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Tax aspects of investments Austria


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This brochure should provide an introduction to Austria’s tax system and has been updated to take account of recently made changes in Austrian commercial and tax law.

This brochure should provide an introduction to Austria’s tax system and has been updated to take account of recently made changes in Austrian commercial and tax law.

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  • 1. www.investinaustria.atInvest in AustriaTAX ASPECTS OF INDUSTRIALINVESTMENTS MADE IN AUSTRIAcompiled byfor AUSTRIAN BUSINESS AGENCYAugust 2012
  • 2. Impressum:Version: Juni 2012Publisher: Austrian Business Agency,Opernring 3, 1010 Vienna, AustriaResponsible for content: PwC ViennaEditors: Rudolf KricklLayout: – Karin Rosner-JoppichPrint: offset5020
  • 3. 3www.investinaustria.atContentsForeword51. Overview 61.1 Taxation of corporate income����������������������������������������������������������������������������������������������������������������������������������������������������������61.2 Taxation of individuals����������������������������������������������������������������������������������������������������������������������������������������������������������������������61.3 Other taxes����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������62. Taxation of corporations 72.1 General provisions����������������������������������������������������������������������������������������������������������������������������������������������������������������������������72.2 Scope of tax liability��������������������������������������������������������������������������������������������������������������������������������������������������������������������������72.3 Tax rates and tax deductions ����������������������������������������������������������������������������������������������������������������������������������������������������������72.4 Group taxation����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������82.5 Dividends ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������92.6 Exemption for income from investments����������������������������������������������������������������������������������������������������������������������������������������92.7 Taxation of branch offices of foreign corporations����������������������������������������������������������������������������������������������������������������������112.8 Foreign income of domestic companies��������������������������������������������������������������������������������������������������������������������������������������112.9 Losses incurred in foreign permanent establishments��������������������������������������������������������������������������������������������������������������112.10 Stock dividends����������������������������������������������������������������������������������������������������������������������������������������������������������������������������112.11 Deductible operating expenses��������������������������������������������������������������������������������������������������������������������������������������������������122.12 Transfer pricing������������������������������������������������������������������������������������������������������������������������������������������������������������������������������132.13 Tax incentives��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������132.14 Restructuring measures ��������������������������������������������������������������������������������������������������������������������������������������������������������������142.15 Taxation of private foundations����������������������������������������������������������������������������������������������������������������������������������������������������152.16 Withholding taxes ������������������������������������������������������������������������������������������������������������������������������������������������������������������������152.17 Purchase of a corporate shell������������������������������������������������������������������������������������������������������������������������������������������������������182.18 Tax administration��������������������������������������������������������������������������������������������������������������������������������������������������������������������������182.19 Electronic filing of annual corporate income tax returns ��������������������������������������������������������������������������������������������������������193. Incorporation and financing of a company 193.1 Incorporation������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������193.2 Startup Subsidisation Act��������������������������������������������������������������������������������������������������������������������������������������������������������������193.3 Nominal capital / premium ����������������������������������������������������������������������������������������������������������������������������������������������������������� 203.4 Incorporation costs����������������������������������������������������������������������������������������������������������������������������������������������������������������������� 203.5 Shareholder contributions and shareholder loans��������������������������������������������������������������������������������������������������������������������� 203.6 Capital transfer tax������������������������������������������������������������������������������������������������������������������������������������������������������������������������� 