English Summary 3/2024

On June 12, 2024 a government bill of the Tax Amending Act 2024 (“AbgÄG 2024”) was brought before the Austrian parliament. The AbgÄG 2024 includes, in particular some minor changes to Austrian Income Tax Law and VAT Law.

M. Formanek

The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (the “Inclusive Framework”) on 19 February 2024 released a report on Amount B – an optional simplified and streamlined approach to apply the arm’s length principle (ALP) to baseline marketing and distribution activities. The guidance gives jurisdictions the option to apply the simplified and streamlined approach from 1. January 2025, either as a taxpayer safe harbor or as a mandatory rule, for in-scope (buy-sell) distributors, sales agents or commissionaires. The OECD report has been incorporated into the OECD Transfer Pricing Guidelines (TPG) as an Annex to Chapter IV. On 17 June 2024 the Inclusive Framework released supplementary reports with additional guidance on pending design aspects of Amount B, which were omitted from the original Amount B report and have in the meantime been completed. The additional guidance published refers to the definition of “qualifying jurisdictions” (especially relevant for country uplifts on the standard remuneration derived from the global pricing matrix) as well as the definition of “covered jurisdictions” (in respect of which the outcome of the simplified approach under the Amount B Framework shall be respected by counterparty jurisdictions irrespective of whether or not those counterparty jurisdictions have actually implemented the simplified approach). One of the most important developments hereby is that apart from the expected low capacity jurisdictions also several – from an Austrian perspective relevant – emerging markets respectively industry partners – such as Albania, Argentina, Bosnia, Brazil, Costa Rica, Georgia, Kazakhstan, Mexico, Moldova, Montenegro, Serbia and South Africa – have indicated their intention to adopt Amount B, which significantly increases the relevance of Amount B for Austrian headquartered groups. The present Tax Flash provides on overview on the additional guidance provided on Pillar One of Amount B and gives some initial observations on how multinationals should respond.

W. Rosar / T. Hahn

In its ruling of 18th April 2024, C-89/23, Companhia União de Crédito Popular, the CJEU dealt with the question of whether the auctioning of items provided as pledge can be regarded as an ancillary service to the main service of granting a loan secured by the pledge.

E. Freitag / A. Mühlberger

For tax purposes, certain activities may be qualified as a “hobby” and, thus, disregarded for income tax purposes if a total profit is not expected to be achievable within a certain timeframe. Activities deemed to be hobby activities do not constitute (negative) taxable income, which prevents the corresponding losses from being taken into account for tax purposes.

In the case of losses arising from the letting of real estate, the Hobby Ordinance (“Liebhabereiverordnung”) distinguishes between the following:

• Letting of owner-occupied homes, condominiums and rental residential properties with qualified rights of use ("small" letting)
• Letting of buildings that do not fall under the "small" letting ("large" letting)

For both types of letting, there no hobby activity is assumed if a total profit is planned within a foreseeable period, which in case of doubt must be proven by the taxpayer by means of a forecast calculation for which the period was extended by five year for periods beginning after December, 31th 2023 as follows:

The draft bill for the Tax Amendment Act 2024 provides for the abolition of a significant VAT exemption for the provision of services between banks, insurance companies and pension funds from 2025 onwards. This limitation may also affect a so-called "independent group of persons" – not only because the VAT-exempt provision of personnel to an "independent group of persons " is also to be abolished.

A. Helnwein / S. Haslinger

The EU Council agreed on a compromise text for a Directive to standardize withholding tax procedures. A reduction at source or a quick reclaim procedure is intended. Certified Intermediaries will be key in the handling of the processes. The Directive shall be implemented until end of 2028 and effective by 2030.

S. Haslinger

Since January 1, 2019, VAT law has differentiated between single-purpose and multi-purpose vouchers. If both the place of supply and the VAT rate are already determined when the voucher is issued, it is a single-purpose voucher, otherwise it is a multi-purpose voucher. The classification as a single-purpose or multi-purpose voucher has an impact on the time when the VAT becomes due: while in the case of single-purpose vouchers, the VAT becomes due when the voucher is issued, the supply made in the course of a multi-purpose voucher is only taxable when the voucher is redeemed. In its judgment of April 18, 2024, Finanzamt O, C‑68/23, the CJEU dealt with the distinction between single-purpose and multi-purpose vouchers and the question of the VAT treatment of multi-level voucher supplies.

