Austria: Court decisions on goodwill depreciation and loss carryforwards; other developments

Recent tax developments include judicial actions

Recent tax developments include judicial actions

The KPMG member firm in Austria prepared a report of recent tax developments that includes the following judicial actions:

Austrian Federal Finance Court on the qualification of compensation payments for location rights

According to Austrian income tax law, goodwill (acquired in the course of a business asset deal) resulting from the acquisition of a trade is to be depreciated over 15 years. The position of the tax authorities and confirmed by earlier court decisions is that this depreciation rule also applies if several parts of a goodwill (such as a customer base) are acquired.

The Austrian Federal Finance Court in a recent decision qualified compensation payments for location rights that were paid in relation to the acquisition of drink dispensers as a customer base. Thus, the compensation payments were determined to be capitalized and depreciated over 15 years. 
 

Austrian Administrative Supreme Court on loss carryforwards, loss trafficking rules

In general, an Austrian company’s tax loss carryforwards can be carried forward indefinitely. However, according to the loss trafficking rules (Mantelkauf), tax loss carryforwards may be disallowed, if there is a significant (equal to or greater than 75%) change in the direct shareholder structure followed by a change of the organizational and the economic structure of the company.

The Austrian Federal Finance Court issued a judgment in a case in which the three criteria were met. In that case, the whole shareholder structure changed followed by a change of the director. The third requirement—a change of the economic structure—was also fulfilled, as the company changed its business from leasing real property and medical equipment to running an X-ray business. Given that the company changed its business activities in connection with the other two structural changes within a few weeks, the court disallowed the tax loss carryforward to the Austrian company. This decision was recently affirmed by the Austrian Administrative Supreme Court. 

Read a January 2022 report prepared by the KPMG member firm in Austria

 

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