Austria Highlights 2014

International tax

Investment basics: Dividends received from a foreign company not subject to a tax comparable to the that do not satisfy the above criteria are tax Austrian corporate income tax; or (2) subject Currency – Euro (EUR) exempt if the following criteria are fulfilled to a tax comparable to the Austrian corporate Foreign exchange control – No restrictions (international participation exemption): (1) the income tax at a tax rate of less than 15%; or are imposed on the import or export of foreign company is a company comparable to (3) tax exempt in its state of residence. capital. Repatriation payments may be made an Austrian company or a company listed in The international participation exemption (for in any currency. Both residents and the EU parent-subsidiary directive; (2) the dividends or capital gains) does not apply if nonresidents may hold bank accounts in any parent company holds directly or indirectly at the foreign company generates passive currency. least 10% of the equity capital of the income and pays tax at a rate of less than Accounting principles/financial subsidiary; and (3) the minimum 10% 15%. The EU/non-EU portfolio dividend statements – UGB (Austrian Commercial shareholding is held continuously for at least exemption and the international participation Code), IAS/IFRS. Financial statements must one year. exemption do not apply if the dividends are be prepared annually. Capital gains – Capital gains generally are tax deductible at the level of the distributing Principal business entities – These are the taxed at the same rate as ordinary income. foreign entity. public/private limited liability company, Under the international participation Holding company regime – See under partnership, sole proprietorship and branch of exemption, gains from the sale of a "Taxation of dividends" and "Participation a foreign corporation. participation in a nonresident company are exemption." exempt unless the resident company has Incentives – Various incentive programs are Corporate taxation: exercised an option to have capital gains available, such as a 10% cash premium on treated as taxable income. Residence – A corporation is resident if it is certain R&D expenses. incorporated in Austria or managed and Losses – Losses may be carried forward controlled in Austria. indefinitely, but generally may be offset only Withholding tax: Basis – Residents are taxed on worldwide against 75% of the profits of a given year. Dividends – Dividends paid to another income; nonresidents are taxed only on The carryback of losses is not permitted. Austrian company are exempt. Dividends Austrian-source income. Branches are taxed Rate – 25% paid to a nonresident company are subject to the same as subsidiaries. Surtax – No a 25% withholding tax unless the rate is reduced under a tax treaty or the dividends Taxable income – Corporation tax is Alternative minimum tax – There is an are exempt under the EU parent-subsidiary imposed on a company’s profits, which annual minimum corporate income tax of directive. A refund of the withholding tax is consist of business/trading income, passive EUR 500 for a limited liability company and possible for EU/EEA parent companies if the income and capital gains. Normal business EUR 3,500 for a joint stock company. expenses may be deducted in computing withholding tax cannot be credited in their taxable income. Interest on debts obtained Foreign tax credit – Foreign tax paid may residence state under a tax treaty. be credited against Austrian tax, but the for the acquisition of a participation is not Interest – No withholding tax is levied on credit is limited to the amount of Austrian tax deductible if the participation is acquired loan interest paid to a nonresident company. payable on the foreign income. within a group of companies. However, the nonresident company is subject Taxation of dividends – Dividends received Participation exemption – Intercompany to Austrian corporate income tax if the loan is from an Austrian resident company are tax dividends are exempt under the domestic, secured against Austrian real estate or other exempt. Portfolio dividends (i.e. where there EU/non-EU portfolio dividend and Austrian rights (the rate may be reduced or is a participation of less than 10%) received international participation exemptions (see the interest may be exempt under a tax from (1) a foreign company listed in the EU under "Taxation of dividends"). treaty). Payments made to a nonresident parent-subsidiary directive; or (2) a foreign As noted above, under the international silent partner in an Austrian company are company comparable to an Austrian participation exemption, capital gains on the subject to 25% withholding tax unless the company that is resident in a non-EU country sale of qualifying participations are tax- rate is reduced or the payments are exempt and there is a broad exchange of information exempt