203.7 Bank loans ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� 203.8 Real estate transfer tax����������������������������������������������������������������������������������������������������������������������������������������������������������������� 214. Austria’s VAT system 214.1 General information����������������������������������������������������������������������������������������������������������������������������������������������������������������������� 214.2 Sales within the European Union������������������������������������������������������������������������������������������������������������������������������������������������� 214.3 Taxable sales and services����������������������������������������������������������������������������������������������������������������������������������������������������������� 214.4 Exemption regulations������������������������������������������������������������������������������������������������������������������������������������������������������������������� 244.5 Basis of VAT computation������������������������������������������������������������������������������������������������������������������������������������������������������������� 244.6 VAT rates����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� 244.7 VAT returns and payment of VAT ������������������������������������������������������������������������������������������������������������������������������������������������� 244.8 VAT grouping ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� 254.9 Reverse charge procedure����������������������������������������������������������������������������������������������������������������������������������������������������������� 254.10 Foreign entrepreneurs����������������������������������������������������������������������������������������������������������������������������������������������������������������� 255. Taxation of individuals 255.1 Territoriality and residence ����������������������������������������������������������������������������������������������������������������������������������������������������������� 255.2 Income from salaried employment����������������������������������������������������������������������������������������������������������������������������������������������� 255.3 Capital income������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� 265.4 Deductions������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� 315.5 Social security contributions ������������������������������������������������������������������������������������������������������������������������������������������������������� 335.6 EU withholding tax������������������������������������������������������������������������������������������������������������������������������������������������������������������������� 335.7 Tax procedures������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� 34
  • 4. 5www.investinaustria.atForewordWhy should foreign investors make a commitment to Austria?Should they do so because of the country’s favourable geographiclocation in the centre of Europe, bordering the fast growing mar-kets of Middle and Eastern European countries? Should they beinterested because of the positive business climate, which ranksamong that of the best rated OECD countries, or because of Aus-tria’s thriving business with its highly developed infrastructure,high level of personal security as well as political and economicalstability? Do Austria’s strong economic performance and the highlevel of education as well as the excellent skills of the workforceappeal to investors? Foreign investors will decide in favour ofAustria mainly for business reasons, but at the same time alsoin order to be able to enjoy the country’s unique and diversifiedculture and lifestyle.Since the fall of the Iron Curtain, Austria has been viewed as theideal steppingstone to the booming markets of Eastern and SouthEastern Europe. Hit hard by the global financial and economiccrisis, the overly extensive involvement of Austrian firms, banksand service providers in Eastern Europe has been subjected tocritical international scrutiny for a short time.The Vienna Institute for International Economic Studies(WIIW) concludes that the economic downswing in Eastern Eu-rope already bottomed out at the beginning of 2009. Since then,there have been clear signs of stabilization or even an economicturnaround. Since 2011, economic growth in Eastern Europe hasreached an average level of 2%, which is once again above EUaverage.Future-oriented Eastern European companies are increasinglychoosing Austria as their EU foothold. CEE businessmen arelooking for a reliable partner in their search for an optimumbusiness location in the EU – a partner who is able to offer the re-quired know-how as well as competent service providers. Austriais the pre-eminent choice here.This brief brochure is to provide an introduction to Austria’s taxsystem and has been updated to take into account any recentlymade changes in Austrian commercial and tax law. However, thebrief summary only offers an overview and some basic informa-tion to interested entrepreneurs. Specialist assistance is thereforerecommended before any decisions are made.All information in this brochure has been carefully collected andbasically corresponds to applicable regulations. However, it maynot be applicable to each specific case. Therefore, no warranty isassumed in this regard.
