Austria: Draft legislation implementing Pillar Two global minimum tax

The Ministry of Finance on 3 October 2023 published draft legislation for implementation of the Pillar Two global minimum tax (Mindestbesteuerungsgesetz (MinBestG)).

The draft legislation provides that:

• Austria intends to implement Pillar Two by means of a separate law rather than amending the Austrian Corporate Income Tax Act, which would include an income inclusion rule (IIR) applicable for fiscal years starting on or after 31 December 2023, an undertaxed profits rule (UTPR) applicable for fiscal years staring on or after 31 December 2024, as well as a qualified domestic minimum top-up tax (QDMTT). Moreover, all safe harbors as suggested by the OECD in its various Pillar Two publications (e.g., temporary safe harbors, permanent safe harbor for non-material constituent entities, QDMTT safe harbor and temporary UTPR safe harbor) would be implemented.
  • The temporary safe harbors (i.e., de minimis test, simplified effective tax rate (ETR) test and routine profits test) would require a qualified country-by-country (CbC) report with data based on qualified financial reporting. CbC reports based on IFRS likely would fulfill this requirement.
  • Under the temporary UTPR safe harbor, Austria would not apply the UTPR for fiscal years starting on or after 31 December 2025 and ending before 31 December 2026 if the nominal corporate income tax rate of the other jurisdiction amounts to at least 20%.
  • Under the QDMTT safe harbor, if an Austrian group has foreign constituent entities (CEs) resident in a jurisdiction that has implemented a QDMTT, the Austrian CE’s can apply a safe harbor so that they neither have to make Pillar Two calculations nor have to pay a top-up tax for a potential low taxation in the other jurisdiction.
• The Pillar Two calculations must be based on accounting information based on the reporting standard of the consolidated financial statements. Thus, Austria has not opted for applying Austrian GAAP for its QDMTT.
• Austrian CEs are, in general, required to file a GloBE information return (GIR) within 15 months after the end of the reporting fiscal year (18 months for the transitional year). However, the draft also provides the option to transfer the obligation to file the GIR to another Austrian CE. Thus, it is possible that only one GIR is filed for all Austrian CEs. In addition, a top-up tax return and the payment of any top-up tax due must be filed and paid within 24 months after the end of the calendar year in which the fiscal year ends. According to the draft, the top-up tax liability will be centralized in one of the Austrian CEs. The draft provides for the option to identify a local group member that is responsible for filing the local tax return and to pay the top-up tax on behalf of all minimum tax group members. If no such group member has been identified, the obligation would be passed on to the top domestic parent or the economically most significant local group member. Since the tax liability is thereby centralized, it is legally required to conclude an internal agreement between the Austrian CEs on how to split up this centralized tax liability, based on their individual “responsibility” for the top-up tax that has to be paid.
• Failures to comply with the administration of the GloBE rules can be sanctioned with a fine of up to €100,000 (€50,000 in case of gross negligence).

Read an October 2023 report prepared by the KPMG member firm in Austria