English Summary 10/2023

Draft Law on Non-Profit Reform 2023

On October 12, 2023, the already long-awaited draft law on the reform of non-profit status and donation relief was published and promises improvements for non-profit and charitable organizations as well as a significant expansion and simplification of donation relief. In addition, the financial reward for the many people working on a voluntary basis in Austria will be made more attractive from a tax perspective. In the future all charitable organisations can be eligible for the legal donation beneficiary. Furthermore, substantial procedural facilitations will be established. 

K. Kovacs / K. Oberhuber / M. Petritz / T. Schuh

Amendments to the investment funds taxation in Austria

The Austrian government recently published a new Venture Capital Fund Act (WKFG) providing for a new legal investment funds entity. Additionally, the new legislation has brought an amendment of the threshold for the acquisition of illiquid assets by other closed-end funds as well as an update for tax provisions for the taxation of interest income derived by investment funds from non-publicly offered debt instruments.

P. Rümmele / A. Cserny

ATAD Interest Limitation Rule: Draft of the Non-Carbon Infrastructure Ordinance

The Austrian Ministry of Finance has published a draft of the Non-Climatic Infrastructure Ordinance regarding the ATAD interest limitation rule. Because of an exemption provision within the interest limitation rule interest expenses for loans to finance long-term public infrastructure projects do not need be included into the calculation for the interest limitation. The ordinance will specify under which conditions the exemption provision can be applied:

1. the infrastructure project shall not be for the transport or storage of fossil fuels
   
2. the infrastructure project shall be subject to a climate change adaptation assessment demonstrating that the infrastructure project will not increase relative greenhouse gas emissions.

If the exemption for infrastructure projects is used, an expert’s opinion, which demonstrates that the infrastructure project is not climate-damaging, should be attached to the corporate income tax return.

In this case, the income from long-term infrastructure projects has to be disregarded when determining the EBITDA. Therefore, in practice, it should be considered on a case-by-case basis whether the provision should be applied or not.

C. Plott

 

Austrian Federal Finance Court on the change in the economic structure with respect to the Austrian loss trafficking rules

As a general rule tax loss carry-forwards can be utilized indefinitely. However, based on the Austrian loss trafficking rules, tax loss carry forwards are disallowed if the identity of the taxpayer changes pursuant to a significant change of the organizational,economic and shareholder structure. Please note that all three requirements must cumulatively be fulfilled in order that tax loss carryforwards are disallowed.

In a recent decision, the Austrian Federal Finance Court denied a change in the economic structure with respect to the Austrian loss trafficking rules although a change of the business activity, which remains in the real estate sector, and a substantial enhancement in the business assets took place. This was argued in particular with the fact that the changes of the business activities and assets were not planned in advance and are only the outcome of a unique market opportunity. Furthermore, the other two criteria were only barely fulfilled.

M. Vaishor / A. Lunzer / F. Adler

Austrian Federal Finance Court: Does a civil court settlement protect against taxation of a negative capital account pursuant to Art 24 sec 2 Austrian Income Tax Act

The Austrian Federal Finance Court recently ruled (BFG 10.8.2023, RV/7100184/2015) with reference to numerous decision by the Austrian Administrative Supreme Court that a civil court settlement concluded in the past is not binding for the tax determination in subsequent years due to the provision of Art 24 sec 2 last sentence Austrian Income Tax Act (ITA), at least not if negative loss allocations could be offset with other sources of income in the past and no objection to or termination of a commercial co-entrepreneur position in a partnership was expressed. Art 24 sec 2 ITA stipulates that in the event of the withdrawal of a partner who is to be regarded as an entrepreneur (co-entrepreneur) of the business, the amount of his negative capital account which he is not required to replenish is to be recognized as capital gain in any event. The Austrian Federal Finance Court also maintains, with reference to Austrian Administrative Supreme Court case law, that "withdrawal" is to be understood as any form of termination. Also cases in which externally acting coercive measures, lead to the fact that the business ceases to exist. The cessation of the business does not have to be due to a decision of the business owner's will.

C. Juritsch

 

News on Home Office PEs - 2 days in the home office and 3 days at the employers premises do not constitute a home office PE

In EAS 3445, the Austrian Ministry of Finance once again dealt with the issue of home office permanent establishment. The case assessed concerns an employee working in the accounting department of a managing holding. The person works two days per week in her home office and three days in the office provided by the employer. The Federal Ministry of Finance concludes, that this does not create a home office permanent establishment for the employer. At the same time it is suggested that the assessment could be different in the case of management staff.

G. Gottholmseder

BMF publishes Update Information Letter on the Application of the EU Mandatory Disclosure Rules in Austria

On 12 September 2023, the Austrian Ministry of Finance published the update information letter on the application of the EU Mandatory Disclosure Rules in Austria. The update information letter replaces the letter dated 21 October 2020 and cancels its applicability. The changes are partially just clarifying and do not bring significant changes for practice. 

M. Schröger / M. Barz

Amendments to the double taxation treaty with China

A protocol was signed between Austria and the People's Republic of China amending the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income and on capital. The reduction of the withholding tax rate on dividends, the extension of the period for construction and assembly permanent establishments to 12 months, and the abolition of the matching credit provision will have to be taken into account in daily practice.