  • 5. www.investinaustria.at61. OverviewAs a result of the tax policy of the last decade Austria definitelyseems to be attractive as a business location in particular forholdings as well as for research and development activities.In 2012, changes in the tax law became necessary as a resultof the “Budgetbegleitgesetz 2012”, and the “1. Stabilitätsgesetz2012”.The changes have been accounted for in the chapters thatfollow. Since the overwhelming portion of commercial andindustrial investment in Austria is concentrated on Austriancorporations, it is mainly the taxation of such types of compa-nies that will be described. Subsequently, the main features ofincorporation and corporate financing, the VAT system as wellas taxation of individuals will be explained. In this first sectionthe most important taxes will be surveyed briefly.1.1 Taxation of corporate incomeCorporate income taxIn Austria companies – in particular corporations (GmbH, AG)– are subject to corporate income tax on their entire income(worldwide income). Profits are taxed at the standard tax rateof 25 per cent. For corporations sustaining losses there is anobligation to pay a minimum corporate income tax. The latteris currently at a quarterly rate of € 437.50 for limited liabilitycompanies (GmbH) and € 875 for joint stock companies (AG).To support start-ups, the minimum corporate income tax forboth types is reduced to € 273 during the first four quarters ofthe company’s existence. The minimum corporate income tax iscredited to taxable earnings in the future.All income that the taxpayer has earned during a business yearis subject to taxation. Income consists of the total amount ofincome after deducting business expenses and after consideringinvestment incentives as well as tax losses carried forward.Corporate residenceFor the purpose of taxation in Austria, a corporation is deemedto be resident and thus taxable in Austria for its worldwideincome (unlimited tax liability) if it has its seat or effective placeof management in Austria. If a corporation has neither its seatnor its effective place of management in Austria, it is subject tolimited tax liability in Austria.Holding companiesUnder certain conditions, Austria grants international participa-tion exemption for investments in foreign companies held byAustrian corporations (see Section 2.6). Therefore, a mini­mumparticipation of ten per cent is necessary. The exemption appliesboth to dividends and capital gains of such investments. Theadvantages of setting up Austrian holding companies are there-fore largely comparable to those of Dutch, Swiss or Luxembourgholding companies.1.2 Taxation of individualsIncome taxIndividuals maintaining residence or habitual abode in Austriaare subject to personal income tax. Unlimited tax liability isextended to all domestic and foreign sources of income (world-wide income). Otherwise individuals are subject to limitedtax liability for Austrian source income. An individual has hishabitual abode in Austria if he is not just staying in the countrytemporarily. If the stay in Austria exceeds six months, unlimitedtax liability in Austria is applicable in any case.Income tax is based on such income as the taxpayer has earnedwithin a calendar year from the seven types of income listedin the Income Tax Act. Sources of income not included inthese seven types of income are thus not taxable. Losses mayin principle be compensated for both within a specific typeof income as well as between the different types of income,although certain restrictions apply. In addition, in the contextof determining income, a person’s ability to earn an income istaken into account by individual deductions and the progressivetax rate currently ranging from nil to 50 per cent.1.3 Other taxesVATVAT is charged on the sale of most goods as well as on services.The standard tax rate is 20 per cent. A limited number of goodsand services are taxed at ten per cent. As a rule, input VAT isfully clearable and recoverable for companies with the excep-tion of some companies operating in special business fields, e.g.banking, insurance and holding companies.Capital transfer taxCapital transfer tax at a rate of one per cent is imposed oninitial contribution of capital as well as other contractual orvoluntary contributions in cash or kind (and certain hybridforms of financing) to corporations. The Court of Justice of
  • 6. 7www.investinaustria.atthe European Communities confirmed in a decision on 7 July2007 that capital transfer tax is not levied on the relocation ofthe registered office of a corporation from one Member State toanother, particularly in relation to states which do not imposecapital transfer tax. Capital contributions made by grandparentcompanies to Austrian companies are, as the financial authori-ties confirmed, not subjected to capital duty. In contrast, capitalcontributions made by grand parent companies to Austriancompanies can be subject to capital transfer tax if the contribu-tion was dedicated to raise participation rights in the Austriancompany and if this rise was primarily in the interest of theparent company who is the sole shareholder of the Austriancorporation. The question as to whom this contribution canbe credited to must be viewed under economic and not underformal criteria.Real estate transfer taxReal estate transfer tax at the rate of 3.5 per cent (reduced taxrate two per cent) calculated on the basis of the acquisition priceis levied on the acquisition and transfer of title of real estatelocated in Austria. In the case of corporate restructuring underthe Restructuring Tax Act and in case of real estate transfersbeing free of charge, the value established for tax purposes (or amul­tiple thereof) is taken as assessment base. In addition to thereal estate transfer tax, a fee amounting to 1.1 per cent of theacquisition price is levied for registration into the land register.Stamp