English Summary 05-06/2023

Draft bill of the Tax Amendment Act 2023

On June 14, 2023 a government bill of the Tax Amendment Act 2023 (“AbgÄG 2023”) was brought before the Austrian parliament. The AbgÄG 2023 includes some positive initiatives and changes as well as various clarifications regarding Austrian tax law. Moreover, the quota system for tax advisors was incorporated into law.

C. Plott / M. Milekic

New quota regulation for filing tax returns

The deadline for submitting tax returns (electronically) is June, 30^st  of the following year. However, if the taxpayer is represented by a certified Austrian tax advisor, the deadline for filing the tax return is extended to March, 31^st of the second following year. This extension of the deadline is regulated in the quota agreement between the chamber of Austrian tax advisors and the tax authorities.

With the Tax Amendment Act 2023 (draft bill), the previous quota agreement will be defined in law and will be stricter. Inclusion in the quota will be restricted. Income tax returns containing only non-self employed income will be excluded from the quota agreement.

The quota has to be fulfilled in five partial quotas of 20 % each. The deadlines for partial fulfilment of the quota remain unchanged, but there is a shortening of the deadlines for tax declarations that contain determinations of business income (Feststellungserklärungen).

Despite the quota agreement, the tax office can recall quota declarations early for certain reasons. These are listed in the quota regulation ordinance.

Failure to comply will result in penalties and quota exclusions. Against this background, the tax return preparation process should be reviewed and, if necessary, brought forward.

S. Resei

Draft bill for Tax Amendment Act changes transfer of hidden reserves for trusts

Due to the recent jurisdiction of the Austrian Administrative Supreme Court, the provision for trusts regarding the tax-neutral transfer of realized hidden reserves to newly acquired participation is adjusted accordingly.

M. Petritz / I. Taxacher

Draft law: Implementation of a new tax incentive regime regarding employee participation programs of start-ups

Pursuant to draft law, Austrian intends to implement a new tax incentive regime regarding employee participation for start-ups.

If certain requirements in conjunction with employee participation programs of startups are met in the time of the granting of the shares, the benefit in kind is not taxable at the moment of granting theses shares but consequently when the shares are sold, or other trigger events happen. The benefit in kind is – if the shares are held at least five years, and the employment relationship has lasted at least three years – in the amount of 75 % taxable with a tax rate of 27,5 % whereas the residual amount is taxable with the applicable tax rate. 

K. Daxkobler / O. Mavher

Draft law: new company „FlexCo”

According to draft law, Austria intends to introduce a new legal form for companies, the “FlexCo” which is supposed to be a hybrid between a public and a limited liability company. A FlexCo is intended to attract venture capital investments and start-ups.

F. Kleemann / M. Vaishor

 

Formation of an Austrian tax group between sister companies

Austrian group taxation entails the pooling of all tax results of the group members. One of the main criteria for the formation of an Austrian tax group is a participation in the capital and voting rights amounting to more than 50 %. There has been an ongoing discussion in Austria, whether – based on the jurisdiction of CJEU – also a tax group between mere sister companies held by a foreign company can form a tax group. Due to a procedural error the Austrian Administrative Supreme Court made a decision by the Austrian Federal Finance Court void. However, the Austrian Federal Finance court corrected the procedural error and again confirmed that the formation of a tax group should be possible in such case. However, the Austrian tax authorities (again) filed an appeal to the Austrian Administrative Supreme Court.

F. Kleemann

Austrian Federal Fiscal Court on the income classification of shares held in a two-tier partnership

In a recent decision, the Austrian Federal Finance Court concluded that in case of a two-tier public co-entrepreneurship, income from trade or business is established for the trustors. The Austrian Federal Finance Court concluded from the underlying facts that the requirements for the status of co-entrepreneur were met. This requires that the partners have entrepreneurial initiative and bear an entrepreneurial risk. Since the trustors exercised their influence on business operations through the limited partner (i.e., sole trustee) representing them, the BFG answered the question of co-entrepreneurship in the affirmative and subsumed the income under income from business operations (Art 23 sec 2 Austrian Income Tax Act). 

