• Service: Tax, Global Mobility Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 2/14/2014

Austria - Group taxation, capital duty, business expense deducibility proposals 

February 14: Changes to the Austrian tax rules concerning group taxation, capital duty, and the tax deductibility of certain business expenses were passed on 29 January 2014 by the Austrian Council of Ministers. It is now expected that a government bill with these proposals will be presented and adopted within the next few weeks.

Changes to group taxation, capital duty rules

Concerning the group taxation rules, the changes would provide that:

  • The group tax regime would be limited to EU countries and to countries with which Austria has concluded a tax treaty containing mutual assistance provisions. Group members from countries not satisfying either of these requirements would be excluded from the group tax regime as of 1 January 2015, and any of these entities’ foreign tax losses claimed in Austria would have to be recaptured within three years.
  • Losses of foreign group members would only be available as an offset against 75% of the “positive” taxable income of the Austrian group parent and Austrian group members of the current year. Excess losses could be carried forward to subsequent tax years.
  • Third-party acquisitions of Austrian operating entities via share transactions after 28 February 2014 would no longer be allowed to deduct depreciation for goodwill upon inclusion of the acquired corporation into the tax group. Ongoing goodwill depreciation deductions, resulting from past acquisitions of Austrian operating group members, would however continue to be tax deductible.

The proposals would repeal the capital duty. Accordingly, Austrian capital duty, currently imposed at a rate of 1% and triggered whenever a direct shareholder provides equity to an Austrian corporation, would be repealed with an effective date of 1 January 2016.

Other proposed changes

The proposed tax changes also would:

  • Restrict the tax deductibility of intra-group interest and royalty payments—i.e., payments that are effected after 28 February 2014, would be deductible in Austria only as far as the corresponding income is taxed in the hands of the “beneficial owner” (holding at least 10% ownership interest)
  • Tighten the rules for tax deductibility of expenses when setting up long-term accruals by implementing a “discount obligation” of 3.5% per annum (instead of the current lump-sum discount rule of 20%)
  • Limit the tax deductibility of payments made to top-level employees to €500,000 per year and extend the solidarity surcharge subjecting “extra payments” made to top-level earners in Austria to an increased, progressive tax rate
  • Amend the tax rules applicable to voluntary severance payments (e.g., “golden handshake” payments now taxed at the beneficial rate of 6%) so that excessive payments would be subject to the regular individual income tax rates of up to 50% and also make such payments non-deductible for the paying company—i.e., proposals that would particularly focus on payments made to board members by a stock corporation
  • Subject interest payments, if made by Austrian banks to non-Austrian residents, to the Austrian withholding tax system as of 1 January 2015; and if Austria has no taxing rights (e.g., because of provisions of an applicable income tax treaty), withholding tax could be reduced / avoided at source providing that the required documentation is presented in advance

For more information, contact a tax professional at KPMG Austria in Vienna:

Hans Zoechling

+43 1 313 32 - 259

Christoph Plott

+43 1 313 32 - 697

Bettina Matzka

+43 1 313 32 - 407

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