dutiesSince 1 January 2011, stamp duty on loan and credit agreementshas been abolished. This modification of the Stamp Duty Actrefers to new agreements signed after 1 January 2011 as well asto agreements which were set up in written form in 2011 forloans/credits concluded before 2011. Furthermore, stamp dutiesare incurred for certain documentation and legal transactionsfor which a contract or notarially certified document has beensigned (e.g. lease contracts, bills of exchange, assignments, etc.).As a result of a decision of the Administrative Court of Justice,e-mails are qualified as documents and trigger stamp duties.Excise taxesExcise taxes are taken out on certain products including petro-leum, tobacco products and alcoholic beverages.2. Taxation of corporations2.1 General provisionsCorporate income tax is applied to the income of companies,which essentially refers to legal entities under private law(and primarily corporations such as GmbH, AG or SE) andequivalent entities. Due to such recognition of corporations asindependent tax subjects, a distinction must always be madebetween tax ramifications at the level of the company and thoseat the level of the shareholder. This means that at the level of thecompany, profits are taxed at the standard corporate income taxrate of 25 per cent while at the level of the shareholder (individ-uals), profit distributions are basically taxed with a 25 per centwithholding tax. As an alternative to withholding taxation,individuals as recipients of profit distributions have the possibil-ity to apply for a taxation based on their individual tax rate (fordetails see Section 2.5).2.2 Scope of tax liabilityCorporations are subject to unlimited taxation in Austria fortheir entire (domestic and foreign) income if they have their seator place of effective management in Austria. If a corporation hasneither its seat nor its place of effective management in Austria,it is subject to limited tax liability on certain sources of incomein Austria.2.3 Tax rates and tax deductionsThe corporate income tax rate basically amounts to 25 percent and applies to all corporations regardless of whether theyretain earnings or distribute them. There is an obligation to payminimum corporate income tax for every full calendar quar-ter for which unlimited tax liability exists and, essentially, atfive per cent of one quarter of the minimum statutory amountof nominal or registered capital (i.e. € 1,750 per year for aGmbH and € 3,500 per year for an AG). This amount is raisedto € 5,452 for banking institutions and insurance companies.The European Corporation (SE) – having a minimum statutoryamount of nominal capital of € 120,000 – has the obligationto pay a minimum corporate income tax amounting to € 6,000per year. With all newly incorporated corporations, as a “youngentrepreneur incentive” minimum corporate income tax atonly € 273 per quarter (i.e. € 1,092 per year) must be paid.Minimum corporate income tax amounts can be set off against
  • 7. www.investinaustria.at8actual corporate income tax liabilities for an unlimited periodof time.Corporate income tax losses incurred by a domestic corporationmay be carried forward without limitation (see Section 2.12 aswell).For more information on the minimum corporate income tax incase of a “tax group”, refer to Section 2.4, last sentence.2.4 Group taxationIf two or more companies exercise the option to form a taxgroup, the taxable results of the domestic “group members” willbe attributed to their respective top-tier (so called parent) com-pany and finally taxed balanced at the top-tier company level.Tax losses of group companies can be consolidated with taxableprofits of other group companies. Domestic group member’sprofits and losses are fully attributed even if the participationis lower. In the course of the tax settlement, negative effects forminority shareholders are being avoided. As far as the utiliza-tion of tax losses accumulated by group members prior to theirparticipation in the tax group is concerned, special conditionshave to be taken into account. Profits are only attributed fortax purposes; there is no requirement for a statutory profit/losstakeover agreement. Economic and organizational integration isnot required.The group consists of a top-tier company and at least one finan-cially affiliated domestic or foreign based subsidiary (so called“group member”).Besides tax resident corporations and cooperatives, also certainjoint-venture structures as well as certain tax resident or non-taxresident EU (or EEA) companies with registered branches inAustria (to which the respective investment can be attributed)may act as group parent.Moreover, besides tax resident corporations and cooperatives,also “comparable” foreign corporations can act as a groupmember.The conditions to be met in order to form a tax group between agroup parent and group members are:• A qualifying participation of more than 50 per cent (director indirect) with the qualifying participation having to existduring the whole fiscal year during which the group taxationscheme shall apply as well as• A written application to form a tax group (legally binding forat least three years) – signed by each of the group members –which has to be filed with the competent tax office and has tocontain an agreement on the allocation of tax costs.A tax group can also include foreign group members. Losses offoreign subsidiaries within a tax group (only the losses gener-ated by the “first tier” of foreign subsidiaries of Austrian groupmembers or parents) can be offset against Austrian profits – theamount of tax losses to be deducted depends on the stake in theparticular participation. The foreign