G. Gottholmseder / M.  Barz

 

Do discounted travel authorizations constitute own consumption for VAT purposes and is the input VAT deduction from the canteen for employees granted?

In a recent ruling of, the Austrian Administrative Supreme Court addressed the questions of whether own consumption exists when employees of a regular transport company purchase travel authorizations at a reduced price (free of charge) for trips during their free time and whether the right to deduct input VAT is granted with regard to the management fee charged by a third-party company, if the third-party company operates a canteen in which employees are offered reduced-price meals.

E. Freitag / A. Mühlberger

Input VAT deduction from erroneous invoices & knowledge of VAT fraud

In a recent ruling, the Austrian Federal Finance Court addressed  questions of input VAT deduction from erroneous invoices and existence of VAT fraud regarding intra-Community supplies and fictitious invoices.

E. Freitag / A. Mühlberger

Denial of triangular transaction simplification in case of invalid recipient VAT-ID on the invoice

In a recent ruling, the Austrian Federal Finance Court addressed the question of whether the triangular transaction simplification can be applied even though the VAT-ID of the recipient indicated on the invoice was invalid when the supply was made. Since the supply has to be made to taxable person within the meaning of the Austrian VAT Act when applying the triangular transaction simplification, the simplification cannot be applied if an invalid VAT number is indicated on the invoice.

E. Freitag / C. Pollak

 

Suspension of the limitation period in court proceedings: unlimited in time?

In its judgment of July 13, 2023, Napfény-Toll, C-615/21, the CJEU addressed the question of whether the suspension of the statute of limitations in pending court proceedings is limited in time. As long as the principles of legal certainty, effectiveness and the fundamental right to good administration are respected, a temporally unlimited suspension of the statute of limitations is not contrary to Union law.

E. Freitag / C. Pollak

 

Missing Documents: Tax Evasion by Tax Advisors due to Failure to file the Tax Return?

If tax advisors undertake to submit the tax return for their clients, they thereby also take over their clients’ duty of disclosure and truthfulness with respect to the tax return. If the tax representatives, then fail to file the tax return, they may be held responsible for tax evasion according to the Austrian Fiscal Criminal Act, if it was actually possible for the tax advisor to prepare a correct tax return according to a recent decision by the Austrian Administrative Supreme Court.

S. Papst / M. Meilinger

(Financial) Criminal Conviction: Exclusion from Procurement Procedure?

A final conviction for certain criminal offences, a punishment due to the Austrian criminal tax law or the failure to meet obligations to pay social security contributions, taxes and duties can lead to far-reaching consequences in public procurement law. The Federal Procurement Procedure Act 2018 concretized and expanded the facts that lead to the exclusion of a contractor from the award procedure. A court conviction for tax evasion, for example, fulfils these offences.

F. Arztmann / S. Papst / S. Rettenbacher

Non-declaration of German pension: Austrian Federal Finance Court assumes tax evasion due to basic knowledge of general tax liability

The non-declaration of a foreign pension in Austria cannot be justified by the assumption that another state is entitled to the right of taxation. In principle, the Austrian Federal Finance Court assumes knowledge of the existence of Austrian income tax liability and presumes an obligation to inquire in the event of any uncertainty on the part of the taxpayer. In the event of a violation of the duty to inquire and disclose, the Austrian Federal Finance Court assumes an intentional tax evasion. With regard to the assessment of taxes in tax proceedings, the long statute of limitations of 10 years therefore applies. 

 

S. Papst / E. Hemetsberger / W. Vötter

Austrian Constitutional Supreme Court on good fiscal conduct as a condition for state aids: Linkage to final conviction under financial criminal law unconstitutional

According to the current case law of the Austrian Constitutional Supreme Court, the legislator may make the granting of subsidies conditional on good fiscal conduct. However, the granting of subsidies may not be made dependent on the date of the final imposition of a penalty under Austrian Financial Criminal Law. On the other hand, linking the eligibility for subsidies to the time of the fulfillment of a financial offence would not be unconstitutional.

S. Papst

 

Austrian Administrative Supreme Court on mandatory penalties in case of omitted UBO-Reports acc. to Beneficial Owners Register Act - BORA: service of notices to the tax advisor is decisive

In case UBOs of an obliged entity were registered by its tax advisor in the past, the service of notices in penalty proceedings following an omission of the mandatory, annual UBO-Report is only effective as soon as these notices are delivered to the established tax representative. Notices delivered directly to the electronic mailbox of the obliged entity do not qualify as effectively delivered.

C. Edelhauser/ W. Gurtner/S. Rettenbacher

IRS publishes draft crypto reporting regulations affecting payment processors

The IRS has published draft crypto reporting regulations that also affect payment processors. From 2025 onwards, broker reporting regarding digital assets to the IRS will be required with respect to transactions by US persons.

Implementing the reporting requirements will make necessary documentation of customers' US status and the collection of detailed reporting information for each transaction.

P. Rümmele