Donations to all corporations receiving public allowances for performing artistic activities that support Austrian art and culture (e.g. theatrical assoiciations) will – according to the draft – become deductible for the donators. Currently, there is no tax benefit for donations for innovative, public-spirited projects. These donations will become deductible after establishing an institute that is responsible for granting allowances for such projects. In order to increase the number of domestic research projects, there will also be tax benefits for donations to foundations and funds which have been established according to the Federal Foundations and Funds Act (“Bundes-Stiftungs- und Fondsgesetz”) or comparable local laws.
Donations to the assets of a foundation.
The new Sec. 4b and Sec. 18 para. 1 subpara. 8 Income Tax Act (“Einkommensteuergesetz”) will allow deductibility of donations for purposes of creating profitable assets of foundations or similar legal estates, thereby extending the already existing benefits of donations found in Sec. 4a and Sec. 18 para. 1 subpara. 7 Income Tax Act. Donations will be deductible within five financial years, starting with the year of the first donation, until a maximum amount of EUR 500,000 has been reached (this maximum amount can be reached at any point within the five years). Moreover, donations will only be deductible up to 10% of the taxpayer’s annual profits (before considering tax-free profit allowance) respectively 10% of the taxpayer’s taxable income may be deducted as special expenses (“Sonderausgaben”). Donations will only be deductible if the profit arising from donated assets is used solely for the beneficial purpose for two fiscal years (starting with the year of the donation). As an exception, 10% of the assets’ profits allocated to a financial reserve per fiscal year can be considered as use for the beneficial purpose. To avoid cases of abuse the donated assets have to be dedicated as fixed assets of the foundation for at least two years. At the time of the donation, the foundation must be part of the Ministry of Finance’s register of beneficial donees (exemptions exist if the foundation meets the requirements for being included in the register within five years of the foundation’s establishment).
Ex post taxation.
If the donated assets are spent within two years or profits made from the donations are not used for the beneficial purpose within five years, this will lead to an ex post taxation. The same applies to both foundations not meeting the requirements of registry three years after their establishment and to foundations which are not included in the register within five years after receiving the donation. The ex post taxation will be implemented by increasing the corporate tax to 30% of the deductible amount, irrespective of whether this amount would generally be subject to corporate taxation or not.
Intermediate corporate tax basis (“Zwischensteuer”).
Deductible donations and donations to the assets of a foundation can be deducted from the intermediate corporate tax base (provided that they haven’t been taken into account for the calculation of income). Deductions are capped at 10% of the revenue that is subject to intermediate tax. A threshold of EUR 500,000 has to be considered for donations to foundations that are made according to Sec. 4b Income Tax Act.
Real Estate Transfer Tax („Grunderwerbsteuer“) and Tax on Donations to Foundations („Stiftungseingangssteuer“).
Gratuitous acquisition of real estate will no longer be subject to Real Estate Transfer Tax, as long as real estate is acquired by corporations, associations of individuals or legal estates pursuing charitable purposes. Moreover, donations to charitable foundations will also be exempt from tax on donations to foundations.
Amendments to the Fiscal Code.
Up to now, corporations which pursue charitable or ecclesiastical objectives must pursue these purposes directly in order to receive fiscal privileges. According to the draft, exceptions will be introduced for both donation-collecting associations (as long as they only support corporations which follow the same purpose as they do) and corporations which perform services for compensation (but without seeking profits) for other charitable corporations. Further exceptions will be put into place for corporations that financially support scholarships, awards for scientific research or adult education, provided that e.g. a university decides on whom such funds will be granted.
The envisaged amendments regarding the Benefit to the Public Act 2015 aim at increasing donations by foundations. Furthermore, donations to corporations that perform artistic activities supporting Austrian art and culture would become deductible by implementing the draft. It remains to be seen whether the draft will be subject to changes in the course of legal appraisal.
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