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

Austria: Proposed tax measures (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.

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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 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 would be 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 application of 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 treated as “normal” tax loss carryforwards that could be used against taxable income in future years.

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 would 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)
    • 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.


For more information, contact a KPMG tax professional in Austria: 

Markus Vaishor | +43 1 31332 3652 | mvaishor@kpmg.at

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