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Tax News: English Summary 06/2020

English Summary 06/2020

English Summary of Newsletter

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Austrian Ministry publishes discussion draft on application of Austrian DAC6-rules

The Austrian Ministry of Finance published a discussion draft regarding the application of the Austrian DAC6-rules. In particular, the deadline for initial disclosures will be prolonged until Oct 31, 2020.

Ferdinand Kleemann / Markus Vaishor

Austria: Proposed tax measures intended to facilitate investments (COVID-19)

The Austrian government earlier this week released two draft bills that include tax measures that are intended to boost Austria’s economy and facilitate further investments all in response to the coronavirus (COVID-19) pandemic.

The proposals include an investment premium, tax loss carryback rules, declining balance depreciation method, accelerated depreciation of buildings, and tax rate reform for individual taxpayers.

Investment premium

The investment premium is intended to create government-sponsored incentives for investments in fixed assets.

  • The investment premium would be 7% of the new investment. However, the premium could increase to 14% for investments in climate protection, digitalization, and health and life-science investments.
  • The investment premium could be allowed for investments in tangible or intangible depreciable assets used in Austrian premises, provided that initial steps in the investment are taken (between 1 August 2020 and 28 February 2021) and the application is filed between 1 September 2020 through 28 February 2021.
  • No investment premium would be available for:
    • Investments related to fossil fuels
    • Land
    • Financial assets such as participations
    • Acquisition of whole businesses
  • The total budget cap for investment premium would be €1 billion on a “first come-first serve” basis.

Detailed administrative guidelines on the requirements and application process for the investment premium are expected.

Tax loss carryback

Currently, Austria only provides for tax loss carryforwards—losses can be carried forward indefinitely and for corporations may be used for up to 75% of taxable income in any given year.

The proposal would introduce limited tax loss carryback rules for entrepreneurs (that is, those subject to income tax) and corporations.

In general, any business income tax losses incurred in 2020 would be available to apply against taxable income in 2019 up to a maximum amount of €5 million. If the tax loss carryback would not be possible for 2019 (e.g., because the taxable profit is too low), the 2020 loss carryback could be further carried back and applied against taxable profit for 2018 (subject to further requirements to be published in an ordinance to be issued by the Ministry of Finance). Any tax losses from 2020 that are not carried back would be treated as “normal” tax loss carryforwards that could be used against taxable income in future years.

However, for taxpayers whose financial year 2020 does not end on Dec 31, 2020 (i.e. for instance on March 31, 2020), there is an option to carry back the tax losses from 2021 to 2020 (or 2019 respectively).

For Austrian tax groups (as defined by Article 9 of the corporate income tax law) additional rules would need to be considered, including:

  • Only the group parent corporation (that is the sole taxpayer of the tax group) could apply for the loss carryback.
  • Tax losses carried back would need to be applied against the group’s income.
  • The maximum amount of the carryback would be equal to €5 million for the group parent corporation plus an additional amount of €5 million for every group member. For instance, the tax loss carryback for a tax group consisting of one group parent corporation and four group corporate members would amount to €25 million.

Declining balance depreciation

The proposal would introduce the declining balance method as a depreciation method, to be used alternatively instead of the already existing linear depreciation method.

  • The depreciation rate would be determined by the taxpayer but could not exceed 30% and could not be changed.
  • The depreciation rate would applied to the respective (residual) carrying amount of the asset.
  • The half-year convention according to Article 7 section 2 of the Austrian income tax law would apply.
  • It would be possible to change from the declining balance method to the linear method going forward, but not the other way around.
  • The declining balance method could be applied to assets that are acquired or constructed after 30 June 2020.
  • The declining balance method does not need to be applied for GAAP purposes, as well.
  • The declining balance method would not applicable for:
    • Intangible assets
    • Used assets
    • Buildings
    • Passenger cars (unless used for commercial passenger transport or driving school or cars with zero emissions)
    • Plants related to fossil fuels

Accelerated depreciation of buildings

In general, the standard depreciation rate applied annually for buildings for Austrian tax purposes is 1.5% for residential buildings and 2.5% for all other buildings. However, it is proposed to introduce accelerated depreciation as follows:

  • Depreciation in the first year would be three times the standard rate (7.5% or 4.5%).
  • Depreciation in the second year would be two times the standard rate (5% or 3%).
  • As from the third year, depreciation would equal the standard rate of either 2.5% or 1.5%.
  • Accelerated depreciation would be applicable to buildings that were purchased or constructed after 30 June 2020.

Tax rate reform

Austria’s regular (individual / personal) income tax rates are progressive (ranging from 0% to 55%) and depend on the applicable “income bracket.” The tax rate for the taxable income from €11,000 - €18,000 is currently 25% but is proposed to be reduced (retroactively) to 20% as from 1 January 2020. The maximum tax rate for income over €1 million of 55% would be extended until 2025.

