Austria: Tax

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This country-specific Q&A provides an overview to tax laws and regulations that may occur in Austria.

It will cover witholding tax, transfer pricing, the OECD model, GAAR, tax disputes and an overview of the jurisdictional regulatory authorities.

This Q&A is part of the global guide to Tax. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/tax-3rd-edition/

  1. How often is tax law amended and what are the processes for such amendments?

    Almost every year the Austrian Parliament enacts a Federal Tax Amendment Act which renews existing Federal Tax Acts.

    It has to be noted that also the provinces of Austria have a power to enact tax laws, which play however a rather subordinated role (except for special business lines like e.g., tourism levy, advertising tax, etc.).

    The legislative process provides that a Federal law is enacted by the Federal Parliament either upon the proposal of the Federal Government, the initiative of a minimum of 5 delegates of the Parliament, proposal of a committee of the Parliament for topics related to its activity or upon the proposal of the Federal Council. During the legislative process several institutions and interest groups like the Chamber of Commerce, the Austrian Chamber of Public Accountants and Tax Advisers, the Bar Association, the Chamber of Labour, the Federation of Austrian Industry and many others may provide input.

  2. What are the principal procedural obligations of a taxpayer, that is, the maintenance of records over what period and how regularly must it file a return or accounts?

    Tax returns for VAT and income tax / corporate income tax are generally due by 30 April (or 30 June in case of electronic filing) after the calendar year to be assessed. If the taxpayer is represented by a tax adviser, tax returns are due by the end of March of the second year following the assessed calendar year at the latest, unless the tax office requests them earlier. Additionally there are monthly or quarterly pre-payments for VAT and quarterly prepayments for income tax and corporate income tax.

    Taxpayer falling under the scope of the Austrian Transfer Pricing Documentation Act must file the master and local file within one month upon request of the tax authority. The CbC-report (if required) has to be filed with the tax office within one year after the end of the pertaining accounting year.

    All taxpayers must keep basic records relevant for taxation for at least 7 years, but are advised to keep them as long as the pertaining periods can be re-opened (10 years after the assessed periods). For VAT it is recommendable to keep certain documents regarding investments in real estate for 20 years.

  3. Who are the key regulatory authorities? How easy is it to deal with them and how long does it take to resolve standard issues?

    The key regulatory authorities for federal taxes are the tax offices led by the Ministry of Finance.

    The Ministry of Finance also prepares draft tax bills for Federal Tax Laws, issues guidelines for the interpretation of tax provisions, rules of Federal Tax Laws, negotiates the Austrian double taxation agreements and has wide ranging competences in international tax law matters. Informal rulings on tax questions on a rather generic level (so-called “Express-Answering-Service”) may be obtained from the Austrian Ministry of Finance.

    The tax offices are the main reference point for the day-to-day tax matters of taxpayers. Some of the tax offices are specialized for certain tasks like the collection of stamp duties and transfer taxes or refund of withholding taxes to non-residents under a double taxation convention.

    Taxpayers may also apply for binding advance rulings on matters concerning transfer pricing, reorganizations or group taxation with the tax office against the payment of a fee of up to EUR 20,000. In other areas informal rulings based on good faith may be obtained. The time needed to resolve an issue with the local tax office or the Ministry depends on the scope, the complexity of the issue and the availability.

  4. Are tax disputes capable of adjudication by a court, tribunal or body independent of the tax authority, and how long should a taxpayer expect such proceedings to take?

    A tax assessment imposed in deviation from the tax return filed or following to an audit can be appealed within one month whereby this period can be extended upon request.

    Upon the filing of the appeal the tax office has first the possibility to amend or withdraw its tax assessment or decision according to the appeal in a pre-decision. The pre-decision can be contested by the taxpayer within one month, whereby this period can be extended as well, in which case the tax assessment or decision is contested in the independent Federal Fiscal Court. Against the decision of the Federal Fiscal Court the taxpayer can appeal to the Supreme Administrative Court or the Constitutional Court (the latter in case the assessment or decision violates a constitutional right or guarantee or an unconstitutional law was applied when rendering the contested decision).

