On October 16th, 2015 the Federal Ministry of Finance (“BMF”) has published a draft for legal appraisal regarding the bill for Amendments to the Federal Tax Law 2015. The bill contains the following amendments – It remains to be seen whether these amendments will be implemented into Austrian law in their current version.
Income Tax Act.
A clarification was included into Sec. 2 para. 4a Income Tax Act (“EStG“) so that certain earnings that are formally invoiced by a company will be directly attributed to an individual under the following preconditions:
- The earnings originate from a position of the individual as legal representative or from working as an artist, writer, scientist, athlete or lecturer.
- The entity invoicing fees for the services rendered by the individual is influenced by the individual and does not possess an independent business beyond the concerned services.
The concept for capital repayment, as defined by Sec. 4 para. 12 Income Tax Act, contains (similar to the legal situation prior to the Tax Reform Act 2015/16) an option: cash outflow that is treated by corporate law as profit distribution can be treated by tax law either as capital repayment or as profit distribution. Profit distribution requires positive internal financing. This precondition has already been foreseen in the Tax Reform Act 2015/16. Recording of differences that were created in the course of reorganizations will not be necessary due to the reform of the limitations on distributions under corporate law.
It is planned to replace the concept of postponed tax payment by a concept of payment in installments of the tax on hidden reserves (as far as business activities are concerned). In conformance with all requirements of Sec. 6 para. 6 subpara. a Income Tax Act, regarding the moving-away of a taxpayer, the taxation of hidden reserves concerning capital assets shall be spread evenly over seven years. In opposition to this, tax on current assets shall be spread evenly across two years. Furthermore the concept of payment in installments shall be applied to the Corporate Restructuring Taxes Act (“UmgrStG“) in cases where Austria loses its taxation right. For non-business income the concept of postponed tax payment will remain unchanged, provided that either the affected individual is actually relocating within the EU or EEA or a gift is donated to an individual living in another state within the EU or EEA.
Currently the withholding tax rate after deductions is set at 35 % for citizens of the EU and EEA. Effective from 2016, the rate shall be lowered to 25 %. These changes will accommodate the tariff reduction regarding nonresident taxation.
Intermediate Corporate Tax (“Zwischensteuer“).
The system regarding intermediate corporate tax will be amended concerning cases of a foundation granting donations to a foreign beneficiary: The reimbursement of intermediate corporate tax for donations to foreign beneficiaries is only permissible if the donations are subject to withholding tax (“KESt“). WHT refunds lead to these donations not being deductible from the assessment basis for intermediate corporate tax. Should the foundation be dissolved, the mere possibility of refunding WHT paid by a foreign beneficiary leads to the reimbursement of intermediate corporate tax being prohibited (regardless of the WHT being actually reimbursed or not). With this draft the legislator responds to the ECJ’s decision in the case F.E. Familienprivatstiftung Eisenstadt (C-589/13).
Sec. 209 para. 3 Fiscal Code concerns income and corporate tax debt: Until now undue tax debts of taxpayers in exit taxation cases have fallen under the statute of limitations 10 years after the tax debt has fallen due which would be the date of moving-away. From now on this period of ten years is supposed to start later, when the retroactive event (either selling or moving into a third state) occurs. This change shall be retroactively applied to tax claims that originated after December 31st, 2005.
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