Christoph Plott / Markus Vaishor

Sales tax reduction to 5 % in the gastronomy, accommodation, cultural and publishing sectors

The gastronomy, culture, accommodation and publishing sectors are strongly affected by the COVID 19 crisis. In order to support these sectors, the Austrian parliament passed a bill  to reduce VAT in these sectors to 5 %. However, the reduced rate only applies from July 1, 2020 till December 31, 2020.

Esther Freitag

News on the COVID 19-Kurzarbeit (COVID 19-Short term work)

In order to clarify the payroll calculation in respect of the COVID 19-short term work, the provision of Sec 37b AMSG was revised by the legislator. Moreover, a team of experts on behalf of the Ministry of Labour, Family and young persons (BMAFJ) has drafted a payroll-guideline. This payroll-guideline as well as the short-time work-minimum-gross-salary-table (Kurzarbeits-Mindestbruttoentgelt-Tabelle), that is based on Sec 37b par 6 AMSG, was published on the website of the BMAFJ.

On May 25th, 2020, two new versions (“Formularversion 7.0”) for the socialparnership-agreements (both with and without works council) were published by the social partners. Those are to be used for first applications for short-time work starting form June 1st, 2020, and for prolongation of short-time works. Since June 1st, 2020, first applications for short-time work cannot be submitted to the AMS (Public Employment Service) with retroactive effect any longer. Applications for prolongation of short-time work can still be applied for with retroactive effect. However, starting with July 1st, 2020, application is only possible until three weeks after the envisioned start of the prolongation. First applications as well as applications for prolongation can only be applied for electronically, via eAMS.

A comprehensive overview in respect of the new social partner agreements, of the procedures regarding first applications for short time work and prolongation application, and of payroll calculation of COVID 19-Short term work can be found in our Tax Personnel News 12 and 13/2020.

  • TPN 12/2020: Updates in regard of  Corona short term work– Prolongation of short-term work and first applications as of June 1st, 2020
  • TPN 13/2020: Update in regard of Corona short term work: COVID 19-short term work in regards of payroll– Revision of Sec 37 b AMSG und Payroll-Guideline 

Katharina Daxkobler / Carl-Georg Vogt

Austrian Federal Finance Court:  Discounting of anniversary bonus provisions with 6% violates the constitution

According to Austrian Income Tax law provisions can only be made for severance payments, retirement payments, anniversary bonuses, other uncertain payments and imminent losses form pending transactions. Long-term provisions in relation to uncertain payments and imminent losses from pending transactions have to be discounted with 3.5% for income tax purposes. Long-term provisions in relation to retirement payments and anniversary bonuses have to be discounted with 6% for income tax purposes. The Austrian Federal Finance Court recently followed the opinion of a taxpayer and states that the obligation for discounting anniversary bonus provisions with 6% violates the constitution, as the type of anniversary bonus provisions is identical with provisions of uncertain payments and should therefore be discounted with 3.5%. The Austrian Federal Finance Court filed an application to the Austrian Constitutional Supreme Court to defeat the respective provision. The further development remains to be seen.  

Markus Vaishor / Katrin Postlmayr

Austrian Administrative Supreme Court on non-deductible input VAT in the event of VAT fraud: input VAT does not reduce the invoice recipient’s income tax base, if the recipient knows about the VAT fraud

In case of VAT fraud, the recipient is not allowed to deduct the input VAT. For income tax purposes, in principle, the non-deductible VAT paid can be a business expense. However, in case the recipient is aware of VAT fraud by the issuer of the invoice or the service provider, the Austrian Administrative Supreme Court has serious doubts that the VAT paid is business related. Therefore, the VAT paid cannot be classified as a business expense and the recipient is not allowed to deduct the input VAT from his/her taxable income.

Stefan Papst / Maja Milekic / Wolfgang Gurtner

Austrian Ministry of Finance informs about the interpretation and application of tax treaties in times of COVID-19

The COVID-19 pandemic has different impacts in the area of international tax law. In particular, questions arise regarding the interpretation of tax treaties in connection with cross-border activities such as home office activities, “Corona short-time work” and topics concerning permanent establishments. In addition to the OECD, the Austrian Ministry of Finance ("BMF") has also dealt with these issues in the written information published on 22nd May 2020.

Florian Rosenberger / Doris Bruckbauer

Austrian Administrative Supreme Court on allocation of the moved supply in chain transactions

In a recent decision, the Austrian Administrative Supreme Court revoked the Austrian Federal Finance Court’s decision due to unlawfulness as a result of a violation of procedural provisions. The Austrian Federal Finance Court had had to decide on the allocation of the moved supply in a chain transaction, but had not carried out any investigations ex officio concerning at which time the second transfer of the right to dispose of the goods had taken place in favor of the final customer.