tax losses have to be calcu-lated according to Austrian tax law. Starting with the taxationperiod of 2012, these losses are limited to the amount calculatedaccording to foreign tax law. Profits realized by foreign subsidi-aries will not become subject to taxation in Austria. Foreign taxlosses previously offset against profits at the level of the Austriangroup parent – in order to avoid “double-utilization” of taxlosses – have to be subjected to recapture taxation in Austria atthe time they are effectively offset or could be offset by the for-eign group member in the source state. The recapture taxationhas to be effected by increasing the profit of the particular groupmember to which the foreign tax losses have previously been al-located. Recapture taxation also has to be applied in case of thewithdrawal of a foreign group member. Recapture taxation alsoapplies to those cases where the scope of economic activities of aforeign group member which belongs to a tax group is reduced– compared to the year in which the losses were incurred – tosuch an extent that in view of the company’s overall economicsituation, economic comparability does no longer exist. (Thisis usually the case where the scope of economic activities hasbeen reduced by 75 per cent.) In other words, lack of economiccomparability is subject to the same treatment that would be ap-plicable in the event of the foreign group member’s withdrawalfrom the tax group.In the case of a domestic tax group, the attribution of profitsand losses is effected at 100 per cent, even in the case the actualamount of holding is less than 100 per cent. In order neither toadvantage nor disadvantage minority shareholders, an appropri-ate system of tax allocations between the group companies hasto be established.Upon acquisition of a participation in an Austrian companythat should be a group member, goodwill has to be deducted
  • 8. 9www.investinaustria.atand badwill has to be added tax effectively over a period of 15years if certain conditions are met (the company has to meetthe active business test when it is acquired). Goodwill has to becalculated by deducting the equity and the hidden reserves innon-depreciable assets from the taxable acquisition costs of therespective participation. Goodwill is limited up to 50 per centof the taxable acquisition costs of the participation. As goodwillamortization results in a decrease of the book value of the amor-tized participation, the previously claimed amortization is taxedin the case of a later disposal of the participation. This taxationcannot be avoided through a tax neutral reorganisation accord-ing to the Austrian Reorganization Tax Act. If a participationfor which goodwill amortization was claimed is reorganised (e.g.merged) and if the participation therefore does no longer existon the level of the top-tier company, the previously claimedamortization rates have to be taxed. However, if an absorbingparticipation takes the place of the amortized participation inthe case of a reorganisation, the amortized goodwill rates arenot taxed as long as the participation in the absorbing companydoes not cease to exist because of a reorganisation. The amorti-zation rates decrease or increase the taxable book value.Current-value depreciations of participations within a tax groupare tax neutral since losses are directly attributed to the groupparent. Losses incurred in connection with the disposal ofgroup participations are also treated as tax neutral.If a group member withdraws from the tax group within thecommitment period of three years (the minimum commit-ment period of tax groups is three years – each of the years with12 months), all the tax effects derived from its group participa-tion have to be reversed. However, the pre-term withdrawal ofone group member does not affect the existence of the rest ofthe group. Withdrawals after the commitment period do not af-fect the allocation of results by the withdrawing group memberto its top-tier company during its group participation. If foreigngroup members withdraw from the tax group before all the for-eign tax losses – previously allocated by them to the group par-ent – have been subjected to recapture taxation in Austria, theoutstanding difference has to be taxed by increasing the profitof the particular group member or parent to which the foreigntax losses have previously been allocated. In case of liquidationor insolvency of the foreign group member (followed by the realand definitive loss of assets), the foreign losses to be subjected torecapture taxation as described above have to be reduced by thepreviously tax neutral depreciation on the particular participa-tion, if any.The minimum corporate income tax has to be calculated foreach group member as well as for the group parent and to bepaid by the group parent if the total result of the group does notexceed the “minimum profit”. Minimum corporate income taxaccumulated by group members prior to their participation inthe tax group can be forwarded to superior group members or tothe group parent under certain conditions.2.5 DividendsDividends are basically subject to a withholding tax of 25 percent. If the recipient is an individual, income tax is consideredto be paid (final or definitive taxation). However, if dividendswill be included in the income tax assessment, they are subjectto the individual tax rate. Dividend payments to corporationsare exempt from corporate income tax, as already mentioned(see “Exemption for income from investments”). For foreignshareholders, the 25 per cent withholding tax at source isreduced on the basis of double taxation conventions (see Section2.16 as well as 5.3.2).In accordance with the