English Summary 10/2022

Austria to adjust income tax rate brackets for inflation automatically

By way of the „Teuerungs-Entlastungspaket Teil II“ (Price Increase-Relief package Part II), the income tax rates and certain tax deductions will be adjusted to the inflation rate for the first time. While the tax rate levels for the calendar year 2023 are raised to various extents, an automatic inflation adjustment mechanism will be in effect as of 2024 effecting a uniform increase of tax rate levels and tax deduction amounts to the extent of two thirds of the average inflation rate.

Furthermore, the legislative package provides for a reduction of the rate of contributions to the family allowance fund (“DB”) from 3,9 % to 3,7 % as of 2023. 

A. Shubshizky / K. Daxkobler

Draft bill of 13 October 2022: Changes/clarifications of/to the Income Tax Act, inter alia tax-deductibility of severance payments from social plans based on the Decision of the Constitutional Court.

Based on the draft bill of 13 October 2022 some changes to the Austrian Income Tax Act are expected. Some of the changes relate to the current inflation developments and price increases. However, the most significant change relates to the tax-deductibility of severance payments from social plans as from 1 January 2023. 

C. Plott / M. Milekic

Austrian implementation of DAC7 introduces comprehensive reporting obligations pertaining to “Platform Economy”

The sixth amendment (“DAC7”) of Council Directive 2011/16/EU aims at adopting existing provisions on the administrative cooperation of EU tax authorities and, additionally, introduces new due diligence and reporting obligations for operators of online platforms. At its core, EU and certain non-EU platform operators shall be obliged to collect, verify and report comprehensive tax-related data on certain sellers and their activities (i.e. rental of immoveable property, personal services, sale of goods and rental of any mode of transport) facilitated via the platform. Subsequently, this information is subject to an automatic exchange between the tax authorities. By this means, increased transparency shall help the tax authorities to better tackle potential fraud, tax evasion and tax avoidance within the thriving field of “platform economy”. Austria’s Digitale Plattformen-Meldepflichtgesetz (“DPMG”) transformed DAC7’s new obligations for platform operators into domestic law. As DPMG comes into effect as of 1.1.2023 and in view of fines to be faced in case of infringement, potential platform operators should assess their DPMG risks in good time and implement appropriate measures to comply with the new rules if necessary. KPMG is happy to provide support in this regard.

M. Petritz / K. Krippner / M. Zwick-Pevny

Draft ordinance on cryptos according to Art 93 sec 4a Austrian Income Tax Act

More than half a year after the new provisions on crypto taxation came into force on 1 March 2022, a draft of the ordinance and the corresponding explanations are now available on how exactly to proceed in those cases in which the acquisition costs and the acquisition date of cryptocurrencies are not known. This is necessary because crypto service providers will be obliged to deduct capital gains tax on income from cryptocurrencies within the meaning of Art 27b Austrian Income Tax Act as from 1 January 2024, and until now there has been no regulation on the form in which the information of the taxpayer must be provided in such cases, and how the acquisition costs must be recognised in the case of acquisitions of the same cryptocurrency in chronological succession. The review period ends on 9 November 2022. 

M. Petritz / M. Deichsel

Energy cost subsidy – Initial information about the funding regarding price increase of gas, electricity and fuel

The war in the Ukraine led to enormous price hikes of energy in Austria. Thus, an energy cost subsidy for companies should partially compensate the increase of prices compared to the previous year. 

Energy-intensive and operational active companies with headquarters or permanent establishments in Austria could apply upon 15th November 2022 for a funding (4 funding levels) between TEUR 400 to EUR 50 Mio. The funding period will be 1st February to 30th September 2022, whereas basically the funding amounts to 30% of the price difference between 2022 and the previous year. Furthermore, the maximal funding amount is based on the energy consumption in 2022. Fundable sources of energy are natural gas, electricity and in the first funding level also fuels. 

Among others the sectors energy production, petrol industry, agriculture, banking and insurance and governmental units are excluded.

A company is energy-intensive, if the costs of energy exceed 3% of the production value (turnover, including subsidies directly linked to the price of the product, plus or minus the changes in stocks of finished products, work in progress and goods and services purchased for resale, minus the purchases of goods and services for resale of the company) determined in European energy taxation directive. The applicable period for the calculation will be the annual statements 2021 or 2021/2022 or the funding period. In case of turnover not exceeding TEUR 700 this funding criterium is not applicable. So far, the value-added method (the energy related taxes exceed 0,5 % of total turnover liable to VAT including export sales minus the total purchases liable to VAT including imports) was not mentioned by the government.

