Manage your tax payments
The regulatory requirements to combat COVID-19 will lead to liquidity bottlenecks for many companies. Therefore, the Austrian legislator, the Austrian Federal Ministry of Finance and the social security institutions allow relief for the deferring and reduction of levies and contributions. In most cases, however, companies have to take action themselves and submit appropriate applications.
Deferral and reduction of tax payments.
In the event of a credible liquidity constraint due to COVID-19, an application for the reduction of tax prepayments (the application for respective reductions for 2020 needs to be filed until October 31st, 2020) as well as an application for deferral or instalment payments can be filed. Additionally, the taxpayer can file an application that no late payment surcharges as well as no deferral interest shall be imposed. Text modules published by the Federal Ministry of Finance can be used to formulate the credibility of the liquidity constraint. Companies affected indirectly must add a justification to their specific concern.
In addition, the Federal Ministry of Finance has provided its own form for the application for tax relief. The application can be sent either by e-mail or uploaded via FinanzOnline. The tax authorities are required to address such applications immediately. With regard to the deferrals, the Federal Ministry of Finance has stated that, if there is any concrete concern, a deferral must be granted until September 30th, 2020. In the event of specific concern, no deferral interest shall be set. Details of the information published by the Federal Ministry of Finance can be found here.
In spite of these facilitations, it is in any case necessary that tax declarations, such as monthly or quarterly VAT returns, are submitted in the correct amount and in due time (15th, of the second month following) and therefore the tax liability is duly announced in full. However, instead of full payment, a deferral application can be submitted on the due date and, if necessary, only a partial amount can be paid in. In principle, this is also possible for payroll taxes or advance payments of income or corporation tax.
A (partial) non-payment of levies without corresponding applications can have unpleasant consequences: In addition to default surcharges (2% of the levies), financial criminal consequences can be threatened. Proactive action by every taxpayer is therefore urgently needed. However, there are leniency possibilities in the case of late payment surcharges.
Since March 15th, 2020, the corresponding applications for deferral or non-fixing of deferral interest and late payment surcharges can also be sent by e-mail to the following e-mail address: email@example.com (please note: the application may only be filed by e-mail until May 31st, 2020). As mentioned earlier, requests for a reduction of income tax and corporate income tax prepayments are also included in the possibility of submitting an application by e-mail. Please note that the original copy of the application must be duly signed before submission and must be kept for seven years on the grounds of evidence.
Extended deadlines for tax return filings
The general deadline for filing the 2019 annual income tax, CIT and VAT returns as well as for filing a tax income assessment declaration (Feststellungserklärung) is extended until August 31st, 2020. Correspondingly, late filing surcharges will not be imposed until August 31st, 2020.
Deferral of social security contribution payments.
Furthermore, it is possible to defer social security contributions. The Austrian Health Insurance Fund (ÖGK) automatically defers social security contribution payments by businesses affected by a closure ordinance or an access restriction for the contribution periods February, March and April 2020. Other businesses with COVID-19-related liquidity problems can submit an informal application for deferral or instalment payment to the ÖGK, which is the regional competent authority. Deferral of these contribution periods is free of interest. For details, please see the ÖGK website here.
The Social Insurance of the Self-Employed (SVS) also accepts applications for deferral and instalment payments for insurance contributions. Prepayments may be reduced as well. Applications can be filed by e-mail or via appropriate forms online. Please see the SVS website for details here.
If social security contributions are not being declared in due time, interest on overdue payments may be charged. In addition, the withholding of social security contributions from employees and the non-payment to insurance agencies is punishable. Thus, it is strongly recommended to disclose the relevant amounts payable and then apply for the above-mentioned payment relief programs in case of liquidity constraints.
File 2019 tax return early to obtain tax credits.
Early filing of FY 2019 tax returns will help to obtain tax refunds early in case prepayments made exceed the calculated tax.
Use extended 2018 tax return filing date.
The so-called Quota-Rule is suspended and the deadline for filing the tax returns for 2018 is extended until August 31st, 2020 for taxpayers represented by a tax advisor.
Exemptions for COVID-19-related grants.
All contributions received by taxpayers due to COVID-19 are tax-exempt. The exemption applies both to funds from the COVID-19 Crisis Management Fund as well as from the Hardship Fund and all grants made for such purposes, e.g. by the federal states, municipalities or interest groups. This includes grants awarded since March 1st, 2020.
Manage your business
AGM and board meeting held online.