Parent-Subsidiary Directive, profitdistributions of Austrian subsidiaries to their EU parents (with astake of at least ten per cent) are either completely exempt fromwithholding tax under certain conditions (one year’s uninter-rupted ownership) or relief may be granted by the application ofthe refund procedure.If the preconditions of the Parent-Subsidiary Directive are notfulfilled, thereby making dividends made in Austria liable totax, the deducted withholding tax has to be repaid upon requestin instances where the foreign dividend recipient is located inthe EU or in Norway and where the double taxation treatydoes not allow the crediting of the Austrian withholding tax.The taxpayer has to prove that the withholding tax cannot beclaimed abroad. This new provision is applicable for all fiscalyears which are yet to be assessed.2.6 Exemption for income from investments2.6.1 Domestic investmentsDividends received by an Austrian corporation on (but notgains from disposal of) domestic investments are, regardlessof the extent of investment and the duration of ownership, ex-empted from corporate income tax. Any withholding taxes arecredited against corporate income tax.2.6.2 Foreign portfolio investmentsPortfolio dividends (i.e. dividends from an investment under10 per cent) received from foreign countries are tax exempt from
  • 9. www.investinaustria.at10corporate income tax if Austria has concluded an agreement onmutual assistance with the foreign country and if the foreigncorporations are comparable to corporations taxable under §7Section 3 Corporate Income Tax Act.2.6.3 International participation exemptionDividends received from shares in foreign corporations andcapital gains from disposals of investments are treated neutralwith respect to corporate income tax (international participationexemption), if• the direct or indirect investment amounts to at least ten percent of the foreign company’s capital;• the Austrian parent company or the foreign corporation isboth subject to unlimited taxation and in addition is equiva-lent to a company taxable under § 7 Section 3 of the Cor-porate Income Tax Act (dual resident company), and capitalshares have been owned uninterruptedly for a period of atleast one year;• the foreign (subsidiary) company is comparable to a domesticcorporation;• there is no suspicion of abuseA suspicion of abuse is assumed if the foreign subsidiary com-pany is taxed at a low rate (below 15 per cent), does not meetan active-trade-or-business test does not meet the subject-to-tax condition and largely earns passive income.Usually interest, royalties (in connection with patents andlicensing), capital gains from the disposal of non-exemptedparticipations, etc. have to be considered as passive income.Dividends and other profit distributions do not have to beconsidered as passive income unless they are distributed bycompanies generating mainly passive income. A managing hold-ing company is not to be considered a company which generatespassive income as specified above.In case of suspected abuse, the participation exemption fordividends is replaced by a tax credit.Prerequisites for the international participation exemptionExtent of investment: at least 10%Holding period: 1 yearDirectness required: noShareholdersunder § 7 Section 3 Corporate Income Tax Act.Corporate rightsall forms of capital shares (e.g. including rights to share infund assets)Permanent establishments of corporations from EU MemberStates located in Austria may also apply the domestic and theinternational participation exemption.In principle, capital gains or capital losses (originating fromcurrent-value depreciations or appreciations as well as from thedisposal of participations) are not taken into account in taxation.However, new acquisitions have the opportunity to exercise anoption for full taxation when submitting a corporate income taxdeclaration for the year of acquisition or for the year in whichthe international participation exemption is applicable the firsttime. This option is irrevocable and also extends to additional ac-quisitions of the particular investment. Unless the option for fulltaxation is exercised, profits and losses are in principle treatedtax-neutral. However, if real and definite losses are sustained ( case of insolvency or liquidation), these may be deducted fortax purposes even if no option for full taxation was submitted.Due to this international participation exemption, Austria isa very attractive place when it comes to incorporating holdingcompanies.2.7 Taxation of branch offices of foreigncorporationsProfit calculation and tax rateThe permanent establishment (e.g. branch office) of a foreigncorporation is liable to taxation in Austria for its attributable in-come. The tax rate is likewise 25 per cent. Here such profits areto be attributed to a permanent establishment that it could haveearned if it had exercised the same or a similar activity underthe same or similar conditions as an independent company (the“dealing at arm’s length” principle). Attribution may be madeby either the direct or the indirect method:• Direct method: Profits are calculated on the basis of thepermanent establishment’s financial statements, taking intoaccount all expenses attributable to the permanent establish-ment, including costs of management and general administra-tion of the company but excluding deemed profit transfers.• Indirect method: In exceptional cases, the company’s totalprofits can be split up among the various permanent estab-lishments according to specific allocation schemes.For transactions between the permanent establishment andother parts of the company, appropriate arm’s length transferprices must be applied.