C. Juritsch

 

EU Commission proposes directive on Faster and Safer Relief of Excess Withholding Taxes

Currently, in case of cross-border investments, many Member States levy withholding taxes on dividends on holdings of equities and on the interest on holdings of bonds paid to investors who live abroad. Withholding may be reduced or refunded by the respective double taxation treaty concluded between the source state and the state where the investor is resident. The problem is that these refund procedures are often lengthy, costly and cumbersome, causing frustration for investors and discouraging cross-border investment within and into the EU. The new residence certificate will allow investors to submit their withholding tax refund request digitally, making the reclaim process faster and smoother. More information can be found here: https://taxation-customs.ec.europa.eu/taxation-1/corporate-taxation/faster-initiative_en

M. Vaishor

 

VAT in the digital age

On 12/08/2022, EU Commission proposed measures to comprehensively modernize EU’s VAT-system (“VAT in the digital age”, ViDA). By amending Directive 2006/112/EC and corresponding EU regulations, the draft legislative package primarily aims at combating tax fraud in the field of VAT. To reduce EUs’ VAT gap, digitalization shall take on a key role. The proposal includes three measures: new real-time digital reporting requirements (“DRRs”) based on e-invoicing replacing the current (inefficient) system of Recapitulative Statements, addressing challenges of the platform economy, and avoiding the need for multiple VAT registrations by enhancing the existing “VAT One Stop Shop” model. Thus, in future, ViDA might have a profound impact on VAT compliance of businesses and their IT prerequisites. It is to note, that the proposed changes are subject to unanimity voting by the Council. Pertaining to new DRRs, reporting obligations go hand in hand with the issuance of invoices. From 2024 onwards, proposed changes to VAT rules shall enable member states to voluntarily make e-invoicing the default system for such issuance – even on a mandatory basis. Under the amended Directive 2006/112/EC, an e-invoice shall be compliant with the European standard on e-invoicing and the list of its syntaxes pursuant to Directive 2014/55/EU, as currently known from B2G transactions. From 2028 onwards, a new real-time digital reporting system based on the underlying EU-standard for e-invoicing shall come into force. E-invoices will then have to be reported to the tax authorities two days after issuance. However, this reporting obligation will only become mandatory for companies with their cross-border B2B-transactions in the EU. On a voluntary basis, member states might impose domestic reporting obligations for other transactions (eg domestic B2B or B2C transactions) as well. In these cases, reporting obligations must be in line with the fundamental principles of EU VAT rules for the mandatory reporting of cross-border B2B transactions. Having these potential but profound changes in mind, businesses should proactively reconsider upcoming VAT risks and their impact on VAT compliance and IT systems in good time. KPMG is happy to support you with our combined VAT and IT expertise to successfully tackle the challenges ahead.

K. Krippner / C. Lackinger / M. Zwick-Pevny

 

Recent developments in European Social Security Law in respect of cross-border telework – Multilateral European Framework Exception Agreement enters into force on July, 1^st, 2023

Cross-border telework can often result in an undesired change of the applicable social security law system, from that of the employer’s seat state to the employee’s residence state. After Austria having recently concluded bilateral framework agreement with Germany, Slovakia, and the Czech Republic for the sake a simplified process to grant exceptions, a multilateral European Framework Exception agreement is entering into force on July, 1^st, 2023, according to which no change of the social security regime will take place upon application.

K. Daxkobler / A. Shubshitzky

 

Austrian Administrative Supreme Court on real estate transfer tax in case of “accretion” according to Art 142 Commercial Code

If the last but one partner of a partnership leaves the partnership, the assets are transferred to the last remaining partner by way of universal succession and the partnership is eliminated legally. If real property is part of the assets, real estate transfer tax is triggered. In a recent decision, the Austrian Administrative Supreme Court confirmed that even if the (former) partners of the partnership are related, the reduced tax rate (for transactions between relatives) is not applicable as the assets are acquired from the (dissolved) partnership.

