English Summary 11-12/2023

FlexCo should be approved by the Austrian parliament on Dec. 15, 2023

In order to meet the requirements of Startups and other innovative businesses, Austria plans to introduce a hybrid legal company form with elements of a limited liability company (GmbH) and a joint-stock company (Aktiengesellschaft) that supposedly will provide more flexibility to its owners. Furthermore, it is contemplated to reduce the minimum share capital for GmbHs to TEUR 10 only. The respective draft bill shall be passed in the Austrian parliament on Dec 15, 2023.

F. Kleemann

 

Austrian Administrative Supreme Court on the tax deductibility of loan termination costs in connection with the acquisition of shareholdings

If a loan agreement that was concluded for the purpose of acquiring a participation is cancelled before the loan was drawn down, the associated costs are tax deductible according to a recent decision by the Austrian Administrative Supreme Court. Any interest difference charged by the bank from the refinancing is not covered by the term “interest”.

M. Formanek

Subsequent taxation of an investment-related profit allowance when selling a share in a partnership

In einem aktuellen Erkenntnis stellte das BFG klar, dass das Zurückbehalten von Wertpapieren, für welche ein investitionsbedingter Gewinnfreibetrag in Anspruch genommen wurde, im Rahmen einer entgeltlichen Veräußerung eines Mitunternehmeranteils ein Ausscheiden der Wertpapiere aus dem Betriebsvermögen darstellt. Sofern die Behaltefrist von vier Jahren noch nicht abgelaufen ist, führt dies zur Nachversteuerung des investitionsbedingten Gewinnfreibetrags.

L. Andreaus / J. Derflinger

FFC: Business expenses from the loss-making sale of a securities account?

The Austrian Federal Finance Court had to decide whether the loss from the sale of securities, which served as repayment vehicles for a business foreign currency loan, can be qualified as business-related and thus reduce profits. The complainant was an entrepreneur who determined his business income using an income and expenditure account (EAR). Only "necessary" business assets are possible within the framework of an EAR and assets that can be allocated to the business must be "business-related" in order to be able to take advantage of the more favorable regulations in relation to certain capital income within the framework of determining business income.  According to the case law of the Austrian Administrative Supreme Court (VwGH), an asset is not deemed to be part of business assets simply because securities were acquired with business funds (VwGH 22.11.2017, Ra 2017/13/0063). The fact that an asset serves as collateral for a business loan does not necessarily make this asset a business asset (VwGH 16.9.1992, 90/13/0299). Accordingly, assets are to be regarded as necessary business assets if they are objectively intended to serve a business and are actually used for business purposes (VwGH 27.1.1998, 93/14/0166). In this case, the Austrian Federal Finance Court affirmed the business use and the losses on the sale of the securities in question are, in the opinion of the FFC, fully recognized as expenses within the meaning of Art 4 sec 4 Austrian Income Tax Act. The appeal to the VwGH was authorized and also filed in with the VwGH.

C. Juritsch

 

Communication with the tax authorities: New electronic file transfer - another step in the digitalization of legal transactions

A new electronic form of communication is now available for tax matters: electronic file transfer ("eDT"). The tax authority provides the taxpayer with an upload/download option for the secure exchange of large amounts of data with the authority. Practical tip: The transferred data is regularly deleted from the electronic data room. Therefore, when using the edT, the taxpayer is not spared the need to document the data exchange with the authority in a comprehensible manner.

S. Papst / G. Schaunig

Tax data management and data-intensive reporting obligations

In the area of taxes, businesses are increasingly confronted with data-intensive reporting obligations that require high-quality tax data and the implementation of efficient tax data management. In practice, companies often struggle with incomplete, outdated, or duplicated master and transaction data. However, high-quality tax data is a prerequisite for more complex regulatory obligations like VAT in the Digital Age (ViDA), the Austrian transposition of DAC7 (“Digitale Plattformen-Meldepflichtgesetz”), and – in the future – Digital Tax Audits. The availability of tax data is not only beneficial for tax administrations, but can also be used by companies for further analyses or data-driven decision-making. On the other hand, tax administrations can use tax data of their taxpayers for further analyses, e.g. as part of a digital tax audit. In the near future, automation, digitization, AI and other technologies will reshape the way businesses and tax administrations deal with the challenges of a globalised and digitalised economy. It is therefore time to value tax data as an important asset for businesses and tax administrations alike and to handle it in an ethical and lawful manner.

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

 

Suspension of the Double Tax Treaty between Austria and Russia

The Austrian Ministry of Finance declared the suspension of several articles of the double tax treaty between Austria and Russia on 6 December 2023. The main impact in practise is the exposure of all articles that allocate the taxation right of specific income between both states. Both states are now entitled to tax all income according to their national tax law. The avoidance of double taxation based on the double tax treaty is no longer available. 

