Eco-social tax reform 2022: Changes to the draft legislation
On 15 December 2021, the bill of the Austrian Eco-social Tax Reform Act 2022 was published. Below we provide an overview of the most relevant changes between the consultation draft and the bill (see German Tax Newsletter of 12 November 2021):
Tax-free employee participation in profits
From the year 2022, employees are to be eligible to participate in profits on a tax-free basis by up to EUR 3,000 per year. However, to determine the ceiling, reference will now be made to the EBIT of the previous year (determined in accordance with the Austrian Company Code (UGB)) instead of the taxable profit. In this context, the taxable profit will only remain decisive for determining the ceiling for taxpayers subject to § 4(1) or § 4 (3) Austrian Income Tax Act (EStG).
Regarding the capping using the previous year’s EBIT, a special scheme will be introduced for companies embedded in a group structure. As an alternative to looking only at the previous year’s EBIT of the individual company, all companies of the group may refer instead to the (total) EBIT of the group.
The legislative materials clarify that the bonus can be linked to appropriate objective measures of the degree of success (e.g. sales, profit margin, operating result). As the legislators have referred exclusively to quantitative measures of sucess, any bonuses (or bonus components) related to qualitative targets will certainly require closer examination regarding their coverage by the exemption provision.
Furthermore, the materials clarify that no conversion of salary payments (“Bezugsumwandlung”) exists, which would impact the tax exemption negatively, if the profit participation replaces individually agreed rewards for services, which were previously granted on a voluntary basis by the employer.
No changes were made to the question, whether such payments must continue to be offered to all employees or specific groups of employees. Thus, ff the differentiation is merely hierarchical, and not based on specific features of job roles, it will be necessary to analyse in detail whether a tax exemption would be possible.
The exemption will apply for all profit participations which are granted from 1 January 2022. In accordance with the meaning and purpose of the regulations, the relevant date will be the date of actual payment, not the date of the target agreement.
The investment allowance in the amount of 10% of acquisition and manufacturing costs (15% in the case of ecological investments) can be applied to depreciable fixed assets acquired or produced from 1 January 2023. For any assets which are acquired/produced over a period of several financial years, it has been clarified that the investment allowance can be applied to partial manufacturing costs or acquisition costs which have already been capitalised.
For depreciable fixed assets, the maximum for the degressive depreciation is currently 30%. The transitional rules for acquisition and manufacturing have now been extended by one year to the end of 2022. Consequently, the degressive depreciation can even be claimed for tax purposes if it is not used under company law ( authoritative principle not applicable).
Reduction of tax rates and social security contributions
Reduction of corporation tax
The Corporate Tax rate will be gradually reduced to 24% in 2023 and then 23% in 2024.
For non-calendar financial years, it has been clarified that taxable income for the tax assessments for 2023 and 2024 should be apportioned pro-rata by calendar month. As an alternative, any profit generated as of 31 December 2022 or 31 December 2023, can be determined by interim financial statements. As a simplification, the non-calendar financial year of the group parent will be of relevance within company groups.
Reduction of wage and income taxes
Instead of the bracket reduction during the year from 35% to 30% from July 2022, a combined tax rate of 32.5% will already apply for the second bracket from the beginning of 2022. In parallel, instead of the bracket reduction during the year from 42% to 40% from July 2023, a combined tax rate of 41% will already apply for the third bracket from the beginning of 2023. This will avoid the need for recalculation of the first half of the year from July 2022 (and July 2023).
(No) reduction of health insurance contributions – increase of deductible amount for transport
Instead of the phasing of health insurance contributions, for low-income earners the supplementary tax allowance for transport costs will be increased from the current EUR 400 to EUR 650.
Taxation of income from cryptocurrencies
As the exchange of a cryptocurrency for another cryptocurrency does not constitute a taxable gain, it has now been clarified that any expenditure connected with such transactions is immaterial for tax purposes.
For the area of corporate taxation, it has been clarified that write-downs and losses from cryptocurrencies should primarily be able to be offset against positive income from realised value increases from capital assets, derivatives, and cryptocurrencies. Furthermore, the contribution provision has been extended to cryptocurrencies, meaning that at the point of contribution the acquisition costs must be recorded, unless the partial value is lower at the time of contribution.
The tax obligation for cryptocurrencies will enter into force on 1 March 2022 and should be applied to cryptocurrencies which were acquired after 28 February 2021. For gains realised between 1 January 2022 and 1 March 2022, the income may, on request, be treated as taxable income from capital (instead of profit from speculation). Accordingly, the application of the special tax rate of 27.5% and the offseting of losses against other income from capital will be possible in the year 2022.
Mandatory deduction of tax on income from capital (KESt) has been postponed from 2023 to 1 January 2024. Accordingly, voluntary deduction of tax on income from capital may be carried out not only in 2022, but also in 2023.