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Austria: Proposed administrative tax law changes, “horizontal monitoring” and advance rulings

Austria: “Horizontal monitoring” and advance rulings

The Austrian government’s recently published draft of administrative tax legislation for 2018 would codify the concept of “horizontal monitoring” and would allow for expanded use of binding rulings. Both measures would increase the predictability of tax payments, reduce tax exposure, and improve cooperation between taxpayers and the tax authorities.


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Horizontal monitoring

Under the draft bill, effective 1 January 2019, “horizontal monitoring” would be established as an alternative to tax audits for larger corporations and corporate groups that satisfy certain requirements. 

Horizontal monitoring was launched as a pilot project in 2011, with the participation of 15 companies. Horizontal monitoring now would be introduced on a permanent basis and would be codified as a provision of the Austrian general tax law. 

Under the concept of horizontal monitoring, companies would be in regular contact and would cooperate with the tax authorities, based on a principle of trust. Regular quarterly meetings would be held between taxpayers and those tax officials dedicated and assigned to them. At these meetings, pending tax issues would be reviewed and discussed, and then the discussions would be documented in writing. Horizontal monitoring would cover most taxes that apply for companies, except for the taxes on wages and customs duties. 

Under horizontal monitoring, the obligations and advantages for taxpayers would include:

  • Companies participating in horizontal monitoring would be required to disclose, proactively, all tax relevant facts to the tax authorities if there is a possibility the tax authorities would take an opposing or deviating view and/or if the facts could have a significant impact on the taxable results of the company. 
  • Companies would be required to introduce a tax control system and would be required to provide evidence on all measures taken so that taxes are properly declared and paid. Taxpayers would be required to obtain a confirmation on implementation (and periodic renewal) of a tax control system by a certified auditor.
  • Based on the principle of trust, no tax audits would take place unless there were certain specific circumstances (e.g., administrative assistance, corresponding adjustment, fiscal penalty procedures, etc.). 
  • Companies participating in horizontal monitoring would have an enhanced right to obtain information with respect to the tax authorities’ position on pending tax issues. Dedicated officials from the tax office would be available to discuss questions on a regular basis. 

To participate in horizontal monitoring, an application would have to be filed by the “top” Austrian company for some or all related companies resident in Austria, provided that certain conditions are met—for instance, at least one of the group companies has revenue greater than €40 million during the preceding two years; the taxpayer is a bank or credit institution; no fiscal penalties were assessed during the last five years; there has been confirmation by an auditor regarding the implementation of a tax control system, etc. The tax office would verify that these conditions are satisfied. 

If the conditions are met, a tax audit would be initiated covering all open years. The taxpayer’s participation in the horizontal monitoring program would be granted by an official tax return (thus demonstrating the company was “reliable” from a fiscal perspective). In this context, certain aspects would be considered—including the behavior and the results of the tax audit and of previous tax audits; the fulfilment of disclosure obligations; repeated applications for deferred payments; potential fiscal penalty procedures, etc. 

Binding rulings

In the past, binding rulings could only be obtained for transfer pricing, tax group, and reorganization issues. The draft bill would expand the scope of binding rulings to apply to international tax questions, to value added tax (VAT) issues, and to the application of anti-abuse regulations. 

Administrative “user” fees would be payable to the tax authorities for a binding ruling, with the user fees ranging between €1,500 and €20,000 depending on the size and type of the underlying transaction. 


Read an April 2018 report [PDF 379 KB] prepared by the KPMG member firm in Austria

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