In order to prevent the dissemination of COVID-19, meetings of shareholders and members of the board of directors of a corporation, partnership, cooperative, private foundation, association, mutual insurance association, small insurance association or savings bank may be held in accordance with a regulation to be adopted without the physical presence of the participants and decisions may also be taken in other ways. By way of derogation from the generally applicable statutory provisions, meetings or resolutions of public limited companies (AG) and limited liability companies (GmbH) and cooperatives may take place within the first 12 months of the financial year of the company concerned.
Insofar as company contracts set deadlines or dates for certain meetings, they may also take place at a later date in 2020. Quarterly Supervisory Board meetings of AG, GmbH and cooperatives may also take place after April 30th, 2020. If, as a result of the COVID-19 pandemic, the legal representatives of a corporation, the board of directors of a cooperative or the management body of an association are unable to prepare the accounting documents in the first five months of the financial year and submit them to the members of the Supervisory Board, this period may be exceeded by a maximum of four months. In addition, the annual financial statements do not have to be submitted to the company register at the latest nine months, but no later than twelve months after the balance sheet date. This scheme applies to all companies whose last or next balance sheet date is between October 16th, 2019 and July 31st, 2020.
Bankruptcy Regulations and Execution Regulations.
According to Austrian Bankruptcy Regulations, a debtor is obliged to apply for the opening of insolvency proceedings no later than 60 days after the reason for insolvency has occurred. In the event of insolvency caused by a natural disaster, this period shall be extended to 120 days. It has now been made explicit that an epidemic and a pandemic also fall within the concept of a natural disaster. This extends the period for applying for the opening of insolvency proceedings to 120 days after the reason for insolvency occurs, if this is caused by the COVID-19 pandemic. In the event of over-indebtedness in insolvency law between March 1st, 2020 and June 30th, 2020, there is no obligation to file for insolvency by the debtor. If the debtor is over-indebted at the end of June 30th, 2020, the opening of insolvency proceedings must be applied for without culpable hesitation, but at the latest within 60 days after the expiry of June 30th, 2020 or 120 days after the occurrence of over-indebtedness, whichever ends later. In addition, the Court of First Instance may at the request of the debtor defer payment schedule rates with regard to the current situation for a maximum of nine months. Furthermore, the Insolvency Court may, of its own motion or at the request of a party or insolvency administrator, extend procedural time limits where the limit-triggering event falls within the period after April 4th, 2020, appropriately, but not more than 90 days.
According to Austrian Execution Regulations, the execution must be postponed at the request of the obliged entity, subject to certain conditions, without the imposition of a guarantee if it has been affected by a natural disaster. It has now been made clear that an epidemic and a pandemic also fall within the concept of a natural disaster. The postponement of an execution can therefore also be requested by an obliged party for these reasons.
Dividend distribution during the COVID-19 crisis
The current COVID-19 pandemic poses massive economic challenges for companies and it partially forces them to revise their targets for the current financial year. In addition, the question arises for companies whether dividend are permissible in view of the negative economic consequences of the COVID-19 pandemic. In particular, companies that benefit from state aid face a difficult decision in this regard.
Dividend distribution and state aid.
The European Central Bank and the Austrian Financial Market Supervisory Authority have sent an urgent recommendation to the banks they supervised to refrain from paying dividends for the past financial year. Austrian politicians are also calling for a ban on the distribution of profits for companies that use state aid in the context of the COVID-19 crisis. From a legal point of view, a dividend distribution is in principle permissible despite the use of state aid.
However, it remains to be seen whether the legislature will make the use of state aid services conditional on the restriction of dividend distributions in the future due to social and political pressure
Dividend distribution during crisis.
The Austrian Limited Liability Companies Act (GmbHG) contains in Section 82 (5) an explicit provision regarding dividend distributions in an economic crisis situation: “If, in the period between the end of the financial year and the shareholders’ resolution on the annual accounts, the directors or the Supervisory Board are informed that the company’s assets have been significantly and probably not merely temporarily reduced by losses or impairments, the profit resulting from the balance sheet shall be excluded from distribution in an amount corresponding to the loss of assets suffered and shall be transferred to account for the current financial year.’
The aim of this provision is that unforeseen deteriorations in the economic situation of the company after the end of a financial year must be taken into account in the upcoming period. Two cases must be distinguished:
- The annual accounts for the past financial year are still being drawn up and have not yet been formally established; an
- the annual financial statements for the past financial year were drawn up before the outbreak of the COVID-19 pandemic and have already been formally established.
