English Summary 03-04/2023

Austrian Ministry of Finance published consultation draft on the Austrian Tax Amendment Act 2023 published 

Recently the Austrian Ministry of Finance published the draft of the Tax Amendment Act 2023. We will soon provide you with a brief overview of the planned tax changes. The review period ends on May 12, 2023. 

C. Plott / F. Kleemann 

Accounting recognition of energy cost subsidy

The Austrian federal government introduced the energy cost subsidy to support energy-intensive business suffering from the substantially increased energy market prices. The Austrian Financial Reporting and Auditing Committee recently published an information on several accounting questions regarding the recognition of the energy cost subsidy.

F.  Kleemann

Unsuccessful application to form a tax group: Obligatory usage of blank forms and filing in original)

The application to form a tax group must be filed by using the “official blank form” due to Art 9 sec 8 Austrian Corporate Income Tax Act. If the application is filed without using this blank form in original, the application is void. The upload of scanned blank forms and filing as so-called other requests (“Sonstige Anträge”) via FinanzOnline has no legal effect.

C. Endfellner

Austrian Administrative Supreme Court on “capital gains transfer” in case of trusts

According to Art 13 sec 4 Austrian Corporate Income Tax Act a (taxable) capital gain from the sale of a participation in a corporation derived by an Austrian trust can be “transferred” to a newly acquired participation amounting to at least 10 % (acquired within 1 year after the sale). In this case, the (initial) capital gain from the sale is not taxable, however, the “transferred capital gains” reduce the tax base of the newly acquired participation; consequently, a future capital gain from the sale of the new participation is insofar increased. Pursuant to a recent decision of the Austrian Administrative Supreme Court, a transfer of capital gains according to Art 13 sec 4 Austrian Corporate Income Tax Act is not possible to newly issued shares of a 100 %-subsidiary of the trust.

M. Petritz / I. Taxacher

Transfer of beneficial ownership with signing or closing?

In terms of M&A transactions, the point in time when beneficial ownership is transferred to the buyer is usually a crucial tax issue. From an Austrian tax perspective, beneficial ownership usually coincides with legal ownership, however, there are some notable exceptions in particular e.g. in case of conditions precedent. The Austrian Federal Finance Court recently reiterated the respective general principles and confirmed that usually beneficial ownership is transferred upon closing of a deal.

M. Vaishor

Privileged taxation at half the average tax rate according to Art 37 sec 5 Austrian Income Tax Act requires the disposal of the entire partnership interest

A proportional disposal of partnership interests qualifies as a transaction within the meaning of Art 24 of the Austrian Income Tax Act. The retention of business assets owned by the selling partner does not preclude this. However, the privileged taxation at half the average tax rate according to Art 37 sec 5 Austrian Income Tax Act requires the disposal of the entire partnership interest according to a recent decision of the Austrian Administrative Supreme Court. 

E. Rohn

Restriction of the reliance rule in connection with a goodwill amortization in a tax group

Under Austrian tax law, financially related corporations may form a tax group for CIT purposes. For share-deals prior to March 1, 2014, there was the option of a goodwill amortization for tax purposes (spread over 15 years). The prerequisite was an acquisition from a third-party entity and the inclusion of the acquired entity in the tax group. In order to continue the goodwill amortization after March 1, 2014, a reliance rule was introduced. Accordingly, this was only possible if the tax advantage from the goodwill amortization could already have an effect on the purchase price determination at the level of the direct acquirer at the time of acquisition. In the case of an import contribution, it is possible to recognize the assets to be contributed at their fair value. According to parts of the literature, the exercise of this option leads to the fact that the reliance rule is relevant. This has now been rejected by the Austrian Federal Finance Court.

L. Andreaus / J. Derflinger

 

The German Federal Fiscal Court submitted another request for a preliminary ruling to the CJEU: Are internal transactions of a VAT group taxable?

