of input VAT from other EU-countries for the year 2021 must be filed until September 30, 2022.

F. Kleemann / F. Popl / B. Stangar

Austrian Administrative Supreme Court: Interest from hedging transactions in relation to foreign participations is not subject to the deduction prohibition under Art 12 sec 2 Austrian Corporate Income Tax Act

In general, under Austrian tax law, expenses directly related to tax-exempt income is tax non-deductible. Hedging transactions that hedge the currency risk arising from the equity of a foreign subsidiary denominated in a foreign currency serve to hedge the group company's equity. The Austrian Administrative Supreme Court recently confirmed that interest expenses from such hedging transactions are not directly related to tax-exempt dividend income or capital gains from this participation and therefore are not subject to the deduction prohibition under Art 12 sec 2 Austrian Corporate Income Tax Act. Interest income and as well exchange rate differences from such hedging transactions are subject to tax.

F. Kleemann / E. Rohn / S. Ebner-Kaufmann

Electric cars in income tax and VAT law

Cars are subject to numerous complex regulations in tax law. Electric cars (cars with CO₂ emissions of 0 g/km) are only a small part out of this. Due to the generally possible input VAT deduction for electric cars with gross acquisition costs of up to and including EUR 80,000, there are in turn income tax error sources. The correct tax treatment of electric cars therefore requires an interlinked consideration of income tax and VAT regulations. Furthermore, tax effects of tax-free subsidies must be considered.

S. Hofbauer / A. Haselwallner

Austrian Administrative Supreme Court on permanent establishments and the limits of disposal (home office)

In a recent decision, the Austrian Administrative Supreme Court rejected the existence of a permanent establishment through the shared use of a desk. The court argued that in case of a shared desk, the power of disposal over a fixed place of business is not sufficiently given. Although the ruling of the Supreme Administrative Court does not contain any explicit statement on home office PEs, there are voices in Austrian literature that see the court decision as the end of home office PEs in Austria. Whether the ruling will actually have such far-reaching consequences is questionable, even if this would be desirable from a practical point of view. Until a possible clarification by the Austrian Federal Ministry of Finance or further court decisions, the issue of home office PEs should therefore be kept under review.

G. Gottholmseder / T. Hahn

New legal base for tax refunds based on double taxation treaties

A new legal basis for DTT refund applications has been created in Art 240 sec 4 of the Austrian General Fiscal Code (BAO). In addition to a number of clarifications, such as the basic applicability to DTT refund applications and the relationship to voluntary assessments, the regulation also introduces new rules, such as the requirement of actual payment and the general applicability of the 5-year period. Furthermore, the clarification that the period for filing an application in case of tax audits starts with the tax audit and not with the point in time at which the withholding tax should have been paid can be seen as an improvement. 

G. Gottholmseder

New rules on withholding tax relief in case of posting of employees

On Sep 1st 2022, the DBA-Durchführungs-Anpassungs-Verordnung (“DTC-Operational-Adjustment-Regulation”) entered into force. The regulation, which consists of three parts, in particular contains the Verordnung zur Abzugsteuerentlastung bei Arbeitskräftegestellung (“Ordinance on the Relief from Source Taxation in the case of Posting of Employees”). Relief from source taxation according to Art 99 sec 1 no 5 Austrian Income Tax Act on remunerations for the supply of employees for working activities in Austria is newly regulated.

K. Daxkobler

Russsian account holder subject to withholding tax on Austrian source interest starting 1. January 2023

The automatic exchange of information with Russia under the CRS has been suspended by the Ministry of Finance in March 2022. Consequently, Russian account holders cannot claim the exception from the withholding tax on Austrian source interest from 1 January 2023 onwards. 

P. Rümmele

CJEU: Right of holding company to deduct input VAT

Recently, the CJEU (08.09.2022, Rs C-98/21, W GmbH) dealt with a holding company’s right to deduct input VAT and ruled that a holding company is not entitled to deduct input VAT, where, first, the input services have direct and immediate links not with the holding company’s own transactions but with the largely tax-exempt activities of its subsidiaries and secondly, those services are not included in the price of the taxable transactions. 

