Austrian Income Tax Guidelines Amendment Decree 2023 published

On 31 March 2023, the Austrian Federal Ministry of Finance published the approx. 360-page final Income Tax Guidelines Amendment Decree 2023. This decree is intended to update the Austrian Income Tax Guidelines (EStR), in particular by incorporating the changes from the Austrian Ecosocial Tax Reform Act 2022 Part I (ÖkoStRefG), the Austrian Tax Amendment Act 2022 (AbgÄG), the Inflation Relief Package Part II, the Ordinance on Withholding Tax Relief for Personnel Leasing, and the Ordinance on Determining Tax Data for Cryptocurrencies. In the following, we would like to give you an overview of the most important amendments.

Clarification regarding subsequent taxation of foreign losses (margin note 203a)

In connection with subsequent taxation of foreign losses, an example was added on the system for permanent establishments with the exemption method according to double tax treaties.

Balance sheet correction (margin note 652 et seq.)

Regarding balance sheet correction pursuant to section 4 para. 2 subsec. 2 EStG (Austrian Income Tax Act), the ramifications of the Austrian Supreme Administrative Court (VwGH) ruling from 29 September 2022, Ro 2022/15/0011, was incorporated. This relates to assertions about the necessary legal remedy for the time-barred year, and elements to take into account for discretionary decisions and for corrections in the case of partnerships.

Depreciation period for bikes and e-bikes (margin note 3115)

For Austrian tax purposes, five years can be taken as the estimated depreciation period for bikes and e-bikes.

Degressive depreciation method – acquisition after 1 January 2023 (margin note 3261)

For fixed assets with an acquisition or production date on 1 January 2023 or later, the degressive depreciation method can only be applied if this method is used for financial accounting purposes as well (i.e. general materiality principle under Austrian GAAP, both in terms of bases and amounts).

Investment allowance (margin note 3801 et seq.)

When acquiring or producing certain fixed assets subject to depreciation, an investment allowance can be claimed as an additional operating expense. The investment allowance is determined on the basis of the acquisition or production cost and is granted in addition to the depreciation of the asset. If there is also a write-down under tax law in the year of acquisition or production, an investment allowance is permissible to the full extent of the acquisition or production cost in addition to the write-down under tax law. The relevant date – independently of payment – is the date of acquisition or production.

The investment amount for the purpose of the investment allowance is capped at a maximum of EUR 1 million in acquisition or production cost per financial year. The investment allowance is 10% of the acquisition or production cost for fixed assets subject to depreciation. The investment allowance is increased by 5%, to a total of 15% of the acquisition or production cost, for certain assets that are aimed at greening the Austrian economy. Hence, the maximum additional deduction amounts to EUR 100,000 or EUR 150,000.

With regard to the maximum investment amount, the relevant approach is not based on the taxable entity, but on the business operation. For corporations, for purposes of the investment allowance a single business operation is assumed. In tax groups, each group member and the parent of the tax group can claim the investment allowance separately if the requirements are fulfilled at the level of each entity.

The investment allowance can only be claimed for assets with an estimated life cycle of at least four years and which pertain to domestic operations or domestic permanent establishments. The four-year retention period on which this is based runs from day to day.

Exception to the prohibition on deduction of social plan payments (margin note 4852m)

Based on the case law of the Austrian Constitutional Court (VfGH), social plan payments as defined by section 109 para. 1 subsec. 1 to 6 of the Austrian Labour Constitution Act are excepted from the prohibition on deduction pursuant to section 20 para. 1 EStG. All severance payments made within the context of social plans after 31 December 2022 can therefore be claimed without limitation as operating expenses.

Taxation of cryptocurrencies (margin notes 6103j et seq., 6178a et seq.)

With the Austrian Ecosocial Tax Reform Act 2022 Part I, income from capital investments has been expanded to include income from cryptocurrencies. By means of Austrian Income Tax Guidelines Amendment Decree 2023 (EStR WE 2023), the regulations for taxing cryptocurrencies were incorporated into the income tax regulations.

Deduction of capital gains tax for evidently hidden distributions (margin note 7758)

In the event of evidently hidden distributions, a compulsory deduction of capital gains tax is provided for, with a subsequent refund procedure.

However, in cases of hidden distributions, the authorities can make a discretionary decision to refrain from using the capital gains tax liability pursuant to section 95 para. 1 EStG and issuing a liability statement, if, before such a statement is issued, it can be proved without a doubt that the parent company is entitled to  capital gains tax relief because of the Parent-Subsidiary Directive.

Personnel Leasing Regulation (margin note 7940a)

The Regulation on Withholding Tax Relief makes it possible to avoid (as relief at the source) or to obtain a refund for the withholding tax for personnel leasing under certain conditions. The most significant amendment is through a fictitious split of the withholding tax due on the leasing fee. By these means, 70% of the withholding tax will be treated as the income or wage tax of the leased worker, while the remaining 30% will be treated as the income or corporate tax of the foreign personnel leasing company. (No split will take place based on actual circumstances.)

In the case of intra-group employee assignments, a simplified relief of 30% of the leasing fee at the source can be achieved by obtaining a tax residency certificate for the foreign leasing employer. For all other cases (outside the group), an exemption notice must be issued.

Full relief at the source can be obtained by also voluntarily deducting payroll tax. The prerequisites named above (tax residency certificate, exemption notice outside the group) must also be met.