  • 10. 11www.investinaustria.atCompensation for lossesA loss deduction for permanent establishments is only possibleto a limited extent. Losses incurred in a permanent domesticestablishment can only be carried forward if they exceed thecompany’s remaining positive worldwide income. The lossdeduction for taxpayers with limited tax liability therefore onlyexists subsidiarily unless sufficient foreign income for loss com-pensation has been earned. However, this rule does not apply ifAustria has concluded a double tax treaty with a non-discrimi-nation clause with the state where the headquarters are located.2.8 Foreign income of domestic taxablepersonsCompanies resident in the domestic jurisdiction are subjectto taxation in Austria with their worldwide income. Where adouble taxation convention exists, double taxation is avoided byapplying the exemption or the credit method (at most up to theamount of the foreign withholding tax). However, if the incomeis derived from a country with which Austria has not concludeda double taxation treaty, crediting is effected on the basis ofunilateral measures.In order to avoid double taxation of a resident, certain foreignincome (business income as well as income from independentpersonal services which accrue from foreign permanent estab-lishments, etc.) is exempted from taxation as long as Austria hasnot concluded a double taxation convention which defines rulesfor the specific case. It is a precondition that the foreign incomeis subject to taxation comparable with the Austrian corporateincome tax with a tax rate above 15 per cent on average. Never-theless, profits which are exempted from taxation increase thetax base (proviso safeguarding progression).2.9 Losses incurred in foreign permanentestablishmentsLosses incurred in a foreign permanent establishment of Aus-trian companies can be offset against their domestic positiveincome within the same financial year. This concept can also beapplied if the respective double taxation agreement stipulates theexemption method. To prevent the company from deductinglosses several times, losses already deducted are subject to recap-ture taxation in Austria as soon as the company has the possi­bility to deduct the respective losses in the country of origin.Starting with the taxation period of 2012, these losses are limitedto the amount calculated according to foreign tax law.2.10 Capital increaseThe conversion of retained earnings of the company into capitaldoes not entail any taxable income for the shareholder. Howev-er, capital reductions are treated as taxable income if the capitalincrease cited above was accomplished with the company’s ownfunds within the last ten years prior to the capital reduction.Otherwise, they are exempted from taxation.2.11 Deductible operating expensesDepreciation and depletionFor tax purposes, only the straight-line depreciation method isallowed. Accordingly, costs are distributed evenly over the as-set’s useful life. For certain types of assets depreciation rates arestipulated as follows:Buildings (for industrial and farmingforestry purposes)3.00%Buildings (banks, insurance companies and similar services) 2.50%Other buildings 2.00%Motor vehicles 12.50%Goodwill6,67%Goodwill from the acquisition of a company must be depreci-ated over 15 years by agricultural and forestry companies as wellas tradesmen businesses. Goodwill resulting from a tax neutralrestructuring of companies cannot be depreciated tax effectively.Tax depreciation is not necessarily the same as business lawdepreciation. Where assets already depreciated are disposed of,the difference between their tax book value and the proceeds ofsale are taxed as profits or losses in the year when the disposaloccurs.In the year of purchase, immediate full depreciation can betaken out on assets the purchase costs of which did not exceed€ 400.AccrualsCertain accruals (such as provisions for liabilities and impend-ing losses) running for more than twelve months as of the clos-ing date of the accounts are accepted for tax purposes at 80 percent of their value. Exempted from this reduction are provisionsfor personnel benefits (severance payments, pensions, vacationsand anniversary awards) for which specific reduction and com-putation methods have been provided. In general, lump-sum
  • 11. www.investinaustria.at12accruals and accruals for deferred repairs and maintenance arenot allowed for tax purposes.Payments to affiliated foreign companiesThere are basically no restrictions with regard to the deductibility ofroyalties (licences), interest payments and payments for services toaffiliated foreign companies provided that they meet arm’s lengthstandards. Payments to affiliated companies not meeting arm’slength standards are treated as a hidden distribution of earnings.These payments are therefore not tax deductible. In addition tothat, Austrian withholding tax can be triggered.With the domestic law implementation of a new EU InterestDirective, withholding taxes on cross-border payments of interestand licence fees (regardless of whether taken out by deduction orby assessment) have been abolished between affiliated companiesin the Member States. According to amount, exemption fromwithholding tax is limited to the extent of arm’s length payments.Companies qualify as affiliated companies if a direct investmentof at least 25 per cent exists or if the companies have the sameparent company, which directly owns at least 25 per cent of each ofthem. The