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Tax News: English Summary 08+09/2019

English Summary 08+09/2019

English Summary of Newsletter

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Tax Deadline September 30, 2019 to apply for a reduction of preliminary tax payments 2019 and to avoid interest on additional tax payments for 2018

The deadline to apply for a reduction of preliminary tax payments for 2019 ends at September 30, 2019. Furthermore, interest (1,38 %) will be charged on additional tax payments for the financial year 2018 beginning with Oct 1, 2019 (for a maximum period of 48 months). The application for a refund of input VAT from other EU-countries of the year 2018 has to be filed until September 30, 2019 to the Austrian tax office. Thus, we recommend a review of the current Austrian tax situation.

Ferdinand Kleemann / Katrin Postlmayr

“Do not touch the tax-group parent”

In a long-lasting court case, the Austrian Administrative Supreme Court confirmed its view that the basic concept of tax-neutral reorganizations covered by the Austrian Reorganization Tax Act does not apply to the minimum holding-requirements of shares in tax-group members by the group parent: By contrast to other provisions in Austrian corporate income tax legislation where holding periods are sustained, the minimum holding-period required for tax-grouping is not continued at the level of the absorbing entity in tax-neutral restructurings.

Bettina Matzka

The sale of a customer base is a supply of service

In its judgment of 27 June 2019, Ra 2018/15/0078, the Austrian Administrative Supreme Court ruled that the sale of a customer base is supply of service within the meaning of the Austrian VAT Act. The tax authorities have so far qualified the sale of a customer base as a supply of goods. 

Esther Freitag / Christina Pollak

Austrian Administrative Supreme Court on VAT-treatment of lease contract

Recently, the Austrian Administrative Supreme Court had to decide von the VAT-treatment of a lease contract whereby the court applied the conclusions of the CJEU in the case Mercedes Benz Financial Services UK Ltd.

Christian Halwachs

Austrian Federal Fiscal Court: ECJ reference (C-593/19) – roaming charges of third country operators

In its decision of 29 July 2019 (RE/2100001/2019), the Austrian Federal Fiscal Court (BFG) referred to the ECJ questions on the effective use and enjoyment according to Art 59a lit b EU VAT Directive and the relocation of the place of supply from a third country to the EU, if both the supplier and the non-taxable recipient of the service are resident in a third country.

Esther Freitag / Draga Turic

ECJ: Provision of fuel cards as VAT exempt financial service

In its judgment of 15 May 2019, Vega International (C-235/18), the ECJ ruled that the provision of fuel cards is qualified according to Art 135 para 1 lit b EU VAT Directive as a VAT exempt granting of a credit.

Esther Freitag / Draga Turic

ECJ regarding the place of origin of import VAT in the event of customs 

The ECJ decided on July 10th, 2019, C-26/18, Federal Express Corporation Deutsche Niederlassung, that although import VAT is basically enforced by the customs authorities and is linked to customs law provisions, it nevertheless follows the independent system of value-added taxation.

Esther Freitag / Alfred Mühlberger

ECJ: Supervisory board activity does not qualify as a taxable supply of services for VAT purposes

In its judgment of 13 June 2019, IO (C-420/18), the ECJ ruled that supervisory board member does not independently exercise an economic activity for VAT purposes, even though he is not hierarchically subordinate to either the management board or the supervisory board, but does not act in his own name, for his own account and under his own responsibility, but for the account and under the responsibility of the supervisory board, and also does not bear the economic risk of his activity.

Esther Freitag / Draga Turic

Austrian Federal Finance Court on the deduction of input VAT in cases of acquiring rented real property

In general, a sale of real property is exempt from VAT according to Art 6 sec 1 subsec 9 VAT Act. The seller is therefore not entitled to deduct input VAT connected to the sale; furthermore, input VAT previously deducted on the acquisition of the property and major refurbishments may be clawed back. However, Art 6 sec 2 provides for the possibility to exercise an option to tax-liability. In this case, the sale is fully taxable at the standard VAT rate of 20 % and any input VAT related is deductible. The buyer is entitled to deduct input VAT on the purchase price immediately (i.e. in the year of purchasing the real property) provided that taxable services such as taxable rentals or taxable sales etc are rendered going-forward. Based on the Austrian tax practice, it must be highly probable that the buyer will indeed achieve taxable revenues, which also needs to be substantiated through respective documentation (e.g. rental contracts etc). The Austrian Federal Finance Court recently decided that an offer submitted to a prospective tenant which is entitled to deduct input VAT is adequate. Thus, input VAT relating to acquisition costs of real property on buyer-side is deductible.

Furthermore, rentals for business purposes are in general exempt from VAT according to Art 6 sec 1 subsec 16 VAT Act and any input VAT directly connected is not deductible. However, Art 6 sec 2 VAT Act provides for the possibility to exercise an option to tax. In this case rentals for business purposes are taxed at the standard VAT-rate of 20 % and any input VAT related is deductible. Regarding this option to tax it has to be considered, that based on a new regulation the lessor can only exercise the option, if the lessee uses the immovable property nearly exclusively for generating taxable revenues (i.e. is entitled to deduct input-VAT). The Austrian Tax Authority determines “nearly exclusively” as a minimum rate of 95 % based on the lessee´s whole revenues generated from the business activity in the respective property. The new regulation applies in general to rentals starting after August 31th, 2012. The Austrian Federal Finance Court decided (in the same case as before mentioned) where a rented property was acquired. Parts of the property were rented to entrepreneurs, which were not entitled to deduct input VAT. The court decided that the new regulation in relation to the possibility exercising the option to tax (see above) is not applicable in the case at hand, as due to the purchase of the real property the purchaser (as the new lessor) entered into the rental contracts according to civil law. Consequently, even in such case of legal singular succession, this cannot be deemed as a new rental contract for VAT purposes. Consequently, the landlord can exercise the option to VAT and thus, any input VAT on the acquisition costs relating to the tax exempt rented areas is deductible (provided that the rental contract was concluded before August 31, 2012) irrespective of whether or not the tenant is entitled to deduct input VAT.

