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

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

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

Capital gains from the sale of real property derived by individuals as from April 1, 2012 are subject to tax with a flat tax rate 30 %. However, there are two important tax exemptions. An exemption applies, if the property had been the seller‘s principal home two years from the acquisition/construction and prior to the sale or for at least five years during the last 10 years. In addition, the seller´s principal home has to be abandoned (applies for both cases).

The Austrian Administrative Supreme Court recently confirmed the practice that the exemption only applies to the “usual” size of a land plot up to 1.000 m² max.

M. Vaishor

The tax office sends the preliminary decision before the appeal ("Beschwerdevorentscheidung") by mistake to the tax representative and not to the taxpayer. The tax representative forwards the document to its client by e-mail. Subsequently, an appeal is submitted. According to the Austrian Federal Finance Court this appeal is illicit. The taxpayer has never received the preliminary decision before the appeal in original, thus this document did not become legally effective. Consequently, an appeal is not possible.

C. Endfellner

As from January 1, 2025, a withholding tax must be withheld on payments for the use of third-party land as part of flood protection measures.

E. Müller / S. Landgraf

In order to maintain the international competitiveness of companies that are covered by the NEHG 2022 and have to surrender national emission certificates, there are relief measures for energy-intensive companies and carbon leakage cases available. Apart from agricultural or forestry businesses, at least 80 % (during the introduction phase till the end of 2024 only 50 %) of this relief sum has to be invested in climate protection projects in the upcoming 12 months.

B. Matzka / K. Nadlinger

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

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

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

In a recent decision, the Austrian Federal Administrative Court accepted the independence of an IT service provider because there was only a factual, but no personal involvement in the operational organization of the company.

K. Daxkobler / S. Rettenbacher

If the tax liability of a company's service is initially denied by experts but later affirmed by supreme court rulings, the historical legal situation is considered unclear from a subjective perspective until the issue of tax law is clarified by the supreme court. Until then, the legal opinion regarding the lack of taxability of roaming services inland is also considered to be justifiable from a VAT perspective. In this case, an intentional reduction of tax is excluded.

S. Papst / T. Tiefenbacher

The amendments to the Austrian Fiscal Criminal Act (FinStrG) as part of the Fraud Prevention Act (BBKG) 2024 (Part 1) aim to tighten criminal liability in connection with dummy companies and fictitious invoices on the one hand, while on the other hand measures to speed up proceedings were provided for, which should help to reduce the workload of the financial criminal authorities. The amendments entered into force on July 20, 2024.

S. Papst / M. Meilinger / B. Weber

With the „Digitale Plattformen-Meldepflichtgesetz (DPMG)“, Austria has transposed the new and comprehensive due diligence and reporting obligations of the DAC7 for platform operators into national law. The DPMG came into force on 1.1.2023. The second reporting round for the 2024 reporting period must be submitted to the Austrian tax authorities by 31.1.2025 at the latest. However, due to the regulatory complexity of the DPMG, there are many open questions of interpretation. To clarify some of these questions, the Austrian Ministry of Finance published FAQs on the DPMG in July 2024. Against this background, both existing and potential new platform operators should (re)assess their situation and take appropriate measures if necessary.

K. Krippner / M. Zwick-Pevny

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

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

Daily allowances to which employees are entitled for construction site and assembly work in accord-ance with collective agreements are tax-free. The Austrian Administrative Supreme Court denied the tax exemption for employees working on the premises of the major customer, although the compen-sation was mandatory under collective agreements. The Supreme Court denied a "travel" within the meaning of the law and thus also the "travel hardship".

K. Daxkobler / G. Schaunig / K. Stur

According to the Austrian Stamp Duty Act, written contracts on the rental of real estate are subject to a 1 % stamp duty whereby the tax base depends on the fees, the length and conditions of the contract. Despite the stamp duty was abolished for rental of properties for residential purposes in 2017, rental contracts for other purposes (e.g. office, logistics etc.), are still subject to stamp duty. In case of a limited contract period, the tax base is the agreed payments the tenant has to pay over the whole contract period (however, in this case the tax base is limited to the 18-fold of the agreed yearly payments). For contracts with an unlimited period, the tax base has to be calculated as the recurring payments per year x 3.

The Austrian Administrative Supreme Court recently ruled that the extension of an existing contract is again subject to Austrian stamp duty even if both the original and the extended contract were treated as if concluded for an unlimited period for stamp duty purposes due to extensive termination rights.

M. Vaishor / F. Popl

Since the Social Security Fraud Prevention Act (SBBG) came into force in 2016, new patterns of fraud have been encountered in practice, the effective combating of which has necessitated legislative adjustments. With the Fraud Prevention Act (BBKG) 2024 (Part II), numerous amendments were made to the SBBG to ensure an effective fight against social fraud by dummy companies. The amendments entered into force on September 1, 2024.

S. Papst / M. Meilinger / B. Weber

Recently, the Austrian Administrative Supreme Court ruled on the calculation of the membership fee to Austrian chambers in case of VAT groups.

P. Mayr / R. Langeneder