It should also be noted that the funded companies must oblige to bonus payment restrictions and on the other hand side energy-saving measures until 23^rd March 2023.

More details will be determined in the funding directive which is not notified by the EU and thus not published by the Austrian funding agency Austria Wirtschaftsservice GmbH.   

 O. Mavher / M. Petritz

Carbon Border Adjustment Mechanism (CBAM): reporting obligations are starting in 2023 – what preparations can make the start easier

The „fit for 55“ package includes the implementation of a Carbon Border Adjustment Mechanism (CBAM). Without a registration as an authorized declarant, it will not be possible to import “CBAM-goods”. The transitional period already starts in 2023 so that as of 2023 first reporting obligations already have to be fulfilled. Preparations for these reporting obligations should be started now.

A. Helnwein / S. Stadik

New information of Austrian Ministry of Finance regarding the reclaim of withholding taxes on dividend distributions

The Austrian Ministry of Finance issued the draft of an amended information regarding the reclaim of Austrian withholding tax on dividend distributions by non-resident shareholders. According to this new draft guidance the foreign shareholder who holds the shares on his custodian account on the day before the General Assembly deciding on the dividend distribution is entitled to reclaim Austrian withholding tax. This new practice may produce deviations from what is documented on the usual tax vouchers which refer to the record date.

S. Haslinger / A. Cserny

Work State Principle – things are remaining the same, aren’t they? 

According to a recent decision of the Austrian Supreme Administrative Court (VwGH), in case of cross-border government services, the place of work was to be found in the residence state of the recipient (and not in the working state of the employee). This decision contradicts the clear wording of the underlying provisions. However, it may well be expected, that this decision will not bring a paradigm shift apart from this particular case (as well as comparable cases between Austria and Switzerland).

F.  Rosenberger

Transfer Pricing Documentation and Penalties in line with EU law 

According to a recent decision of the Court of Justice of the European Union (ECJ 13.10.2022, X GmbH & Co. KG, C-431/21), transfer pricing documentation requirements (as well as related penalties) can be in line with EU law, even if they are applicable only in a cross-border context. This decision reflects the main criteria taken into account by the German Bundesfinanzhof (BFH 10.04.2013, I R 45/11, BStBl II 2013, 771) in a former decision.

F. Rosenberger

Austrian Administrative Supreme Court on recognition of provisions for onerous rental agreements

In general, a taxpayer may recognize a provision for a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. In practice, in particular rental contracts often lead to discussion with the tax authorities in the course of tax audits. In a recent case, a taxpayer recognized a provision for future losses from rental contracts for several stores. Some of the stores were closed and other stores were only expected to achieve a negative profit margin since the quality of the location declined in relation to the originally agreed rent. According to the decision of the Austrian Federal Finance Court only the provision for the closed stores was accepted since the rent (to be payable due to a fixed contract runtime) was paid for useless premises. However, the provision was not accepted for stores that only contributed a negative profit margin (but were nonetheless continued since closing the stores would even have increased the negative profit margin) as this was viewed as a general business risk. Recently, the Austrian Administrative Supreme Court confirmed this view. 

M. Vaishor / K. Postlmayr

Substantial reliefs regarding the hiring of foreign specialists

As of October 1, 2022, substantial changes for the recruiting of foreign specialists entered into force.

Amendments were made to the Alien Employment Act (Ausländerbeschäftigungsgesetz), the Labor Market Promotion Act (Arbeitsmarktförderungsgesetz), the Settlement and Residence Act (Niederlassungs- und Aufenthaltsgesetz) and the Aliens Police Act 2005 (Fremdenpolizeigesetz 2005).

K. Daxkobler

Austrian Federal Finance Court on requirements for an expert’s opinion to demonstrate a shorter useful life for rented properties

According to the Austrian Income Tax Act, the depreciation rate for buildings used to generate income from letting and leasing is 1.5 %, which corresponds to a useful life of 66.67 years. By means of an expert’s opinion, a shorter useful life can be substantiated. Recently, the Austrian Federal Finance Court confirmed that such opinion is subject to strict requirements. In particular, the expert’s opinion must refer to the time of the first rental and the connection between detected defects and the estimated period of use must be explained in a comprehensible manner.

M. Vaishor / A. Lunzer

BFG: Commercial real estate trading in case of sale of 30 plots of land in four years

The Austrian Federal Finance Court (BFG) recently concluded that in case of a reclassification and parceling of land belonging to an agricultural and forestry operation the sale of a larger number of plots of land may constitute (taxable) commercial real estate trading pursuant to Art 23 of the Austrian Income Tax Act particularly if the focus is on the realization of the capital gains rather than the continued use of the properties as an investment. 