The Austrian tax authorities appealed against this judgement, therefore the Austrian Administrative Supreme Court will deal with this case.

Markus Vaishor / Katrin Postlmayr

Intergovernmental mutual agreement procedures: implementation of agreement and relation of MAP to national remedies newly regulated from 1st September onwards

In practice, despite the existence of a DTA a double taxation of income by two states may occur, especially if the Austrian tax authorities and the foreign tax authorities of a non-EU state assume different circumstances. In such cases, Art. 25 of the OECD-Model-Convention provides a two-step approach to solve these problems. As a first step, the two states have to go through a mutual agreement procedure. If they cannot avoid the double taxation on this first step, the two states have to solve the problem in arbitration proceedings as a second step. In practice, it is important, whether the taxpayer’s rights can be fully safeguarded using such an intergovernmental procedure and how an intergovernmental agreement can be implemented into the national law. These questions have been resolved by the Austrian legislator since 1st of September 2019 via sec 48 of the Austrian Federal Fiscal Act.

Stefan Papst / Maximilian Holzschuster

Latest Labor Law Related Amendments

On the 23rd resp. 31st July 2019, three labor law related amendments were published in the Austrian Federal Law Gazette. There is a legal entitlement to the “Dad-Month” (“Papa-Monat”) for births taking place de facto from the 1st September 2019 onwards. Furthermore, the parental leave periods, for births from the 1st August 2019 onwards (basically limited to the 2nd birthday of the child), will be fully creditable in regard of the entitlements depending on the years of previous work experience. Finally, a specific form of leave – which is to be agreed upon with the employer – was introduced for large-scale emergencies from the 1st September 2019 onwards, with a lump 200-euro-refund via disaster relief fund (Katastrophenfonds). 

Carl-Georg Vogt

The Latest Austrian Federal Finance Court´s Decision regarding the Consideration of Regular Employee Cost Contributions in respect of the benefit in kind due to the Private Use of Company Cars

The Austrian Federal Finance Court (BFG) has decided that Sec 4 para 7 of the Regulation concerning the Value of Benefits in Kind (“Sachbezugswerteverordnung”), according to which cost contributions by the employee to the employer reduces the value of the benefits in kind due to the private use of a company car, is to be interpreted as meaning that regular cost contributions (with the exception of the payment of fuel costs by the employee), even if the acquisition cost of the car exceeds EUR 48.000, is to be subtracted from the highest possible value according to Sec 4 para 1 of the Regulation concerning the Value of Benefits in Kind (depending on CO2-emission: EUR 720 or EUR 960). This is in contradiction to the – for the employee less favorable – view of the tax administration as expressed in # 186 and # 187 of the Wage Tax Guidelines (LStR), according to which the regular cost contributions are to be considered before the application of the above-mentioned highest value.

Katharina Daxkobler

As from January 1, 2020 companies are obliged to accept governmental documents electronically)

As from January 1, 2020 companies (except for small enterprises) are obliged to accept governmental documents electronically. In order to be able to receive documents electronically, a registration with the Unternehmensserviceportal (“USP”) or an authorized delivery service is required. A registration is strongly recommend as from January 1, 2020 governmental documents will be delivered electronically and statutory deadlines will commence. Companies and individuals that are not obliged to file VAT returns may participate in the electronic communication on a voluntary basis.

Roman Lampel / Claudia Juritsch / Astrid Kristof / Maja Milekic

The Austrian initiative to pass the new bill on reportable cross-border arrangements „EU-Meldepflichtgesetz“ for the implementation of EU Directive 2018/822/EU – DAC 6 was presented to parliament in the first week of July 2019

Local Austrian draft legislation for the implementation of EU Directive 2018/822/EU regarding mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements was presented to parliament in the first week of July 2019. The new bill shall be enacted on 25 September 2019 and is intended to become effective as of July 1, 2020.

The draft of the Austrian implementation law „EU-Meldepflichtgesetz – EU-MPfG" largely adopts the language of the German translation of EU-Directive 2018/822, DAC 6.

Intermediaries are granted a waiver from filing information on a reportable cross-border arrangement in case the reporting obligation would breach the legal professional privilege of the intermediary under Austrian law. In such circumstances, Austrian legislation requires intermediaries exempt from filing to notify other intermediaries and all relevant taxpayers of their waiver, thus the reporting obligations may also shift to relevant taxpayers.

Information reporting on cross-border arrangements to the Austrian competent authority has to be submitted electronically using the E-Government portal “FinanzOnline” starting July 1, 2020. Moreover, information reporting on cross-border transactions the first step of which having been implemented between June 25, 2018 and June 30, 2020 must be filed latest until August 31, 2020.

The automatic exchange of information on cross-border arrangements will take place among EU Member States within one month of the end of the quarter in which the information was filed. The first exchange of information shall be communicated by October 31, 2020 via a newly established Central Directory of the European Union providing access to competent authorities of all Member States.

Stefan Haslinger / Christiane Edelhauser

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