In the first case, i.e. if the annual accounts for the past financial year have not yet been formally established, the shareholders must take a clear view of the economic situation of the company and examine whether the COVID-19 pandemic caused losses are significant and are not likely to lead to a temporary reduction in the company’s assets. If this is the case, the part of the balance sheet profit corresponding to the loss of assets may not be distributed. Instead, it must be presented on account for the current financial year. If necessary, the amount of the distribution block shall be determined by drawing up an interim balance sheet.
If the shareholders are aware of the existence of the aforementioned conditions of Section 82 (5) GmbHG, they are obliged to vote against a corresponding distribution of the balance sheet profit on account by their duty of loyalty. If the shareholders nevertheless decide to distribute profits ultimately leading to the insolvency of the company, there may even be direct liability of the shareholders. The managing directors (and a supervisory board, if established) are obliged to draw the shareholders’ attention to the losses incurred in the meantime before the resolution of the annual financial statements. In addition, if the conditions of Section 82 (5) GmbHG are met, the managing directors must refrain from distributing profits, even if the shareholder decision to the contrary is taken.
The Stock Corporation Law (AktG) does not contain a similar provision. However, an analogous application of the payout ban is also to be considered in this case.
COVID-19: Accounting and reporting in accordance with Austrian GAAP (UGB) and IFRS
The COVID-19 pandemic has far-reaching implications for Austrian companies and thus also for accounting. At the beginning of March 2020, the German Institute of Auditors (IDW) published a technical report on the impact on accounting in this respect. The Austrian Financial Reporting and Auditing Committee (AFRAC) has now also developed special information on this subject.
Impact on accounting as of December 31st, 2019.
In principle, the effects of COVID-19 represent so-called “value-based” events, i.e. there is no impact on the recognition and valuation of balance sheet items financial statements as of December 31st, 2019 drawn according to Austrian GAAP (UGB). The same applies to IFRS financial statements, which is why the effects of coronavirus will normally be classified as non-adjusting events (in the sense of IAS 10.3 (b) icw IAS 10.10) and therefore the amounts recognized in the financial statements as at December 31st, 2019 are not to be adjusted. A different assessment might be given if, for example, subsidiaries in China are included in consolidated financial statements and these have had an impact before the balance sheet date.
However, even if classified as a value-based event, the Austrian GAAP also entail additional reporting requirements in the annex and management report for medium-sized and large corporations. The notes shall state material events after the balance sheet date and explain their financial impact. The same applies to the IFRS notes in accordance with IAS 10.21. The COVID-19 pandemic will normally be classified as a significant event. Where it is not possible to estimate the financial impact, this fact shall be disclosed. Furthermore, additional disclosure requirements may arise in regarding the acceptance of the continuation of the company (see below).
The management report will normally address the COVID-19 pandemic in the context of the presentation of the main risks and uncertainties and the impact on the expected development. Moreover, risks that endanger the going concern-premise must be addressed in particular and they must be described as such in accordance with AFRAC 9. The dynamics of the spread of COVID-19 may make it difficult to reliably estimate the duration of COVID-19 and the impact. If the effects are not foreseeable, the entity shall disclose this fact.
Impact on the principle of the continuation of the company (Going Concern).
In accordance with Austrian GAAP as well as IFRS, financial statements are generally drawn up on the principle that the company’s activities will continue, as long as there are no factual or legal reasons that indicate otherwise.
A deterioration in the financial position after the balance sheet date may indicate that it is necessary to verify whether the preparation of the financial statements on a going concern premise is still appropriate. In assessing the appropriateness, all the information available concerning future developments as well as consequences due to the COVID-19 pandemic as at the date of the preparation shall be taken into account.
If there are any factual or legal reasons for the continuation of the business, the management shall make a specific assessment of the ability to continue within the framework of a continuation forecast (planning invoice). Therefore, the entity shall include all available information on the future, taking into account at least a period of 12 months after the balance sheet date. In the case of signs of a crisis, a period of at least 12 months from the date of preparation of the financial statement has to be taken into account. According to the AFRAC technical information, if a crisis analysis is performed, the following COVID-19-specific events and their impact on liquidity and financing must be taken into account: demand declines and production constraints, breaks in supply and value chains, production interruptions and closures of sales outlets, possibility of flexible capacity adjustment or the possibility or necessity of changing business models.
If according to the management’s assessment the going concern premise generally can be applied, however, significant uncertainties have been taken into account when performing the analysis, this fact shall be included in the notes. The main reasons that indicate a going concern premise and the plans to address these reasons must be adequately presented.
However, AFRAC recommends that micro-companies that do not have to prepare notes according to Austrian GAAP include information on material uncertainties regarding the going concern premise in their annual financial statements (e.g. under the balance sheet).
