Austrian Ministry of Finance (BMF) publishes draft of the Austrian Tax Amendment Act 2024

On 3 May 2024, the Austrian Ministry of Finance (BMF) published a draft of the AbgÄG 2024 (Austrian Tax Amendment Act 2024; AbgÄG 2024). This draft includes, in particular, the following significant amendments:

Income tax

    • With the AbgÄG 2023, contributions of a partner into its partnership are treated two- sided for income tax purposes: Whilst in the amount of the own participation the contribution is a tax contribution the quota of other partners is a deemed sales transaction. This two-sided approach is with the draft AbgÄG 2024 also applicable for withdrawals (including failed restructurings of partnerships under the reorganisation tax act). In addition, the law stipulates that the splitting of a contribution or withdrawal transaction should also apply to transfers of assets between the shareholder’s company and the partnership’s company assets (expansion to business assets).
    • The AbgÄG 2024 should allow virtual/phantom shares, which otherwise meet all the requirements of the new start-up incentive shares, to be converted by 31 December 2025 the latest into start-up incentive shares without being subject to valuation and (wage) taxation. Before the conversion, it should be considered if this is beneficial for the employer side.
    • Food donations should be made tax-free, i.e. the book value according to tax law is considered to be a business expense.
    • It is intended that the loss utilization rules for a new group parent become stricter, i.e. tax losses available prior to the formation of the new tax group, which originate from former tax-effective write-downs of book values under tax law or from disposal losses with regard to investments in corporations that were already members of another tax group at the time of the write-down or disposal, can no longer be offset against the group result at the level of the new group parent. The offsetting prohibition should be temporary and only apply to the new group parent. The draft law lacks detail on how the initial loss restriction is to be calculated as well as details on any relief from this restriction.
    • The available offsetting of losses of foreign group members in the tax group regime is to be embedded as an option (instead of a mandatory tax provision).
    • The application for group taxation has been limited by recent case law to paper application. The draft tax bill intends to reopen the possibility to apply online (via FinanzOnline) by using the respective forms duly signed (qualified signatures).
    • The low-taxation tests for CFC and local anti-hybrid purposes should be extended by national top-up taxes in accordance with Pillar II.
    • The temporary CbCR safe harbour rule is to be extended to include groups of companies that are not obliged to prepare a country-by-country report (CbCR). Changes to the simplified calculation for hybrid structures are also being considered.
    • Numerous minor details will be clarified, and linguistic inadequacies should be corrected.

Value added tax

    • As part of the implementation of the changes according to EU-Directive (EU) 2020/285, an “EU small enterprise” will be implemented so that Austrian taxable persons can also make use of the exemption for small enterprises in other Member States and – vice versa – foreign taxable persons can make use of the exemption for small enterprises in Austria. The relevant turnover of the small enterprise in the EU may not exceed EUR 100,000 in the previous and current year, whereby a tolerance limit for a one-off excess can be implemented by the Member States.
    • For the exemption for small enterprises to apply to foreign taxable persons in Austria, the EU-wide turnover must not exceed EUR 100,000. If the EU-wide turnover is not exceeded by 10%, the tax exemption can continue to be applied until the end of the calendar year. In addition, the national turnover-limit for the application of the exemption for small enterprises needs also to be taken into account, which means that the taxable transactions in Austria are only allowed to reach a maximum of EUR 42,000.
    • Regardless of the invoice amount, small enterprises can make use of the option to issue invoices for small amounts in accordance with section 11 para. 6 UStG (Austrian Value Added Tax Act). The existing EUR 400 amount for invoices for small amounts remains unchanged.
    • In the future, food donations will be subject to a VAT exemption with the full right to deduct input VAT (i.e. no self-supply has to be considered).
    • The special scheme for taxing the profit margin made by a taxable dealer, does not apply to the supply of works of art if the reduced tax rate was applied for the supply to the taxable dealer or for the import by the taxable dealer.

Other changes

    • Applications for extensions of deadlines for the submission of tax returns should be limited to a one-off grace period.
    • Dual tax resident companies face rather high complexities. If a company has legal personality in the country of domicile, although it is not to be treated as a legal entity under Austrian law, it can be served with tax notices as well as assessment letters. Unlimited tax liability of the shareholders needs to be considered.
    • The VAT credit interest should be restricted.

Other amendments

    • The general limitation to deduct expenses should be extended to income connected with cryptocurrencies.
    • Clarifications for funds are proposed, i.e. a more guiding for special income items.
    • Multiple stamp duty fees should be reduced for enclosures that are submitted to the authority electronically if they have already been submitted on paper for the same procedure (one-off stamp duty).
    • To mitigate the shifting of tax competencies, the tax competence for groups with Austrian entities being subject to CbCR and/or Pillar II should generally be the Austrian Tax Authority for Large Enterprises.

In our opinion, the new law can be expected to be final in early summer.

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