Members’ Bill: Amendment regarding the ban on deductions for voluntary severance payments

On 13 October 2022, a members’ bill was tabled for the remedy of the ban on deductions for voluntary severance payments. The Austrian Constitutional Court (VfGH) overturned the ban on deductions for voluntary severance payments in March 2022 and set a deadline for legislative amendments to be carried out by 31 December 2022. Further changes concern, among other things, the tax-free employee profit participation, the adaptation of the flat rate for small businesses, and the VAT treatment of COVID-19 related supplies.

Ban on deductions for voluntary severance payments

In line with the VfGH decision, an exception will be introduced to the ban on voluntary severance payments for voluntary severance payments made in the context of social plans (concluded as a result of a change in business operations within the meaning of the Austrian Labour Constitution Act (ArbVG)) after 1 January 2023.

In practice, it may be questionable whether an eligible social plan exists as a result of a change in business operations within the meaning of the Labour Constitution Act:

• For example, to be eligible as such a change within the meaning of the Labour Constitution Act, the minimum requirements are that a substantial proportion of employees need to be affected by efficiency and automation measures, and the change in business operations must bring a significant disadvantage for the entire workforce or significant parts of it.
• It is likewise questionable whether the relief is also applicable to social plans that have been concluded on the basis of individual agreements due to the absence of a works council.

Further amendments to the Austrian Income Tax Act

Tax-free employee profit participation

• If the employer is a bank or an insurance company, it will be possible for the tax-free profit participation to be based on the results from ordinary business activities pursuant to the Austrian Banking Act or the underwriting result pursuant to the Austrian Insurance Supervision Act – instead of using EBIT – for the purposes of greater validity. This will apply for the first time for assessments for 2022 and for salary payment periods ending after 31 December 2021.
• In addition, by way of clarification, in the event of a simultaneous inflation bonus and profit participation, the amount that exceeds EUR 3,000 per year must be assessed. Accordingly, both forms of relief may be used simultaneously, but the total tax-free amount will be capped at EUR 3,000.

Adaptation of the small business flat rate in line with inflation

The relevant amount for the flat-rate option for income tax calculation has been increased by EUR 5,000. The VAT threshold (based on the VAT rule for small businesses) is thus expected to increase to EUR 40,000. This will apply for the first time to tax assessments for 2023.

Amendment to the Austrian VAT Act

The zero rating of supplies, intra-Community acquisitions and imports of COVID-19 in-vitra diagnostic products and COVID-19 vaccines, as well as closely related supplies of services, will be extended to 30 June 2023.