unless the resident company has under a tax treaty. clause in a tax treaty between Austria and exercised an option to have capital gains Royalties – Royalties are subject to a 20% the subsidiary’s state of residence, are treated as taxable income. withholding tax, but the rate may be reduced exempt from corporate tax (domestic/ The EU/non-EU portfolio dividend exemption or the payments exempt under a tax treaty or EU/non-EU portfolio dividend exemption). does not apply if the foreign company is (1) the EU interest and royalties directive. Technical service fees – Fees for technical Anti-avoidance rules: a proposed transaction and a binding ruling services are subject to a 20% withholding tax on issues relating to restructurings, tax Transfer pricing – No special transfer unless reduced or exempt under a tax treaty. groups and transfer pricing. For a binding pricing provisions exist, but the Ministry of ruling, the taxpayer will be charged a fee of Branch remittance tax – No Finance has issued guidance based on the up to EUR 20,000 by the tax authorities. Other – No OECD guidelines. Transactions between affiliated companies must be at arm’s length. Personal taxation: Other taxes on corporations: Although there are no formal documentation Basis – Austrian resident individuals are Capital duty – A capital tax of 1% is levied rules, the tax authorities may request taxed on their worldwide income. on compulsory shareholder contributions, as documentation. Taxpayers may obtain Nonresidents are taxed only on Austrian- well as voluntary direct and hidden capital binding rulings on transfer pricing issues. source income. contributions to an Austrian corporation if Thin capitalization – There are no specific Residence – An individual is resident if effected by the direct shareholder. A thin capitalization rules, but, in accordance he/she is domiciled or has a habitual abode partnership with a corporation as an unlimited with case law, interest may be reclassified as in Austria. A habitual abode is presumed if partner is deemed to be a corporation. a dividend in certain situations. The tax the individual stays in Austria for more than Payroll tax – Municipalities levy a general authorities usually accept a debt-to-equity six months. payroll tax of 3% on total salaries and wages ratio of 4:1 in tax audits, although this is not paid monthly by permanent establishments considered a safe harbor. Filing status – Each taxpayer must file a return; joint filing is not permitted. based in Austria. Controlled foreign companies – No Taxable income – Taxable income is the Real property tax – Municipalities impose an Other – Under the statutory GAAR, the tax sum of income from all sources, including annual real estate tax of up to 2% on up to authorities can make adjustments if there has income from employment, the carrying on of five times the assessed value of property. been an abuse of legal form and methods to a business or profession and income from Social security – The employer is required achieve a tax benefit. investments. to make pay-related social insurance Disclosure requirements – No contributions. The employer's contribution Capital gains – As from 1 April 2012, capital generally ranges from 21.7% to 21.83% of an Administration and compliance: gains relating to investments and real estate are subject to a 25% capital gains tax. The employee's salary. The employee's Tax year – The tax accounting period alienation of participations of less than 1% in corresponding contribution of 18.07% to generally may not exceed 12 months. 18.2% must be withheld by the employer and a corporation or participations in an Consolidated returns – Companies may remitted to the social insurance agencies. investment fund acquired before 1 January form a consolidated group in Austria. To be 2011, bonds or derivations acquired before 1 Stamp duty – Stamp duty is levied at a rate eligible to file a consolidated return, a parent April 2012 and real estate acquired before 1 ranging from 0.8% to 2% on various company must hold more than 50% in the April 2002 usually is subject to more transactions (e.g. assignment of receivables, affiliated company. Nonresident companies favorable grandfathering rules. rent and lease contracts) if the transaction is also may participate in a tax group and their Deductions and allowances – Deductions evidenced in a stamp duty relevant deed in losses may be used in Austria. However, from income are available for various losses, Austria. Loan/credit contracts are no longer foreign losses of nonresident companies are special and exceptional expenses, disabled subject to stamp duty. subject to a recapture rule if the nonresident individuals and to farm and forestry workers. Transfer tax – Transfers of real estate are leaves the Austrian tax group, changes its Allowances based on a taxpayer's personal subject to an acquisition tax of 3.5% of the business significantly compared to