Avoidance of claim interest and reduction of pre-payments for CIT and IIT – applications can be made until 30 September or 31 October 2020

Reminder: Down payments to avoid claim interest for corporate income tax and individual income tax for the year 2019, as well as applications for the reduction of pre-payments for corporate income tax and individual income tax 2020, need to be made by 30 September 2020! Applications for reductions due to COVID-19-related revenue losses can continue to be made until 31 October 2020 (based on Austrian Ministry of Finance information of 24 March 2020).[1]

Claim interest

For back payments and tax credits in relation to corporate income tax and individual income tax 2019, claim interest will begin to be incurred from 1 October 2020 (for max. 48 months). The current interest rate is 1.38% (base rate + 2%). The claim interest cannot be deducted from taxable income and the credit interest is not taxable. If the calculated amount of claim interest is below EUR 50, no interest will be levied.

In order to avoid claim interest for back payments, a down payment in the amount of the anticipated back payment for corporate income tax or individual income tax 2019 can be made until 30 September 2020. However, excessively large down payments are not advisable as credit interest will not be calculated on these amounts.

It is important to remember to include a corresponding payment reference on the bank transfer form for the pre-payment (e.g. “K 1-12/2019” or “E 1-12/2019”) in order to guarantee correct allocation of the payment.

The Austrian Economic Recovery Support Act 2020 (Konjunkturstärkungsgesetz – KonStG 2020) envisages that tax offices should refrain from imposing claim interest. However, this provision only applies to claim interest for back payments in relation to corporate income tax and individual income tax 2020. For these back payments, interest will only start to be incurred from 1 October 2021.

Option to defer tax payments

If it is not possible for a taxpayer to make a down payment to avoid claim interest, another way to avoid claim interest is to submit the tax returns for the year 2019 as soon as possible to receive an assessment. The amount of corporate income tax or individual income tax 2019 may be deferred “without deferment interest” until 15 January 2021 in accordance with Sec. 212 in conjunction with Sec. 323c para 13 Austrian Federal Fiscal Code (BAO). Applications for deferral after 30 September 2020 must be substantiated in accordance with the legal requirements (significant hardship and non-impairment of recoverability). After 15 January 2021, deferment interest will be calculated and imposed at the following rates:

Applications for reduction of pre-payments of corporate income tax and individual income tax

Do the pre-payments for 2020 exceed the tax liability arising from the anticipated taxable income for 2020? In this case, it is possible to apply for reduction of the pre-payments for 2020 until 30 September 2020. The application must include corresponding documentation – a transparent planning calculation or forecast regarding the anticipated income for 2020 must be submitted to the tax office. For groups of companies within the meaning of Sec. 9 Austrian Corporate Income Tax Act (KStG), the application for reduction must be submitted by the group parent and take all group members into account.

If revenue has been lost due to COVID-19, applications for reduction of corporate income tax and individual income tax pre-payments for the year 2020 can continue to be made until 31 October 2020, in accordance with Austrian Ministry of Finance information of 24 March 2020 (“Expanded special scheme regarding coronavirus”). For these purposes, it must be plausibly demonstrated that a liquidity shortfall has arisen which is attributable to COVID-19.

[1] Note: This information is not a source of legal authority. However, it is likely that the tax offices will act in accordance with Austrian Ministry of Finance recommendations.