M. Vaishor / K. Postlmayr / B. Stangar 

RETT: Fair value cannot be estimated based on the real estate value 

Austrian real estate transfer tax (RETT) is generally calculated from the purchase price, at least from the real estate value. The real estate value has to be determined either according to a lump sum calculation based according to the real estate value ordinance or by using a suitable real estate price index. The real estate value was introduced as a taxable value in 2016. Prior to its introduction instead of the real estate value the minimum tax base for calculating RETT was the fair value.

The Austrian Federal Finance Court recently ruled that for the determination of RETT for transactions prior to 01.01.2016 there is no legal basis for using the real estate value instead of the fair value and that an estimate of the fair value in the amount of the real estate value cannot be considered as it is significantly below the prices that can actually be achieved.

M. Vaishor / F. Popl

Accretion due to withdrawal under § 142 Austrian Corporate Law is subject to RETT even without consideration

If the last but one unitholder of a partnership leaves the partnership, the assets and liabilities of the partnership are transferred to the remaining unitholder legally by way of universal succession. In such case, the Austrian Federal Finance Court recently confirmed the established case law that the assumption of liabilities also constitutes a consideration for the purposes of calculating real estate transfer tax.

M. Vaishor / A. Lunzer

Draft 2022 update of Austrian VAT Guidelines

Recently, the Austrian tax authorities published the draft update 2022 of the Austrian VAT Guidelines. 

F. Kleemann / E. Freitag

New Withholding Tax Reporting as from 2024

The Austrian Tax Amendment Act 2022 introduces a new form of withholding tax reporting which will come into force in 2024. The Austrian Ministry of Finance will likely issue an ordinance later this year. 

A. Cserny / L. Franke

Austrian Administrative Supreme Court on purchaser’s liability: Liability for taxes without preceding tax assessment

According to Art 14 Austrian Federal Fiscal Code there is a limited liability for taxes for a purchaser of a business. In the specific case it was questionable whether the liability of a purchaser for a VAT debt of the seller was lawful without a preceding VAT assessment (so-called "purchaser liability"). In this regard, the Austrian Administrative Supreme Court concluded that according to tax law the assertion of liability requires the existence of a tax debt, but not that this debt has been asserted against the taxpayer. In such cases, there is no legal deficit, because the liable party can raise objections against the unassessed tax claim in the liability proceedings; provided that the tax office has informed the liable party of the reason and amount of the specific tax debt. 

S. Papst / W. Vötter

Request for suspension of levying CIT: Expatriation of managing director not relevant for the assessment of the application 

If the managing director of an Austrian private limited company (GmbH) moves his residence to Spain, this is no obstacle for the approval to suspend the levy of the GmbH’s CIT. Taxpayer is the GmbH, and the company did neither change the seat nor transfer assets abroad.

C. Endfellner

Austrian Administrative Supreme Court on obligation to clearly identify the recipient of payments: No assessment by the Austrian Federal Finance Court on the submission of the taxpayer - violation of procedural rules

The Austrian Tax Authorities and the Austrian Federal Finance Court did not accept the taxpayer’s deduction of operating expenses, because according to their opinion the named recipients (two limited liability companies) could not provide the underlying services due to their lack of existence in the period of performance. As a result, they could not be the true recipients. The Austrian Federal Finance Court did not pay any attention to the submission by the taxpayer that the deducted payments had been taxed at one of the designated limited liability companies. For this reason, the Austrian Administrative Supreme Court annulled the Austrian Federal Finance Court’s ruling due to a violation of procedural rules.

S. Papst / W. Vötter / S. Rettenbacher

Austrian Administrative Supreme Court: Liability of an association’s chairperson for turnover tax debts

The liability of representatives under tax law according to Art 9 Austrian General Federal Fiscal Code (BAO) also applies to persons, who represent an association according to the statutes. Representatives are liable with their personal income and assets for negligently unpaid taxes of the association. If the concept and statutes of an already existing swingers’ club are adopted for the foundation of another swingers’ club without inquiring with the tax authorities or an expert in tax law, under which conditions it is permissible to run a swingers' club as a charitable association, negligence is to be assumed.

S. Papst / W. Vötter

Voluntary self-disclosure: requirements and seven practical tips

The voluntary self-disclosure enables the taxpayer to return to tax honesty. When preparing a voluntary disclosure, the legal requirements must be met. These are discussed in the following article. In addition, practical tips & tricks will be pointed out.

S. Papst / W. Gurtner