The German Federal Finance Court submitted another request for preliminary ruling to the European Court of Justice concerning the German VAT group. The CJEU is asked whether transactions carried out between members of a VAT group are taxable or not. The German Federal Fiscal Court further asked whether the fact that the recipient is not entitled to (fully) deduct input VAT does have an impact on the qualification of the taxability of these internal transactions of a VAT group. As the German rules are similar to the Austrian ones the decision will be interesting also for Austria. 

A. Helnwein / S. Stadik

No VAT liability due to a VAT invoice if the risk of VAT loss is prevented

In cases where it is more likely than not that services are only received by non-taxable persons, there is generally no VAT liability based on the invoice. However, since it cannot be guaranteed that no taxable person (entitled to deduct input VAT) is among the recipients of the services and has rightly or wrongly deducted input VAT, a VAT liability can be assessed by way of estimation. An invoice correction towards the non-taxable persons is not necessary.

E. Freitag / A. Mühlberger

The denial of input VAT deduction in cases of VAT fraud

On November 24, 2022, the CJEU judgment on the Finanzamt M case (C-596/21) was published. In this case, the CJEU had to deal with the question of how far the input VAT deduction can be denied in the case of VAT fraud. The CJEU concludes that the denial of the input tax deduction is not limited to the amount that led to an actual VAT loss and it is also not relevant whether the first supplier in a VAT chain knew or should have known about the existence of the fraud. 

E. Freitag / C. Pollak

BFH regarding consideration of transfer price adjustments when determining the customs value

In line with the opinion of the CJEU, the German Federal Fiscal Court rejects the refund of import duties if the transaction value is subsequently adjusted as a lump sum by means of a transfer pricing adjustment and neither the amount nor whether the adjustment will be upwards or downwards is determined in advance.

E. Freitag / A. Mühlberger

 

Provision of bikes and electric vehicles to employees

With effect from January 1^st, 2023, this administrative practice was codified and expanded in the “Sachbezugswerteverordnung” (Ordinance on the valuation of benefits in kind). Accordingly, not only (temporary or permanent) salary conversions in favor of bicycles are accepted, but also those in favor of electric cars. Since the “Sachbezugswerteverordnung” is also relevant for social security contributions, such changes to employment contracts (irrespective of legal consequences under labor law) must now also be taken into account for the purposes of social security contributions. 

A. Shubshizky / K. Daxkobler

 

Current Developments in Austria’s Tax Treaty Network

Austria disposes of a comprehensive network of tax treaties. Currently, some changes are to be expected in this field. On the one hand, this is true for Austria’s tax treaty with South Korea, which will be amended in some respect by 2024. Moreover, the tax treaty with Germany shall be subject to revision. Last, but not least, it may happen that Austria’s tax treaty with Russia will fall apart.

F. Rosenberger

Calculation of the Maximum Deduction with respect to Foreign Tax Credits

The calculation of the maximum deduction for foreign source taxes is subject to the basic principle, that income taxation always refers to a certain tax year. Consequently, expenses incurred in the current tax year (e.g. expenses associated with current R&D projects) do typically not reduce the maximum deduction amount applicable to foreign source taxes levied on income earned in the same tax year (e.g. royalty income earned in consequence of R&D projects carried out in previous tax years).

F. Rosenberger

Austrian MoF’s opinion on the donation of a “GmbH”-participation with French real estate

A transfer of a stake in an Austrian GmbH owning a property located in France (via several intermediary companies), on the occasion of death of a resident of Austria to a charitable Swiss foundation is subject to Art 1 sec 1 and sec 2 of the Austrian Foundation Entrance Tax Act (AFETA) and triggers the Austrian foundation entrance tax. This is based on the Ministry of Finance’s interpretation of AFETA in connection with Art 5 sec 3 DTT(inheritance)-Austria-France which extends the concept of “immovable property” to include shares, shares or other rights in a company, the assets of which, directly or indirectly, are principally immovable property located in France. However, it should not be based on an arithmetical predominance, i.e. more than 50%, but in particular on whether property ownership is the main business purpose of the Austrian company. If the participation is qualified as immovable property within the meaning of Art. 5 sec 3 DTT (inheritance)-Austria France Austria would have to exempt assets from taxation.