Esther Freitag / Alfred Mühlberger

EU subsidiary company is not "automatically" permanent establishment of its foreign parent company

On May 7th, 2020, the CJEU decided C-547/18, Dong Yang electronics, that an EU subsidiary of a company based in a third country does not fundamentally mean that the foreign company constitutes a permanent establishment in the Community territory. The service provider is obliged to check whether the recipient of the service has a fixed establishment on the basis of the substantive requirements of Art. 11 of the VAT Regulation and is not obliged to check the contractual relations between the parent company and the subsidiary.

Esther Freitag / Alfred Mühlberger

UZK: Application for a waiver or refund of statutory charges - Application deadline

Customs duties and in Austria also import VAT and special excise duties may have been over- or under-determined, notified, entered in the accounts and may have already been paid. The customs authorities may subsequently recover such duties which have not been reported or have been reported too low. On the other hand, the customs debtor may apply for a waiver or repayment against the notification of over-declarations. The following information is provided to deal with the "application period" for the second case, e.g. waiver or repayment of duties.

Esther Freitag / Alfred Mühlberger

Austrian Federal Finance Court: revision proceedings permissible eight years after tax audit

In case of newly emerged facts, tax authorities do not have to issue an order concerning revision proceedings immediately. Revision proceedings are possible until the end of the period of limitation. As the assessment notices on the income of partnerships (Art 188 Austrian General Fiscal Code “BAO”) are not subject to statutory limitation, in such a case, revision proceedings are theoretically possible for an unlimited period of time.

In case the tax authority’s revision order does not contain any reasons, this cannot be corrected by the tax authority in an appeal proceeding (e.g. Ritz, BAO6 § 307 Tz 3). Hence, revision proceedings are only possible for other reasons, e.g. emerging of further, unknown facts.

Orders on revision proceedings, which do not properly state the addressee of the order, have to be classified as “non-existing” from a legal point of view. Therefore, further revision proceedings can be based on the same “newly emerged” facts (Art 303 BAO) as stated in the “non-orders”. As from a legal point of view the “non-orders” have never been in existence, the iterated use of their content in a further order of revision proceedings is not deemed to be an undue second revision proceeding according to a recent decision of the Austrian Federal Finance Court.

Stefan Papst / Wolfgang Gurtner

Austrian Federal Finance Court on inadmissible appeals against tax assessments

In general, a taxpayer can file an appeal against an assessment from the Austrian Tax Authorities within one month. The appeal must, inter alia, include a detailed explanation. If the 1-month-deadline cannot be met, an application for an extension of time to file an appeal may be filed. In practice, tax payers sometimes file appeals without a proper explanation in order to meet the deadline for the appeal which usually results in a note by the tax office asking for rectification. However, recently the Austrian Federal Finance Court qualified an appeal as inadequate, as the appeal deliberately did not include an explanation. Thus, the appeal was rejected. 

Markus Vaishor / Katrin Postlmayr

The Austrian Ministry of Justice issues updates on administrative regulations, GMSR, for the application of the global standard for the automatic exchange of financial account information in Austria “Gemeinsamer Meldestandard-Gesetz – GMSG", as well as a new ordinance on the list of participating and reportable jurisdictions based on § 91 Z 2 GMSG.

The new ordinance issued by the Ministry of Finance (MoF) on 28.05.2020 on the list of participating jurisdictions expands the number of participating as well as reportable jurisdictions, with whom Austria will exchange financial account information in 2020.

The most recent update of the administrative regulations on the implementation of the CRS in Austria, GMSR, issued on 19.04.2020, cover updates based on legal amendments (JStG 2018, AbgÄG 2020) as well as the implementation of recommendations of the Global Forum on transparency and exchange of information for tax purposes of the OECD.

Moreover, the MoF confirmed the ongoing validity of the MOF´s legal opinion on preexisting savings and custodial accounts dormant bearer accounts without any indicia, as laid down in the written information of the MoF of 16.07.2020, also with respect to such accounts with an account balance or value exceeding USD 1.000, according to amendments to the GMSG based on the AbgÄG 2020.

Philipp Rümmele / Christiane Edelhauser

Notarial certification and notarial deeds without physical presence

The Austrian legislator amended the Notarial Code (NO) with the 4th COVID-19 Act and created the possibility of electronic notarial deeds and certifications. Until 31.12.2020, all notarial deeds or other public or publicly certified documents can be drawn up digitally, i.e. without physical presence of the party.

Dominik Pflug

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