  5. Are there set dates for payment of tax, provisionally or in arrears, and what happens with amounts of tax in dispute with the regulatory authority?

    Prepayments of income tax are due by the middle of each annual quarter. Prepayments of VAT are due by the 15th of the second month following the prepayment-period, which can be either the annual quarter or the calendar month (the latter for annual turnovers exceeding € 100.000). As regards annual tax returns, see above point 2.

    Assessment decrees can be appealed against, in which case the tax still remains due and enforceable. A suspension of enforcement is usually granted upon request in case that the appeal has a chance of success and the taxpayer does not jeopardize the enforcement of taxes. However, suspension of enforcement gives rise to a monthly interest charge (of 2% above the base rate, currently 1.38%) of the suspended tax payment which will only be due if the taxpayer finally has to pay the disputed tax amount.

  6. Is taxpayer data recognised as highly confidential and adequately safeguarded against disclosure to third parties, including other parts of the Government?
    Is it a signatory (or does it propose to become a signatory) to the Common Reporting Standard? And/or does it maintain (or intend to maintain) a public Register of beneficial ownership?

    The data relating to tax matters are subject to the tax secrecy which basically stipulates that the tax authorities are not allowed to disclose any data they gained knowledge of during the tax proceedings to any third party including other public authorities. However, there are exceptions to the tax secrecy rule, like the disclosure of facts in connection with criminal tax proceedings or other cases stipulated by the law or in case that imperative public interest requires it.

    Austria is a signatory of the Common Reporting Standard providing for the automatic exchange of information between member countries on financial accounts of non-residents. It exchanges information on accounts which non-residents hold with Austrian financial institutions with all EU member countries and the countries which have signed and ratified the multilateral competent authority agreement of 29 October 2014, appearing on a list.

    Austrian corporations have to disclose their beneficial ownership information to a central register kept by the Austrian Ministry of Finance by May 2018.

  7. What are the tests for residence of the main business structures (including transparent entities)?

    A corporation is treated resident under Austrian domestic tax law, if it has its statutory seat or place of effective management in Austria. To determine the place of effective management the place is decisive, where the important decisions for the management of the company are taken and prepared. The vast majority of double taxation conventions concluded by Austria determines residence using the effective place of management as a tie-breaker; Austria has not followed Art 4 of the MLI with its new rules for dual resident companies.

    Transparent entities (partnerships) are not regarded as taxpayers in Austria. Therefore the income is allocated proportionately to the direct or indirect partners being individuals or corporations.

  8. Have you found the policing of cross border transactions within an international group to be a target of the tax authorities’ attention and in what ways?

    Ordinary tax audits usually encompass VAT, CIT and withholding taxes. In case of ordinary tax audits, cross-border transactions within international groups always play an important role for tax authorities. Usually, increased attention is devoted to re-organizations, transfer pricing issues and other transactional details, such as debt-push down structures.

    There are separate tax audits on wage tax and social security contributions and on stamp duty issues.

  9. Is there a CFC or Thin Cap regime? Is there a transfer pricing regime and is it possible to obtain an advance pricing agreement?

    Austria has implemented CFC rules based on the EU Anti-BEPS Directive, effective as of 1 January 2019. These CFC rules will provide for a (proportional) allocation of non-distributed low-taxed passive income of foreign subsidiaries to the Austrian parent company as defined in Art 7 (2) (a) of the EU Anti-BEPS Directive. The new (reinforced) CFC rules will apply, if the Austrian parent company holds directly or indirectly – alone or together with associated enterprises – more than 50% of the voting rights or profit participating rights of the foreign subsidiary and if more than 1/3 of the the foreign subsidiary’s income is passive and low-taxed, i.e. subject to effective tax rate of not more than 12.5% abroad. There will be an exception for foreign subsidiairies with significant economic activity in terms of personnel, equipment, assets and premises. Austria had already a „soft“ CFC legislation in the past, which only concerned the distribution of dividends, i.e. lead to a switch-over from the international participation exemption on dividends stemming from low taxed passive income to a foreign tax credit, apart from general non-acceptance of foreign subsidiaries due to general anti-abuse provisions and the substance-over-form principle.