D. Puehringer / G.Gottholmseder

 

Reporting Obligations 2024 for Platforms and Payment Service Providers - Overview and Update

In recent years, the EU and Austrian legislators have increasingly introduced (VAT) recording and reporting obligations. The focus has been on the digital economy, which means that platforms and, more recently, payment service providers have to submit reports to the Austrian tax authorities within certain deadlines. The following article provides an overview of the reports and deadlines for platforms and payment service providers in the first half of 2024.

E. Freitag / Ch. Pollak

Distribution of gifts: VAT treatment as a ancillary supply

In its judgment of October 5, 2023, Deco Proteste – Editores Lda, C-505/22, the CJEU addressed the question how gifts for new customers of newspaper abos are treated for VAT purposes. The CJEU has held that in the case at hand, the gifts are an ancillary supply to the main supply and therefore do not trigger a deemed supply.

E. Freitag / Ch. Pollak

The indirect customs representative as debtor of the import VAT

In its ruling of September 19, 2023, Ra 2022/16/0010, the Austrian Administrative Supreme Court dealt with the provisions of Art 26 sec 3 in conjunction with sec 5 lit e Austrian VAT act, which stipulate that in case of indirect customs representation, the declarant (usually the freight forwarder) does not become the debtor of import VAT (booked to the tax account). According to the administrative court, the question of whether a customs power of attorney constitutes an authorization within the meaning of Art 26 sec 5 lit e Austrian VAT act must be answered by interpreting the national civil law provisions.

E. Freitag / A. Muehlberger

German Federal Fiscal Supreme Court: Import VAT and input VAT deduction

According to the German Federal Fiscal Supreme Court, the input VAT deduction for import VAT has to be denied, if an entrepreneur only provides customs clearance service or transportation service with regard to the imported goods and therefore the import VAT is not part of the costs of a specific output transaction of the entrepreneur.

E. Freitag / A. Muehlberger

 

CBAM (CO2-Border Adjustment) – Update

On October 1, 2023, CBAM entered into force in its transitional phase, with the first reporting period for importers ending January 31, 2024. Regarding the step-by-step introduction of the reporting obligation for CO2-intensive products and what entrepreneurs must observe/do, we refer to our Tax Newsletter of September 25, 2023. The main new developments are outlined below.

E. Freitag / K. Nadlinger / A. Muehlberger

 

DAC7/DPMG – Are you ready for your first report as a digital platform operator?

DAC7 introduced, inter alia, new due diligence and reporting obligations for online platform operators for tax purposes. The Digitale Plattformen-Meldepflichtgesetz (DPMG) transposed these new obligatons into Austrian law. DPMG came into force on 1.1.2023. The first report for the 2023 reporting period must be submitted to the Austrian tax authorities by 31.1.2024 at the latest. As time is pressing and in view of severe legal consequences under financial criminal law in the event of a breach, potential platform operators should assess their risks arising from DAC7/DPMG as quickly as possible. Further, the implementation of suitable technical measures to comply with the legislation is also likely to take a correspondingly long time. In short, it is time to act. KPMG Austria will be happy to assist you with further information pertaining to DPMG.

K. Krippner / M. Zwick-Pevny

 

Federal state and municipal taxes: Legal validity of a submission of an appeal in case of a disclaimer in the e-mail?

Regarding the amusement tax and thus a municipal tax, an attorney files an appeal per e-mail, which is admissible under Austrian procedural law for taxes that are collected by the municipalities. The substantive requirements of this appeal are met. However, by default the lawyer uses a disclaimer in his e-mails saying that he does not make statements with legal effect by e-mail. The Federal Finance Court has doubts as to whether the lawyer wants to file a legal remedy. As the attorney does not subsequently submit a written confirmation of his submission in the rectification proceedings as requested, the appeal is deemed to have been withdrawn.

C. Endfellner

 

Taxpayer may only apply for tax credit of RETT to capital gains tax in tax return

Capital gains from the sale of real properties derived by individuals are subject to a 30% flat tax rate. Furthermore, the transfer of Austrian real property may trigger real estate transfer tax (RETT) up to a rate of 3.5%. If a taxpayer receives a property by way of inheritance or gift and paid RETT, the RETT could be credited to the capital gains tax on the capital gain provided that the property is sold within three years. However, the Austrian Federal Finance Court recently confirmed that the taxpayer may only apply for the tax credit in his/her tax return, i.e. a separate application by a letter sent to the tax authorities does not entitle the taxpayer to the respective tax credit.

M. Vaishor