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Latest amendments to Austrian tax law
Corporate income tax (CIT): Restrictions concerning deductibility of interest
The Austrian Corporate Income Tax Act allows for a deduction of interest in connection with the external financing of shares if certain prerequisites are met. Following a recent ruling by the Administrative Court, which stated that other financing costs (commitment fees for a loan etc) are within the meaning of the term “interest” as stated in the Austrian CITA, a new restriction was introduced allowing only for a deduction of straightforward interest. Therefore other financing costs (eg commitment fees, exchange losses, withdrawal fees or bank charges etc) are no longer deductible as expenses in Austria.
VAT: New provisions concerning the place of performance and introduction of the EU Mini-One-Stop-Shop Regime
As of 1 January 2015 the destination principle applies for electronically supplied services and telecommunications, radio and television broadcasting services provided to customers. As a consequence, and in order to reduce the administrative burden, the Mini-One-Stop Shop regime will be applicable as of 1 January 2015, under which companies can register in just one EU Member State (One-Stop-Shop) as opposed to registering for VAT purposes in every applicable EU Member State.
Companies resident in the EU have to file the application with the financial authorities in their state of domicile. Companies who are not resident in an EU Member State may file an application if they do not have a permanent establishment in the EU and are not registered for VAT purposes in the EU. If Austria is the state of identification, the application has to be filed electronically via FinanzOnline.
Payroll: Amendments concerning taxation of cross-border personnel leasing
Under article 15 of the OECD Model Tax Convention the right to tax employment income basically lies with the state where the work is carried out. However, employment income may be taxed in the employee’s state of residence if:
- The employee’s residence in the state where the work is carried out does not exceed a period of 183 days (within a 12 month time span)
- The remuneration is paid by an employer or for an employer who is not resident in that state
- The fee is not borne by a permanent establishment of the employer in that state (183-day-clause)
According to a recent statement by the Austrian Ministry of Finance the term “employer”, within the meaning of the second bullet point, has to be interpreted from an economical point of view. This has a major impact on the allocation of taxation rights concerning cross-border personnel leasing. As the person for whom the dedicated employee is actually working has the status of an employer, the state in which the employer is resident is essentially the same state in which the employee is working. Consequently the 183-day-clause is no longer applicable in such cases. In cases of inbound personnel leasing (domestic employer), Austria taxes employment income regardless of whether the 183-day-period is exceeded in Austria. In cases of outbound personnel leasing (foreign employer) employment income is tax exempt (subject to the progression clause) in Austria, even if the 183-day-period is not exceeded.
However, this will not apply to “active services” of the dedicating entrepreneur ie consultancy services or education services.
Publication of a “White List” determining states which provide extensive assistance to Austria
The Austrian income tax law demands extensive assistance especially for the recognition of foreign losses. Therefore the Austrian Ministry of Finance issued a list naming all states which provide extensive assistance to Austria (White List).
To be included in the White List the other state must have concluded a DDT with an exchange of information article according to the new OECD standards or have entered into a tax information exchange agreement or fall under the scope of directive 2011/16/EU.
This has a major impact as losses of foreign subsidiaries or foreign permanent establishments are only recognised if the losses were incurred in a jurisdiction listed by the Revenue. Furthermore, foreign subsidiaries are only allowed to enter into an Austrian tax group if they are resident in a state enumerated in the White List.
The recent amendments to Austrian Tax Law introduced restrictions to the deductibility of financing costs concerning the acquisition of shares affecting multinational companies with a presence in Austria. Furthermore, a revised understanding of the term “employer” within the meaning of art. 15 para 2 OECD-MTC (183-day-clause) leads to a different allocation of taxation rights to the employee’s income.
In order to reduce the administrative burden for companies providing electronically supplied services or telecommunications, radio and television broadcasting services, the 'Mini-One-Stop-Shop' regime will be introduced allowing for a registration for VAT purposes in just 1 EU Member State.
As the availability of extensive assistance is important for several income tax matters (ie recognition of foreign losses), the Austrian Ministry of Finance issued a White List enumerating all states providing extensive assistance to Austria.
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