S. Haslinger / M. Vaishor

Austrian Administrative Supreme Court: Income from property sales in „hobby- corporations”

The Austrian Administrative Supreme Court recently confirmed that sales of real properties are also taxable for corporations whose activities qualify as hobby activities for tax purposes. 

M. Schneiderbauer / E. Müller

COVID-19 related Stamp Duty exemption not only applicable for contracts with relation to sovereign interest  

In Austria, the written conclusion of certain contracts may trigger stamp duty. With regards to contracts which were concluded or amended due to the COVID-Pandemic, a stamp duty exemption is available.

So far, the Austrian tax administration interpreted the stamp duty exemption according to Art 35 sec 8 Austrian Stamp Duty Act as only applicable as long as the relevant contracts / amendments are related to governmental acts needed in relation to COVID-19 measures (eg rental of premises for test centres). The Austrian Federal Finance Court, however, came to the conclusion that also contracts / amendments between non-governmental persons (in the case at hand a hotel operator and its landlord) can fall under the stamp duty exemption if there is an evident connection between the contract/amendment and a measure targeting on minimizing the impacts of COVID-19 (eg extension for rental payment, rent reductions). However, the court also pointed out, that it is in the responsibility of the taxpayer to demonstrate such connection.

I. Ebenberger / F. Fraberger

Austrian Constitutional Supreme Court on the principle of equality in relation to Austrian Real Estate Transfer Tax

According to Art 1 sec 3 Austrian Real Estate Transfer Tax Act, real estate transfer tax is levied if at least 95 % of the shares in a real estate owning are unified within the hands of one shareholder. The Austrian Constitutional Supreme Court has recently ruled that this provision does not violate the principle of equality under Article 7 of the Federal Constitution.  

M. Vaishor / K. Postlmayr

Austrian Federal Finance Court on liability according to Art 11 General Federal Fiscal Code: No right of appeal against tax assessment notices

The liability set out in Art 11 General Federal Fiscal Code is based on intentional fiscal crimes or the intentional infringement of tax rules. Thus, in cases where a taxpayer is liable to pay taxes based on a final decision according to fiscal criminal law, the decision has a binding legal effect for the liability according to Art 11 General Federal Fiscal Code. This applies regardless of the specific content of the underlying tax assessment notice (e.g. VAT assessment notice, income tax assessment notice). Therefore, the taxpayer has no right of appeal against the initial tax assessment notice. 

S. Papst / M. Milekic

Austrian Administrative Supreme Court on the reopening of proceedings: Reasoning by reference sufficient

In the event that new facts emerge after the tax assessment notice has been issued, the tax proceedings may be resumed (Art 303 sec 1 (b) General Federal Fiscal Code / BAO). However, it is necessary that the facts already existed prior to the issuance of the notice. For the reasoning the tax office may also refer to audit reports and audit meeting minutes. Even chains of references are possible according to a recent decision of the Austrian Administrative Supreme Court.

S. Papst / W. Gurtner

Austrian Supreme Administrative Court: Lack of reasons in the notice of annulment pursuant to sec 299 Austrian Federal Fiscal Code (BAO) does not preclude renewed annulment

In the case at hand, the taxpayer filed an appeal against a reasoned annulment assessment (§ 299 BAO) issued by the tax authority, because it had been preceded by an annulment assessment that had already been rescinded due to a lack of reasons. The Austrian Administrative Supreme Court (VwGH) did not recognize any illegality in this approach of the authority (VwGH 04.11.2021, Ra 2021/13/0100).

S. Papst / W. Gurtner

Austrian Federal Finance Court on voluntary self-disclosure and estimation of taxes: Complete exemption from penalty conceivable, even if subsequent payment of tax was incomplete

If a tax has not been paid correctly, the later payment of this tax may constitute an implied voluntary self-disclosure. If this payment is too low due to an underestimation of tax to be paid by the taxpayer, such an implied self-disclosure can – in case of doubt –still result in a complete exemption from penalty according to a recent decision of the Austrian Federal Finance Court.

S. Papst / W. Gurtner