C. Juritsch

 

Austrian Federal Finance Court on the requirements for a tax neutral contribution of real properties

The Austrian Federal Finance Court recently confirmed once again that the distinction between pure asset management and a real estate business within the meaning of the Austrian tax provisions must be based on the overall picture of the circumstance. In a recently decided case, the sale of five properties within six years was not sufficient for a commercial real estate business due to the circumstances of the individual case. As a result, a tax-neutral contribution of a real estate portfolio within the Austrian Reorganization Tax Act was not possible. A tax neutral reorganization of real properties is only feasible if there is a business (i.e. commercial leasing including the provision of atypical ancillary services or commercial real estate trading). 

M. Vaishor / K. Postlmayr

Austrian Federal Finance Court on Austrian Real Estate Transfer Tax in relation to expiration of the building right

A building right within the meaning of the Austrian Building Right Law is the right - limited in time - to have a building on or under the ground area of a plot of land. If a building right is granted for the first time, Austrian Real Estate Transfer Tax (RETT) is triggered at the time of the conclusion of the contract. After the expiry of the building lease, the building generally falls back to the landowner. According to the prevailing opinion, the reversion of the building also triggers Austrian RETT. If an agreement in the building lease contract on the reversion of the building lease complies with the respective provision of the Austrian Building Right law in terms of its content, the obligation to pay Austrian Real Estate Transfer Tax with respect to the building shall only arise upon the actual reversion to the landowner. The Austrian Federal Finance Court recently confirmed this.

M. Vaishor / K. Postlmayr

Austrian Administrative Supreme Court on the tax exemption for self-constructed properties

Capital gains from the sale of real property derived by individuals are subject to tax with a flat tax rate of 30 % (January 1, 2016 – present). These capital gains are exempt if the property was self-constructed by the seller (inter alia). However, the exemption is applicable only to the extent that the constructed building has not been used to generate income within the last ten years. The Austrian Administrative Supreme Court recently decided the following: If a building has been constructed with the intention of a future rental, the exemption for self-constructed properties is not applicable in case of a sale. 

M. Vaishor / K. Postlmayr

 

Austria’s implementation of DAC7: Consequences under financial criminal law in case of infringements – voluntary self-disclosure (not) allowed

Austria’s Digitale Plattformen-Meldepflichtgesetz (“DPMG”) transformed DAC7’s new obligations for platform operators into domestic law. The “DPMG” not only implemented the automatic exchange of information and reporting obligations, but also introduced a sanction mechanism under financial criminal law in the event of non-compliance. For most offences, the maximum penalty is EUR 100,000 (gross negligence) or EUR 200,000 (intent). Voluntary self-disclosure is explicitly excluded. The authorities in charge of financial criminal law are responsible for prosecuting the offences.

S. Papst / W. Gurtner / E. Hemetsberger

No access to files for the liquidator of a GmbH in the financial criminal proceedings of its directors

According to the Austrian Administrative Supreme Court, the liquidator of an insolvency estate has no right to inspect the files of the proceedings, if financial penalty proceedings are only conducted against the former directors of the insolvent company. Since fines under the Austrian Companies Criminal Code are to be regarded as fines for punishable acts within the meaning of Art 58 sec 2 of the Insolvency Code (IO) and thus cannot be asserted as insolvency claims, the assets are not affected by the imposition of a fine against the company. Due to the absence of any contact with the insolvency estate, the liquidator of the insolvency estate is not authorized to represent the insolvency estate in matters concerning the imposition of a fine for a financial offence under the Companies Criminal Code (VbVG). 

S. Papst / E. Hemetsberger / W. Vötter