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Austria: Tax loss carrybacks (COVID-19)

Austria: Tax loss carrybacks (COVID-19)

Austria recently introduced rules to allow a carryback (expected) of tax losses for 2020 as a response to address the economic implications of the coronavirus (COVID-19) pandemic.

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Overview

Previously, the tax law in Austria only provided for tax loss carryforwards—that is, losses can be carried forward indefinitely, and for corporations may be used for up to 75% of taxable income in any given year.

In response to the COVID-19 pandemic, the Austrian government introduced tax measures that are intended to boost Austria’s economy and facilitate further investments—including measures to allow the availability for tax loss carrybacks for use by entrepreneurs and corporations. The provisions were enacted into Austrian tax law (Art 124b Sec 355 of the income tax law and Art 26c Sec 76 of the corporate income tax law) (24 July 2020), and a related ordinance implementing these measures was issued by the Austrian Ministry of Finance with an effective date of 17 September 2020.

Tax loss carryback—general mechanism

In general, any business income tax losses incurred in 2020 that cannot be applied against positive income in 2020 may be carried back and offset against taxable income in 2019 up to a maximum amount of €5 million.

If the tax loss carryback is not available to be used for 2019 (for instance, because the taxable profit is too low), tax losses from 2020 may be further carried back and offset against taxable profit for 2018. 

Austria 1

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

Austria 2

Note: The following discussion, for the sake of clarity, refers to taxpayers whose financial year is the calendar year.

Tax loss carryback into 2019—“COVID-19-reserve”—prior to 2020 tax assessment

Expected business income tax losses incurred in 2020 can be directly offset against taxable income of 2019 by recognizing a “COVID-19-reserve” as a separate deduction item in the course of the tax assessment 2019. The COVID-19-reserve is limited by reference to three amounts:

  • Expected business income tax losses for 2020
  • 60% of the positive business income for 2019 (if a reliable estimation of the expected business income tax losses is available) or 30% of the positive business income for 2019 (if a reliable estimation of the expected business income tax losses is not available and if the income tax prepayments were reduced to zero or to the minimum corporate income tax)
  • €5 million

Any COVID-19-reserve recognized for 2019 (as a separate deduction) is added to the taxable result for 2020 tax assessment. 

Actual tax loss carryback into 2019 and 2018—after 2020 tax assessment

Any tax losses from 2020 that are not carried back by way of the COVID-19-reserve may “actually” be carried back after the 2020 tax assessment. Nevertheless, the amount of the COVID-19 reserve plus the “actual” tax loss carryback is limited to €5 million total.

Any remaining tax losses for 2020 that could not be carried back into 2019 may be carried back to 2018 (limited to €2 million).

Any further tax losses for 2020 that are neither carried back to 2019 or 2018, will serve as “ordinary” tax loss carryforwards to be used in tax assessments as from 2021 and onwards.

Special provisions for Austrian tax groups

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

  • Only the group parent (that is the sole taxpayer of the tax group) may apply for the tax loss carryback.
  • Tax losses carried back are to be offset against the group’s income.
  • The maximum amount of the carryback is €5 million for the group parent 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 and four group members would amount to €25 million. 
Austria 3

KPMG observation

The mechanism in relation to the “COVID-19-reserve” and the “actual” tax loss carryback into 2019 also applies with regard to tax groups. Neither the law nor the ordinance clearly states if the €2 million limitation applies for the group parent and all group members (in the example above, €10 million in total). Until further guidance from the Ministry of Finance, it is the opinion of tax professionals that this is the case.

 

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

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

Karin Postlmayr | +43 1 31332 3154 | kpostlmayr@kpmg.at

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