    There are currently no thin cap rules in Austria. In case of low debt-equity ratios the tax office challenges the interest deduction and assumes under specific circumstances hidden equity.

    As regards transfer pricing Austria has implemented Action 13 of the BEPS Action Plan for multinational enterprises (MNEs) in its Transfer Pricing Documentation Act. Accordingly, MNEs have to file the master file and/or their local file with the tax administration in case they exceed certain thresholds of their annual turnover (in general EUR 50 million). Large MNEs with a consolidated group revenue of at least EUR 750 million have to take part in the CbC-reporting for accounting periods beginning on or after 1/1/2016. Regardless of whether an Austrian affiliated entity falls under the increased documentation requirements for MNEs it is however necessary to keep adequate transfer pricing documentation explaining the cross-border inter-company relations.

    Taxpayers may apply for a binding advance tax ruling with the local tax office in charge relating to transfer pricing matters, based on the facts and circumstances to be presented by the taxpayer prior to their implementation. To a certain degree it is also possible to reach cross-border advance pricing arrangements on a bilateral or multilateral basis, which are of a rather general level. Although the taxpayer has no formal right to request such mutual agreements, the Austrian Ministry of Finance can negotiate with the other contracting in order to clarify issues of interpretation of transfer prices on the basis of conventions for the avoidance of double taxation containing a provision that reflects Article 25 para 3 of the OECD MTC.

  10. Is there a general anti-avoidance rule (GAAR) and, if so, in your experience, how would you describe its application by the tax authority? Eg is the enforcement of the GAAR commonly litigated, is it raised by tax authorities in negotiations only etc?

    Transactions are deemed to be abusive and are therefore disregarded if they consist of a chain of legal transactions, which has an unusual and inappropriate character and can only be explained due to tax reasons. In addition, the Austrian law follows the substance over form approach. These two GAAR rules are often used by the authorities to challenge tax structures, intragroup transactions and reorganisations.

    The principle purpose test (PPT), as stipulated in Art 6 of the EU Anti-BEPS Directive is implemented in Austria as of 2019. Accordingly, a transaction is regarded as abusive if one of its principal purposes (no longer: the only purpose, as descirbed before) is the saving of taxes. According to the explanatory notes of the tax bill introducing the PPT the PPT is intended to be interpreted along the lines of the ECJ‘s case-law on the abuse of tax law, which the Austrian Supreme Administrative Court used to do also in the past with the old GAAR rule described above. The Austrian tax administration understood the pre-existing GAAR in a way to exclude structures without any meaningful non-tax reason and thinks to come to the same conclusions with the new PPT rule. It might remain to be seen whether this will be shared in the practise and the courts in case of a legal remedy against a decision of a tax office. Additionally, the PPT rule will also become relevant for Austrian DTC as far as they are covered by the MLI (see below point 12 and 13).

  11. Have any of the OECD BEPs recommendations been implemented or are any planned to be implemented and if so, which ones?

    Pursuant to the EU Anti-BEPS Directive EU member states have to implement an interest limitation rule, exit taxation, a general anti-abuse rule, CFC rules and rules against hybrid mismatches.

    The Austrian Ministry of Finance assumes that the provision denying deductibility of interest and royalty payments if they are subject to low taxation at the foreign related recipient company are regarded as targeted rule for preventing BEPS risks which is equally effective to the interest limitation rule set out in the Directive. If so, Austria has to transpose the interest limitation rule at the latest until 1 January 2024.

