A draft regulation regarding controlled foreign corporation (CFC) taxation includes measures concerning the possible assessment of low taxation regarding:
Other rules in the draft CFC regulation provide an “escape clause” with regard to determining whether the passive income earned by a low-taxed CFC is more than one third of its total income, with the one-third limit being determined separately for each fiscal year over a three-year period. Thus, the CFC regime would apply if the sum of passive income generated in the three-year measuring period is more than one third of the sum of the total income generated in these three fiscal years.
There is a “substance escape clause” providing that the CFC regime would not apply if the CFC conducts significant business activity in terms of employees, equipment, assets, and premises. The draft regulation includes a list of business activities that typically do not constitute qualifying business activities.
In applying the CFC regime, losses from the CFC are not attributed to the Austrian controlling corporation, but positive passive income and negative passive income can be offset against each other.
Lastly, the draft CFC regulation includes a “switch-over” provision from the prior CFC rules.
Read a December 2018 report [PDF 367 KB] prepared by the KPMG member firm in Austria
Other topics briefly discussed in this KPMG report include:
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