E. Freitag / C. Pollak

The following article provides an overview of the planned "major" customs reform as of 1 January 2028. The planned reform, which was first published by the EU Commission on 17 May 2023 (see COM (2023) 259 final), focuses in particular on 1) the creation of an EU customs authority to monitor an EU customs data platform (EU data hub), 2) changes to e-commerce and 3) the removal of the customs exemption threshold and the introduction of a simplified ad valorem tariff. In addition, this article also briefly discusses 4) further changes and provides an outlook.

E. Freitag / K. Nadlinger / A. Mühlberger

• Mandatory reportable data for UBO-Reporting (under severe financial crime penalties) is widely enhanced according to Austrian BORA, effective as of July 1, 2024, with respect to UBO-relevant nominee/fiduciary relationships throughout the entire (national or international) ownership and control structure of an obliged/reporting entity. UBO-relevant nominee/fiduciary relationships established in the participation chain will also be indicated in official excerpts of the Austrian UBO-Registry.
• Furthermore, specific information must be disclosed regarding the beneficial interest of identified UBOs on the amount of assets (in percent) granted by the grantor/settlor/trustor to a (local or superordinated foreign) foundation, similar legal entity, trust or trustlike arrangement. Such disclosed percentages of assets granted by UBOs to foundations/trusts will also be indicated in official excerpts of the Austrian UBO-Registry
  
• Reporting obligations are specified to be fulfilled within 4 weeks for non-reportable entities that become reportable as well as for reportable entities that become non-reportable and hence wish to take advantage of their new non-reportable status (otherwise they will have to continue reporting their UBOs at least once a year to the Austrian UBO-Registry).

In its recent decision, the Austrian Administrative Supreme Court confirmed the view of the Austrian Federal Finance court that the formation of a sister group with a foreign group parent is permissible, but as expected and contrary to the Federal Finance Court’s approach, did assign the group parent function to the foreign parent company, as the group member and group parent functions should not be mixed.

M. Vaishor / A. Lunzer

The so-called "Growth Opportunities Act" was published in the German Federal Law Gazette (“Bundesgesetzblatt”) on March 27, 2024. Among other things, it contains changes to the transfer pricing rules for intra-group inbound financial transactions (in particular IC loans but also cash-pooling arrangements), which will limit the deductibility of interest expenses at the level of German group entities. The new TP regulations hereby also affect Austrian headquartered groups with German subsidiaries and prescribe increased documentation requirements in relation to existing (no grandfathering!) and new intra-group loans to German group entities. It is highly recommended to perform a detailed transfer pricing analysis of any existing or planned cross-border intra-group inbound financial transactions with German group entities, if material in terms of transaction volume.

T. Hahn / J. Praml

In its judgment of May 16, 2024, Slovenské Energetické Strojárne, C‑746/22, the CJEU dealt with the question if an input VAT refund application must be granted, even if a taxable person only submits the documents requested by the Member State of refund after the expiry of the one-month period provided for in Directive 2008/9.

E. Freitag / C. Pollak

Not only natural persons can be liable to prosecution, but also companies. The relevant Austrian Corporate Criminal Liability Act (Verbandsverantwortlichkeitsgesetz) is intended to motivate companies to comply. This law, which has been in existence for around 20 years, is applied with above-average frequency in financial criminal proceedings. "Tax control systems" can have a risk-minimizing effect. This overview focuses on consequences after the offense has been committed and specifically on the so-called "prosecution discretion".

S. Papst / G. Schaunig

If a company has its registered office abroad, but its management is based in Austria, it is subject to unlimited corporation tax in Austria. In addition, the directors of the company may be liable, if the non-payment of the tax results from a culpable breach of their duty.

S. Papst / W. Gurtner

Agriculture and forestry are of paramount importance to society as a whole. Agriculture mainly produces food and animal feed, while forestry is primarily important for timber production. Tax law also takes into consideration the special position of agriculture and forestry (e.g. flat-rate tax). The Austrian Federal Finance Court considers favorable tax treatment of forestry to be unconstitutional. It remains to be seen, if the Austrian Constitutional Supreme Court will annul this tax treatment as unconstitutional.

S. Papst / G. Schaunig