The guidelines (German) [PDF 5.71 MB]— Körperschaftsteuerrichtlinien 2013, BMF-010216/0009-VI/6/2013— indicate a more restrictive approach by the Austrian tax authorities with respect to the tax treatment of certain interest deductions and loss carryforwards in coming years.
Debt-financed share acquisitions, debt push-down model rules
Having tightened the rules on the deductibility of interest relating to debt-financed share acquisitions in 2011—i.e., with respect to debt- financed intra-group share acquisitions—the Austrian tax authorities have again tightened the interest deduction rules to counter the use of “debt push-down models.”
Under the new 2013 corporate income tax amended guidelines, interest deductions are denied―even if there is a straight third-party sale of an Austrian target company by an Austrian acquiring company―if the transaction is related to the acquisition of the entire group of which the Austrian target is a member.
Careful planning of the transaction’s structure and timing may be required in order to secure interest deductibility in Austria.
Loss carryforward rules
Upon a sale of shares in an Austrian corporation, tax loss carryforwards may be used to offset future profits, provided that no restructuring takes place.
However, tax loss carryforwards may be forfeited if—besides a significant change in shareholding (more than 75%)—the economic as well as the organizational structure of the company changes significantly, as it is then considered to be a “shell company” (Mantelkauf).
Historically, the Austrian tax authorities adopted a rather formalistic approach with respect to whether there was the requisite change to the company’s structure to invoke the rules restricting the use of tax loss carryforwards. As regards the organizational structure, the decisive factor was whether the majority of managing directors registered with the Commercial Register had changed.
With the 2013 guidelines, a strict substance-over-form approach is now applied. Under this approach, if the individuals who were actually managing the business are replaced, a change in the organizational structure is assumed.
As regards the economic structure, a similar trend can be observed. In situations involving “holding companies” (i.e., companies focused on holding assets), there may be a risk of forfeiting tax loss carryforwards if those companies “enlarge” their business but do not dispose of assets held at the time the losses were incurred.
Tax professionals in Austria have observed that timing and careful planning may help taxpayers preserve tax loss carryforwards in corporate acquisition situations.
For more information, contact a tax professional with the KPMG member firm in Austria:
+43 (1) 31332 - 777
+43 (1) 31332 - 407
+43 (1) 31332 - 259