    The existing Austrian exit taxation system only requires minor adjustments. Moreover, the Austria tax law already provides for an effective general anti-abuse rule.

    The implementation of CFC rules as from 2019 will have strong impacts on the Austrian tax landscape. Provisions with respect to hybrid mismatches shall, in principle, be transposed by the end of 2019. It has to be noted that the Austrian tax law already contains provisions dealing with measures preventing tax avoidance due to certain hybrid structures (like addressed in BEPS Action 2).

    As regarding transfer pricing, Austria has implemented Action 13 of the BEPS Action Plan by its Transfer Pricing Documentation Act (described above in point 10). Austria also takes part in the mandatory automatic information exchange regarding the CbC-reporting with other EU member states and countries having implemented the Multinational Authority Agreement (the list of currently participating countries is provided in the following link:http://www.oecd.org/tax/automatic-exchange/about-automatic-exchange/CbC-MCAA-Signatories.pdf).

    On 7 June 2017 Austria has signed the Multilateral Instrument (MLI), as stipulated in BEPS Action 15, which entered into force in Austria on 1 July 2018. Austria fulfils the minimum standard of the MLI and has additionally adopted e.g. option A of Art 5 and accepts Article 10 regarding the anti-abuse provision for low-taxed PEs in third states. Austria has also largely implemented BEPS Action 14 by opting for the arbitration provision of the MLI and is ready in its treaty negotiations to extend the arbitration further.

  12. In your view, how has BEPS impacted on the government’s tax policies?

    The governmental program of the new Austrian government states per December 2017 that within the next 5 years the issue of a digital PE (see also BEPS Action 1) shall be addressed by the Austrian legislator. In March 2018 the EU commission published two drafts for directives regarding the enactment of a digital service tax (as a short-term solution) and of digital PEs (as long-term solution). Due to ongoing discussions in this field on European level general concessions of EU Finance Ministers have been achieved, but no concrete porgress has been achieved so far.

    The Austrian domestic GAAR provision has been changed in the annual Tax Amendment Act 2018, see in that respect also question 11 above). Some of the Austrian double tax conventions will be amended by the MLI in this respect, implementing the principal purpose test of Art 7 of the MLI.

    As regards the provisions relating to the creation of a PE by commissionaire structures, as suggested by BEPS Action 7, Austria has made a reservation in the MLI, as it is of the opinion that its interpretation of the existing treaties already allowed such interpretation in some cases. Whether this will be accepted by the courts remains to be seen.

  13. Does the tax system broadly follow the recognised OECD Model?
    Does it have taxation of; a) business profits, b) employment income and pensions, c) VAT (or other indirect tax), d) savings income and royalties, e) income from land, f) capital gains, g) stamp and/or capital duties.
    If so, what are the current rates and are they flat or graduated?

    Austria committed itself to the international standards of the OECD Model.

    1. Resident corporations in Austria are subject to corporate income tax of 25% with their total income regardless of the source (e.g. business income, savings income and royalties, income from land) unless it is exempt from taxation. The most important items of exempt income are dividends and, under certain conditions, capital gains generated from the sale or other disposition of foreign shareholdings. According to the government program the corporate tax burden shall be reduced in the near future.

      The business profits of individuals are subject to personal income tax at a progressive rate starting at 25% (for net income above EUR 11,000) and going up to a maximum rate of 50% (for net income above EUR 90,000) and of 55% (for net income above EUR 1,000,000).

    2. Employment income and pensions are also subject to personal income tax at the progressive rate (see above at point a)). The employer has to withhold the income taxes levied on employment income.
    3. VAT is generally levied on the sale of goods and supply of services. The standard rate is 20%. Certain goods and services, however, are subject to a reduced tax rate of 10% (e.g. food, books) or 13% (e.g. plants, hotel accommodation).
    4. Ordinary capital income (dividends, interest payments) of individuals is subject to a flat-rate tax of 27.5%, with the exception of certain savings income, where a flat-rate tax of 25% applies. Savings income and royalties of corporations are subject to corporate income tax of 25%.
    5. Rental income of individuals is also subject to personal income tax at the progressive rate (see above at point a)). Income derived by individuals from the disposal of real estate is subject to flat-tax rate of 30%.