the year in circumstances are replaced by tax credits (for consideration (plus a 1.1% registration fee which the losses were incurred or is sole earners, sole educators and with the land register). If there is no subsequently liquidated. An annual corporate employees). consideration, the real estate transfer tax is income tax return must be filed for each usually based on three times the assessed member of the group subject to unlimited tax Rates – Rates are progressive up to 50%. value of the property, whereas the 1.1% liability in Austria, as well as for the head of Other taxes on individuals: registration fee is based on the fair market the group. Capital duty – No value of the real estate. For certain privileged Filing requirements – Austria operates a transactions (e.g. reorganizations), the self-assessment regime. Advance payments Stamp duty – Stamp duty is levied at a rate registration fee is based on three times the of corporate tax are required in four ranging from 0.8% to 2% on various assessed value. installments. The tax return must be filed transactions (e.g. assignment of receivables, Other – Austrian banks and foreign banks electronically by 30 June of the year following rent and lease contracts) if the transactions with an Austrian branch are subject to a the tax year. Filing deadlines may be are evidenced in a stamp duty relevant deed banking tax based on the balance sheet total extended if the corporation is represented by in Austria. Loan/credit contracts are not reduced by equity and secured contributions. a tax advisor. subject to stamp duty (nor are securities for such loans). The banking tax amounts to 0.055% to Penalties – Penalties apply for failure to 0.085% of the tax base. In addition, a comply. Capital acquisitions tax – No surcharge is levied of 0.013% on the Rulings – Taxpayers may request a Real property tax – Municipalities impose an derivative transaction volume. nonbinding ruling on the tax consequences of annual real estate tax of up to 2‰ on up to five times the assessed value of property. Inheritance/estate tax – No, but there is a Filing and payment – Tax on employment Nonresidents that make taxable supplies of statutory notification requirement for gifts. income is withheld by the employer. Certain goods or services in Austria also are required Transfers of real estate are subject to an types of investment income are not included to register. acquisition tax of 3.5% of the consideration in the computation of the taxpayer's income Filing and payment – VAT returns are filed (plus a 1.1% registration fee with the land but are subject to a special 25% withholding electronically on a monthly basis. Annual register). If there is no consideration, the real tax. Other income is self-assessed; the returns must be filed electronically by 30 estate transfer tax is based on three times taxpayer must pay advance income tax in June of the year following the tax year. Filing the assessed value of the property; the 1.1% four installments. The tax return must be filed deadlines may be extended if the registration fee is based on the fair market electronically by 30 June in the year following entrepreneur is represented by a tax advisor. value of the real estate. For certain privileged the assessment year. Filing deadlines may Source of tax law: Austrian Income Tax transactions (e.g. between close relatives), be extended if the individual is represented Act 1988, Corporation Tax Act 1998, Value the registration fee is based on three times by a tax advisor. Added Tax Act 1994, Stamp Duty Tax Act the assessed value). Penalties – Penalties apply for failure to 1957, Real Estate Tax 1955, Real Estate Net wealth/net worth tax – No comply. Transfer Tax 1987, Capital Duty Tax Act Social security – Employed and self- Value added tax: 1934, Inheritance and Gifts Tax Act 1955, employed individuals must make social Stability Tax Act 2010, Flight Tax Act 2010. Taxable transactions – VAT is levied on the security contributions in an amount Tax treaties: Austria has concluded over sale of goods and the provision of services. determined based on the individual's salary 90 tax treaties. or income from self-employment. Rates – The standard rate is 20%. A lower Tax authorities: Revenue offices of the rate of 10% applies to foodstuffs, agricultural Other – A flight tax is levied on all Austrian Ministry of Finance. passengers departing from an airport within products, rents, tourism and entertainment. International organizations: EU, Austria. The tax ranges from EUR 7 to EUR Banking transactions are exempt and a zero OECD, WTO. 35 depending on the distance flown. rate applies to exports. Registration – Austrian entrepreneurs Administration and compliance: Deloitte contact whose annual turnover exceeds EUR 30,000 Michael Weismann Tax year – Calendar year. must register for VAT purposes. E-mail: [email protected]

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