M. Vaishor

 

After valid receipt of a letter via FinanceOnline that remained unnoticed, no request for restoration possible

The taxpayer receives a letter by the tax office, in which the tax office demands further details regarding an appeal, to be responded to within one month. This letter is sent to the DataBox in FinanceOnline. As the previous communication was per ordinary post and as the taxpayer gets no e-mail about the receipt via the DataBox, the month expired without any action. This fact cannot be reversed with a request for a restoration of the previous condition (“Wiedereinsetzung in den vorigen Stand”), as the (non-)action of the taxpayer (no knowledge about the receipt) exceeded slight negligence.

C. Endfellner

Late response of taxpayer regarding a request to complete the necessary facts in an appeal is invalid

An entrepreneur files an appeal without an explanatory statement. If the tax office requests this statement and the entrepreneur does not respond in time, the appeal is regarded as automatically withdrawn. 

C. Endfellner

 

DAC 8: reporting and exchange of information on crypto-assets and cross-border rulings to certain individuals agreed by the EU Council

While the upcoming regulatory framework MiCA (Markets in Crypto Assets) has recently been in the focus of attention regarding the regulation of crypto assets, on 16 May 2023 the EU Council agreed on another directive that was already presented as a final proposal by the EU Commission in December 2022 and deals with tax transparency. The eighth stage of the amendment to the Directive on Administrative Cooperation (DAC) provides for the tax authorities of EU Member States to collect information on crypto assets, NFTs and stablecoins from taxpayers and to pass it on to other EU Member States. Once again, crypto-assets will therefore become the focus of comprehensive regulation.

M. Petritz / M. Deichsel

Changes and Innovations in the Austrian Beneficial Owners Register Act (BORA) according to the current draft(s) of the Ministry of Finance amending BORA

The Registration Authority (Ministry of Finance – MoF) recently presented a draft amending the Austrian Beneficial Owners Register Act (BORA) with changes to the current legislation by

• introducing the obligation to prove a “legitimate interest” for third parties to access UBO-data in the Austrian UBO-Registry.
• extending mandatory reportable data with respect to nominee/fiduciary relationships and information on the percentage of assets granted to a local or foreign foundation/trust by the grantor/settlor/trustor;
• extending the legitimate objectives of the Austrian UBO-Registry and the data held therein in order to enforce international sanctions, enhance transparency of public procurements and the collection of public revenue (e.g., for combatting dummy companies);
• granting access and enhancing powers in the Austrian UBO-Registry to a greater number of local authorities;
• intensifying the cooperation between local and foreign authorities and organisations to fulfil the newly enhanced objectives of BORA, including the exchange of data and documents;
• introducing/specifying reporting obligations with respect to non-reportable entities that become reportable as well as with respect to reportable entities that become non-reportable and wish to exercise their new non-reportable status;
• amending and enhancing financial criminal offences with respect to reporting violations as well as to applications for access to the UBO-Registry by third parties without “legitimate interest”;
• introducing a new ranking for tax authorities regarding the recipient of the service of documents starting administrative procedures to enforce missing/late UBO-Reports, to be primarily delivered to authorized recipients, yet to the obliged entity only in case no authorized recipient was established towards (all) tax authorities.
• applying BORA also to the new legal form of a “Flexible Company” according to the draft legislation as part of a corporation law act 2023 presented most recently by the Ministry of Justice. These new Flexible Companies will generally be exempted from UBO-Reporting due to non-sufficient ownership interests (below 25%) of shareholders according to Art 6 BORA.

C. Edelhauser

Insurance Premium Tax instead of VAT for paid guarantee promises in all industries

The German Federal Finance Court (BFH) ruling of 14 November 2018 has prompted the German Federal Ministry of Finance to change its legal opinion on the treatment of paid guarantee promises (“entgeltliche Garantieszusagen”) for VAT and insurance tax purposes. Under new tax decrees issued by the German Ministry of Finance, the additional warranty payments are largely to be considered as insurance benefits subject to German insurance premium tax (IPT) instead of VAT in all industries as of January 2023. Due to the insofar comparable regulations of the Austrian IPT Act, the question now arises as to what effects this may have in Austria.

U. Zehetner / C. Glantschnig / T. Grilz