      Income of corporations from land is subject to corporate income tax of 25%.Private capital gains relating to shares in a corporation or other financial instruments are generally subject to a flat-tax rate of 27.5%. Income derived by individuals from the disposal of real estate is subject to flat-tax rate of 30%. Capital gains of corporations are generally subject at the standard tax rate of 25%. However, gains from the sale of an international participation (i.e. the nonresident subsidiary is comparable to an Austrian company or is listed in the EU parent-subsidiary directive, the parent company holds at least 10% of the capital of the subsidiary for at least one year).

    6. Stamp duties are due on numerous legal transactions concluded in written form. The rates vary between 0.8% and 2%. Residential lease agreements are exempt from stamp duty since November 2017. However, business lease agreements (i.g. for shops) are still subject to stamp duty.

      Capital duty on equity contributions to companies was abolished from 31.12.2015.

  14. Is the charge to business tax levied on, broadly, the revenue profits of a business as computed according to the principles of commercial accountancy?

    In general, the determination of the taxable income is based on the Austrian GAAP account, however, adjustments are necessary to comply with specific fiscal tax provisions (e.g. different depreciation periods, tax reliefs etc.). In the new government program it is intended to consolidate the tax balance with the commercial balance.

  15. Are different vehicles for carrying on business, such as companies, partnerships, trusts, etc, recognised as taxable entities? What entities are transparent for tax purposes and why are they used?

    For Austrian tax purposes it has to be distinguished between intransparent and transparent entities.

    Stock companies (Aktiengesellschaft (AG)), limited liability companies (Gesellschaft mit beschränkter Haftung (GmbH)) and private foundations (Privatstiftung) are intransparent and subject to Austrian corporate tax law. Private foundations may not run an active business.

    Partnerships - most importantly the general partnership (Offene Gesellschaft (OG)) and the limited partnership (Kommanditgesellschaft (KG)) are legal entities, but treated transparent for tax purposes; income is taxed proportionally in the hands of the partners.

  16. Is liability to business taxation based upon a concepts of fiscal residence or registration? Is so what are the tests?

    Individuals having a domicile or their habitual abode in Austria or corporations having their corporate seat or their place of management in Austria are considered residents for Austrian income and corporate income tax law purposes, respectively and are subject to unlimited resident taxation in Austria on a world-wide basis.

    Non-residents are taxed on the basis of a territorial system (involving taxation of PEs and other income sourced from Austria like income from immovable property located in Austria and Austrian dividends and Austrian interest payments to individuals under certain circumstances).

  17. Are there any special taxation regimes, such as enterprise zones or favourable tax regimes for financial services or co-ordination centres, etc?

    There are no special taxation regimes, such as enterprise zones or favourable tax regimes for financial services or co-ordination centres.

  18. Are there any particular tax regimes applicable to intellectual property, such as patent box?

    There is no patent box, but a premium of 14% applies to R&D expenses for R&D inhouse activities performed in Austria.

    Conversely, intra-group interest and royalties are non-deductible if the foreign receiving company is subject to low taxes (i.e. less than 10%).

  19. Is fiscal consolidation employed or a recognition of groups of corporates for tax purposes and are there any jurisdictional limitations on what can constitute a group for tax purposes? Is a group contribution system employed or how can losses be relieved across group companies otherwise?

    Under domestic law a regime of group taxation is available upon request for corporations having a share in the statutory capital and the voting right of the group member of at least 50%. The consolidation takes place only for CIT purposes (for VAT different criteria are relevant).

    The income of each group member company has to be calculated separately (including filing annual corporate income tax returns to the Austrian tax authorities) and is then allocated to the head of the tax group, which is the only entity of the group subject to CIT (i.e. it receives the CIT assessment for the whole group).

