News › Taxand’s Take Article

Austria Preserves its Attractiveness for Foreign Investors

Austria

The Austrian government has introduced a draft of a new anti-avoidance regulation to cover its annual interest burden of EUR9 billion. The current draft focuses on anti-avoidance rules rather than on new taxes or the abolishment of attractive tax incentives for investors. Despite high budget deficits, the Austrian government is trying to avoid increasing the tax burden for businesses. Taxand Austria discusses why foreign investors should consider Austria for their investments.

The attractive group taxation regime is still maintained. This enables companies acquiring the majority interests in other companies to offset losses of one company with profits of another company in the group. Moreover, it enables goodwill depreciation, if both companies are within Austria. In the case of cross-border participations, group taxation allows compensation of foreign losses with Austrian profits.

The tax deductibility of interest expense on loans for the acquisition of new shares will not be abolished according to the latest government bill.

The main issue that made companies nervous recently was the discussion around the proposed abolishment of tax incentives in connection with the acquisition of majority shares in Austrian and foreign companies. This provision would have decreased the profitability of many existing group structures and cross-border participations of Austrian companies. Multinationals benefit from having their headquarters in Austria. Austria's location acts as a spring board to neighbouring countries in Central and Eastern Europe. The abolishment of these incentives would have jeopardised these businesses. After detailed discussions between the government and representatives of the Austrian Chamber of Commerce the Austrian government dropped this idea and decided to concentrate on anti-avoidance provisions.

The latest government bill now contains regulations to prevent tax evasion, particularly focussing on the black economy.

The most important measures are the following:

  • Commission payments to undisclosed recipients will be taxed at 50% instead of 25%.
  • Principals in the field of construction industry will be liable for payroll taxes at a rate of 5% of the compensation.
  • The limitation periods will be extended to at least 10 years (absolute limitation period to 15 years)
  • The capacities and competencies of tax authorities will be enlarged.
  • The cooperation with Europol will be enforced.

Taxand's Take


Despite the budget deficit and interest burden, the Austrian government in trying hard to avoid levying additional taxes on the Austrian economy. Austria still remains an attractive place for investments. The new provisions focus on anti tax avoidance measures rather than new or higher taxes. The group taxation regime and the deductibility of interest for investment loans make Austria an attractive location that gives foreign investors the benefits of easy access to neighbouring markets in Central and Eastern European countries.

Your Taxand contact for further queries is:
Herta Vanas
T. +43 1 5338633 800
E. herta.vanas@taxand.at

Taxand's Take Author