The Austrian Ministry of Finance issued a draft bill on 9 April 2018 for the Annual Tax Act 2018. The draft bill may be subject to changes and the final version is not yet foreseeable. We will keep you updated on future changes and may give detailed information on proposed changes.
The exit tax rules are amended in a way that the current period for the payment of equal installments is reduced from seven to five years. In addition, there will be situations leading to an immediate maturity of the outstanding installments:
- Transfer of assets, businesses or permanent establishments to a state outside of the EU/EEA region.
- Change of the registered office or effective place of management of a corporation to a state outside of the EU/EEA region.
- Insolvency or liquidation of the taxpayer
- Delay of the payment of the installments for more than three months
A new withholding tax is proposed for compensation payments of infrastructure operators in the amount of 10%.
Corporate Income Tax.
Introduction of rules (new Sec 10a CITA), which attribute low taxed passive income of foreign controlled corporations and permanent establishments to the Austrian parent company (“CFC-rules”). Control within the meaning of this rule is exercised if an Austrian parent entity directly or indirectly has more than 50% of the voting rights or capital respectively is entitled to more than 50% of the profits. Passive income would be interest, license income, dividends and income from disposal of shares, income from finance leasing, income from activities of banks and insurance companies (with specific exceptions) as well as income of settlement companies. Low taxation is present if the tax rate is not higher than 12.5%. As a consequence, such income of foreign corporations and Permanent Establishments would be attributed to Austrian parent companies as profits even before the profit is distributed. .
Amendments to the switch over clause are proposed in the way that a switch over from the exemption method to the credit method applies for distributions from international participations and qualified portfolio shareholdings over 5%, in case the foreign subsidiary obtains low taxed passive income.
The amendments are intended to enter into force for business years starting from 1 October 2018.
The proposed withholding tax for compensation payments of infrastructure operators should also be applicable for corporations with a tax rate of 8.25%.
Value Added Tax.
Amendments of the margin taxation of travel services (Sec 23 VATA) as well as the extension of the taxation according to the receipt of payment to all independent professions according to sec 22 Z 1 ITA regardless of legal form.
Real Estate Transfer Tax.
The draft clarifies that after consolidation of shares in an entity holding Austrian real estate, the latter is still attributed to the company and not its shareholder.
The draft bill provides for an abolition of stamp duties on securities provided for rental contracts, which are exempt from stamp duty.
Federal Fiscal Code.
The draft bill includes a legal definition of abuse of law. Legal structures are examined with regard to their economic objectives, unusual nature and inappropriateness. Reasonable economic grounds should rule out abuse of law.
According to the draft bill the subjects of advance rulings pursuant to sec 118 FFC will be expanded and also include questions of international tax law (as of 1 January 2019), value added tax (as of 1 January 2020) and questions of abuse of law (1 January 2019).
Further, the so called horizontal monitoring by the tax authorities as an alternative to the usual tax audit shall be introduced. Horizontal monitoring could be available from 2019 upon application and depending on certain requirements (for example turnover of more than EUR 40 Mio). This would allow for an ongoing control instead of a retrospective audit, thus increasing the planning security for tax payers.
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