    Also tax losses of first-tier foreign subsidiaries in which a sufficient financial interest is held by the group can be included in the group consolidation on a pro-rata basis, if the subsidiary is a resident of a country with which Austria has concluded agreements on mutual assistance in tax matters, subject to a recapture upon using the losses in the foreign jurisdiction in subsequent years or by leaving the group.

    The group has a minimum duration of three calendar years; a recapture on a stand-alone basis takes place for all group members which are not meeting the minimum adherence of three full accounting years.

  20. Are there any withholding taxes?

    Apart from wage withholding tax at the progressive income tax rate, dividends paid to non-resident companies are, in general, subject to a withholding tax. Dividend withholding tax amounts to 27.5% (25% if paid to a corporate shareholder), unless a reduced rate applies under a tax treaty. Dividends falling under the scope of the EU Parent-Subsidiary Directive (company form listed in the Directive; at least 10% shareholding, retention period of one year) are exempt from any withholding tax, if the EU parent company has an active business and sufficient substance; otherwise a refund procedure can be operated with the Austrian tax authority.

    Royalties paid to non-resident companies are subject to a withholding tax of 20%, unless a reduced rate applies under a tax treaty or are exempt from any withholding taxes pursuant to the EU Interest and Royalties Directive.

    Loan interest payments to non-resident companies are currently not subject to WHT as long as the loan is not secured with domestic real estate. Interest on bank deposit or certain publicly issued corporate bonds may trigger Austrian withholding tax (25%/27.5%), if an Austrian paying agent or custodian is involved.

    WHT of 20% has also to be levied on fees for technical or commercial advisory services, unless the rate is reduced or the payments are exempt under an applicable tax treaty.

    As of 1 January 2019 a special withholding tax applies on income derived from the letting of rights on land to infrastructural enterprises in connection with transmission of energy or use of cables below or above the surface in the public interest (e.g. electricity, gaz, oil or heating), which amounts to 10% in case of individuals and 8,25% in case of corporations.

  21. Are there any recognised environmental taxes payable by businesses?

    There are several taxes in Austria, whose tax base is in dependency of the impact on the environment, e.g. various forms of energy taxes (tax on electricity, gas, carbon, mineral oil, etc), car-related taxes for cars with combustion engines (consumption tax, increased insurance tax, tax on motor vehicles).

  22. Is dividend income received from resident and/or non-resident companies exempt from tax? If not how is it taxed?

    Dividend income of domestic companies is tax exempt.

    Dividend income from foreign corporations is exempt from corporate income tax under the international participation privilege if the (i) foreign company is comparable to a domestic company or is an EU company listed in the EU Parent-Subsidiary Directive, (ii) minimum holding period of 1 year has elapsed, (iii) shares in the foreign company constitute at least 10% of the nominal capital and (iv) the foreign company does not mainly derive low taxed passive income.

    Dividend income from portfolio participations (participation below 10%) in foreign companies is exempt from corporate income tax as well if the (i) foreign company is comparable to a domestic company and is resident in a country with which Austria has agreed on a comprehensive exchange of information or is an EU company listed in the EU Parent-Subsidiary Directive and (ii) does not fall under the scope of the international participation privilege (and in case of particiaption above 5% is not low-taxed).

    Individuals are subject to a flat-rate tax of 27.5% on dividend income.

  23. If you were advising an international group seeking to re-locate activities from the UK in anticipation of Brexit, what are the advantages and disadvantages offered?

    An advantage in relocating business activities to Austria may lie in the modern group taxation regime, the extensive double tax treaty network with in total more than 80 countries. Austria has a participation exemption for dividends and qualified shareholdings in foreign corporations. Important factors are strong political stability and the geographically location of Austria in the center of Europe. The new government program foresees a reduction of corporate tax rate for retained profits. Furthermore there is no inheritance or gift tax in Austria.