Value-based findings between the preparation and adoption of the annual accounts.
If, between the date of the preparation of the annual accounts and its adoption, new value-based findings in relation to the COVID-19 pandemic arise, no adjustment of the financial statements and management report is required in principle.
Similarly, an amendment to the proposal regarding the use of the company´s earnings, which has to be disclosed in the notes of medium-sized and large corporations following the preparation of the annual or consolidated financial statements, or any actual use of the company´s earnings that differs from the proposal, does not enclose any obligation to amend the financial statements already adopted in this respect.
Impact on accounting after the reporting date of December 31st, 2019.
According to AFRAC, for balance sheet dates after December 31st, 2019, it is generally the case that a country-by-case and individual assessment must be made as to whether the outbreak and the effects of the COVID-19 pandemic are value-based events or whether they must be observed in accordance with the reporting date principle. In this context, companies shall take into account inter alia the WHO’s declaration of an international health emergency as of January 30th, 2020, and the declaration of a pandemic as of March 11th, 2020. In Austria, the announcements of the various measures taken by the Austrian Federal Government must be given special consideration by March 13th, 2020 at the latest.
If the effects of the COVID-19 pandemic are classified as adjusting events (i.e. subject to consideration), there may be far-reaching effects on the valuation of assets and liabilities. This concerns, for example, the assessment of the need for impairment of assets (in particular goodwill, tangible assets and financial assets), the fair value measurement of assets and liabilities, the creation of idle capacity in connection with the valuation at cost of inventories due to underutilization and interrupted supply chains, as well as an increased risk of bad debts. However, any claims to state or insurance benefits may also be disclosed.
On the liabilities side, the COVID-19 pandemic may require the creation of provisions (e.g. provisions for losses from pending transactions or for contractual penalties or onerous contracts) in the case of pending sales and pending procurement transactions. In addition, the possible breach of credit terms (covenants) must be taken into account, as well as contingent liabilities such as liability relationships, which can become binding and are then to be included in the balance sheet as liabilities.
Customs procedures changed
The Austrian customs authorities have adopted various measures to assist companies in the event of difficulties caused by COVID-19
Extended deadlines in customs procedures.
In the case of various customs procedures, time limits may be extended. If the delivery period cannot be met in the transit procedure, this period shall be extended automatically if the carrier or the holder of the procedure makes a simple written declaration to the customs office of destination (also retrospectively) that the delay is caused by the COVID-19 pandemic. Requests for extensions of time limits on the basis of pandemic circumstances may be made in the event of reimbursement or remission, special procedures and temporary importation. If the three-year period for re-importation of returned goods due to the Corona virus cannot be complied with, this is considered a special reason and should be followed up. Customs offices do not collect administrative charges for the processing of pandemic deadlines.
Adjustment of the security.
Companies that have provided an overall security (such as the deferred payment account for inward processing authorization or customs warehouses) may adjust the overall security on request, subject to the condition that the security to be provided has changed due to pandemics.
If an applicant is unable to comment on a decision of the customs office within 30 days due to pandemic slack, they shall inform the customs office responsible for the procedure. The customs office may then extend the period by a further 30 days.
Customs authorities may grant payment facilitation such as instalment payments for customs debts provided that the company proves that it is facing significant economic or social difficulties as a result of the COVID-19 pandemic.
Interest on late payments due to non-timely payment will generally be suspended until May 31st, 2020 due to the pandemic.
Avoid the presentation of accompanying documents in paper form.
Export or transit enclosed documents no longer need to be physically presented at the customs office of departure or transit, provided that the MRN (unique registration number for customs declarations such as registration numbers for export or shipping) is announced by other media such as text messages, e-mail, WhatsApp.
Deferrals are also possible in the area of excise duty. Applications for deferrals of excise duty may be submitted in writing to the customs office. Due to the sharp increase in the consumption of hand sanitizers, pharmacies are now allowed to use untaxed alcohol for the production of disinfectants. Tax-free use is possible for pharmacies from the moment the applications are submitted (and not only from the approval of the customs authorities).
Export restrictions on protective equipment.
COVID-19 has greatly increased the need for medical protective equipment. In order to meet this demand, the EU has imposed an export restriction on medical protective equipment (protective goggles and visors, face shields, mouth-nose protective equipment, protective clothing, gloves). Disinfectants are not covered by the export restriction. An export authorization shall be presented in case these products are exported. The authorization requirement is valid for six weeks from March 15th, 2020. Norway, Iceland, Liechtenstein and Switzerland are excluded from the export restriction.
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