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Austria will increase cap for R&D premium by ten times
The Austrian Government has announced that the cap for the R&D premium for external R&D activities shall increase tenfold. However, the Austrian Government will - among other things - restrict the offsetting of foreign losses in the Group Taxation Regime. Saving measures will target loss-generating activities abroad and will limit the extent to which losses of non-resident Group Members can be offset against taxable profits of the parent company in Austria.
Further, profits of individual persons and foundations from the sale of real estate and land will be taxed at a flat tax rate of 25% (if purchased since 1 April 2002). 3,5 % tax will be levied on the selling price of real estate and land that was purchased before 1 April 2002. Taxand Austria analyses the Austrian Group Taxation Regime and restrictions on the offsetting of losses of non-resident Group Members or permanent establishments against taxable profits in Austria.
R&D premium increased ten-fold:
In Austria, a premium of 10% of the annual R&D expenses is granted for both in-house and external R&D activities. While the premium for in-house R&D activities is granted unlimited, the premium for external R&D activities is currently capped at EUR 100,000, meaning that a maximum premium of EUR 10,000 may be claimed in the tax return. As of 1 January 2012, this cap shall be extended to EUR 1m per year. Therefore, a premium of up to EUR 100,000 may be claimed in the tax return 2012 and forward.
Group Taxation Regime
Under the Austrian Group Taxation Regime, losses of non-resident Group Members can be offset against taxable profits of the parent company in Austria - thus reducing the corporate tax base. For this purpose, losses of non-resident Group Members have to be calculated according to Austrian tax law. Under present legislation, the full amount of foreign losses calculated according to Austrian tax law can be offset against taxable profits in Austria. This also applies in cases where the loss calculated according to Austrian tax law is higher than was actually suffered abroad.
According to the amendment, foreign losses of Group Members will continue to have to be calculated according to Austrian tax law in order to be deductible in Austria. However, the extent to which foreign losses of Group Members will be deductible shall now be limited to the amount of loss calculated under foreign law. The same shall apply to losses of foreign permanent establishments. These amendments will be effective as of financial year 2012.
Real estate and land
Further saving measures target the sale of real estate and land in Austria by individual persons and foundations. Under current tax law, profits from the sale of real estate and land are only taxable if real estate and land are sold within ten years of their purchase. After the ten year period ("speculation period"), the profit remains untaxed. This speculation period shall now be abolished. Consequently, profits from the sale of real estate and land will be subject to taxation regardless of the time that has passed since their purchase.
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As of 1 April 2012, profits from the sale of real estate and land will be subject to 25 % tax. For real estate and land, that were purchased before 1 April 2002, the taxable base will be 14 % of the turnover (thus 3,5 % tax is levied on the selling price). These measures will target individuals and will favour those who sell real estate and land within 10 years of their purchase. Up to now, their profits were taxed at their individual income tax rate of up to 50%. Profits from the sale of real estate and land owned by companies are already subject to the corporate income tax of 25%. However, the sale of private homes that have been lived in for at least 2 years since their purchase and the sale of buildings erected by the taxable person itself are excluded from taxation.