English Summary 4/2024

Recently, the Austrian parliament passed a bill regarding an uplift of the income tax brackets for inflation. Furthermore, the threshold for the small business exemption for VAT purposes is increased to EUR 55.000 as from Jan 1, 2025.

F. Kleemann / M. Vaishor

As the deadline for applying for a reduction of preliminary tax payments for 2024 ends on September 30, 2024, and interest will be charged on tax arrears for the assessment year 2023 as of 01.10.2024, it is advisable to review the tax situation and the expected tax burden for the years 2023 and 2024 by October 1, 2024. Furthermore, the application for a refund of input VAT from other EU-countries for the year 2023 must be filed by September 30, 2024. Last but not least, financial statements with the balance sheet date Dec 31, 2023 have to be filed with the Austrian companies’ register until September 30, 2024. If this deadline is missed the company itself and its managing directors may be confronted with fines.

F. Kleemann / B. Stangar

According to Austrian domestic tax law, company reorganizations such as mergers, contributions in kinds or spinoffs are tax-neutral under the Austrian Reorganization Tax Act (RTA) if certain requirements are fulfilled. For inter alia contributions in kind, a notification needs to be sent to the tax office within a certain time frame in order for the favorable provisions of the RTA to apply.

As from July 1, 2025 these notifications need to be made via a standardized form to be filed via “FinanzOnline”. Recently, the tax authorities published an ordinance regarding this upcoming obligation.

L. Maukner / F. Brugger

In general, an Austrian company’s tax loss carry-forwards can be carried forward indefinitely. However, according to the loss trafficking rules (“Mantelkauf”), tax loss carry-forwards may be disallowed, if there is a significant (≥ 75 %) change in the direct shareholder structure followed by a change of the organizational and the economic structure of the company.

In terms of changes to the organizational structure, the actual and factual operative management is crucial based on case law of the Austrian Administrative Supreme Court. Consequently, even if new managers join the board, respectively existing managers stay on the board, it is relevant who actually conducts the operative business. In a recent case there were no changes to the board, however, the existing manager (who continued to serve as a managing director formally) no longer conducted the business. The Austrian Administrative Supreme Court ruled that the Austrian loss trafficking rules may apply in such case.

M. Vaishor

Pillar II applies to groups of companies that have a consolidated revenue of more than EUR 750 million. Its scope hence depends on the consolidated financial statements of the group which are prepared by the ultimate parent entity. Private foundations may also be such an ultimate parent entity. Thus, Pillar II poses practical challenges for such private foundations which are further described in this article.

C. Marchgraber

According to the Austrian international participation exemption, an impairment of the participation is tax-neutral unless the taxpayer exercised the option to treat the participation as taxable in the year of its acquisition (in which case the impairment is tax-deductible). Furthermore, the Austrian group taxation regime provides that foreign tax losses of foreign group members can be deducted in Austria. However, such foreign tax losses (utilized in Austria) are clawed back at a later stage either when the underlying tax loss-carry forwards are utilized abroad or the group member leaves the group. In case of a liquidation the tax-neutral impairment can be offset with the (taxable) claw-back.

In a recent court case, the tax non-deductible impairment exceeded the amount of the clawed back tax losses. Since the foreign group member was liquidated, the taxpayer argued that the amount of the impairment exceeding the claw-back should be qualified as a “final capital loss” that should be tax-deductible under the Austrian international participation exemption (which basically provides that final capital losses can be considered even if the participation is qualified as tax-neutral).

However, the Austrian Administrative Supreme Court upheld the decision of the Austrian Federal Finance Court (BFG) and rejected this interpretation of the group tax rules. Consequently, an impairment exceeding the claw-back amount cannot be deducted for tax purposes.

M. Vaishor / B. Stangar

Austria has a well-developed network of double tax treaties (DTT), that has, however, recently been subject so several changes. Recently, there has been a partial suspension of the DTT with Russia and Belarus. The potential effects on taxpayers resulting from such partial suspension have been summarized by the Austrian Ministry of Finance (BMF) in recently published decree regarding the suspension of the DTT with Russia (2024-0.317.354) respectively regarding the partial suspension of the DTT with Belarus (2024-0.459.298, BMF-AV Nr. 89/2024). In addition, there is an amendment to the DTT-Chile due to the most-favored-nation clause as stipulated in article 7 of the protocol, which effectively leads to reduction of withholding tax rates on interest payments and royalties. The mentioned changes and the consequences resulting from such changes in the respective DTT are of relevant importance for companies and individuals, that hold business relationships in these contracting states.

T. Hahn / J. Pimingstorfer

On August 31, 2023, the cross-border worker regulation in the double tax treaty between Austria and Germany was adjusted. The amended treaty entered into force on January 1, 2024. As part of the “Express Answer Service” (EAS), the Austrian Ministry of Finance has now communicated its legal opinion on the application of the cross-border worker regulation in the case where the cross-border worker is employed by at least two employers.

T. Hahn / J. Pimingstorfer

The Austrian Federal Finance Court has ruled that income from employment of flight personnel of a Malta based airline residing in Austria, is to be exempt from Austrian taxation (with progression clause) according to the DTT Austria-Malta, even if this income is not actually taxed in Malta and double non-taxation occurs. This decision contradicts the legal opinion of the Ministry of Finance (BMF) published shortly before, which in EAS 3448 of November 17, 2023, would have denied the tax exemption and applied the credit method, resulting in far-reaching consequences.

C. Bischoff / A. Schlögl-Jettmar