recipient of the interest payments or of the licence feesalso has to be the beneficial owner. Permanent establishments ofaffiliated companies – acting as beneficial owner or as debtor of thepayments – are also covered by the exemption from withholdingtax. The investment must have been owned for a period longer thantwelve months in order to be able to benefit from the exemption asdescribed above.There are basically no regulations stipulating the minimum equityrequired by an Austrian company (“Thin Capitalisation Rules”).Nonetheless, the fiscal authorities may under special circum­stancesrule that an owner loan is an equity replacement. Furthermore,the Austrian commercial law basically requires a minimum equityratio of eight per cent. If the equity ratio of the company fallsbelow eight per cent and its earning power (virtual period for debtredemption) at the same time does not meet certain requirements,the management has to deal with consequences as far as its respon-sibility is concerned.Interest for the acquisition of participationsFrom 2005 onwards, interest on loans taken out to acquire do-mestic or foreign participations was generally tax deductible aslong as the arm’s length principle was considered. However, as aresult of the “Budgetbegleitgesetz” 2011, interest expenses relat-ing to the acquisition of shares from related parties or (directlyor indirectly) controlling shareholders are generally non-deduct-ible from 2011 onwards. Interest will be deductible regardlessof whether the involved companies are part of a tax group ornot. Expenditures for cost of money, exchange losses and bankcharges related to the loans taken out to acquire participationsare not considered tax deductible. Merely interest expendituresare deductible.Costs of debt financing regarding distribution ofprofitsInterest payments associated with debt financed profit distribu-tions are tax deductible. However, interest payments in connec-tion with debt financed repayments of capital contributions arenot deductible as business expenses.TaxesTaxes on income and other personally related taxes as well asVAT which are not associated with deductible expenses may notbe deducted. Other taxes, for instance capital transfer tax, maybe claimed as operating expenses.Other essential pointsExpenditures in connection with the conduct of one’s personallife are basically not deductible. Deductibility of the costs of abusiness meal is generally reduced to 50 per cent of the expensesactually incurred if these are considered advertising expenses.Tax loss carry forwardsTax losses may be carried forward for an unlimited period oftime and set off against earnings from later years. A generalrestriction on the deductibility of losses from loss investmentmodels exists. Losses from such investment models may neitherbe set off nor carried forward. They may only be set off againstlater profits derived from the same investment.Additionally, there is another restriction on the deductibility ofoperating losses. Deductible losses may only be set off at a rateof 75 per cent of the total amount of the annual taxable income.The remaining losses however are not lost, but are deductible infuture business years (again, within the 75 per cent limit).2.12 Transfer pricingAustria has implemented the TP guidelines set forth in theOECD directive. According to these guidelines, all legaltransactions between affiliated companies must be carried outaccording to the arm’s length principle. Furthermore, Austriantransfer pricing guidelines were issued by Austrian tax authori-ties on 3 November 2010. The guidelines represent the Austriantax authority’s understanding of intercompany business rela-tionships with regard to their arm’s length classification and arebased on the OECD transfer pricing guidelines. Where a legaltransaction is deemed not to correspond to this arm’s length
  • 12. 13www.investinaustria.atprinciple, the transaction price is adjusted for corporate incometax purposes. Such an adjustment constitutes either a construc­tive dividend or a capital contribution. There is the option of ob-taining in advance a non-binding ruling of advice (EAS) fromthe tax authorities. Furthermore, the recently enacted reformof the Austrian Corporate Income Tax Act (“Abgabenänder-ungsgesetz 2010”) provides for an advance ruling opportunitywhich has been applicable since the beginning of fiscal year2011. With the implementation of this binding advance ruling,information in the fields of transfer pricing, group taxation andmergers acquisitions can be requested from the Austrian taxauthorities against payment of an administrative fee.2.13 Tax incentivesResearch incentivesStarting with fiscal year 2011 (“Budgetbegleitgesetz 2011-2014”), the research and development premium (“RDpremium”) was increased from eight to ten per cent for fiscalyears from 2011 onwards. The RD premium is limited toresearch activities performed in Austria. Furthermore, the RDpremium is granted for research and development performed bysubcontractors on request, but the basis for the premium is lim-ited to € 1,000,000 of the company’s research expenses of thefiscal year. Moreover, the premium can only be claimed if theorder was given by a domestic company or permanent establish-ment and the assigned company is located within the EuropeanUnion or European Economic Area.Starting with fiscal year 2013, the premium can only be claimedif the taxable person is able to provide an expert opinion fromthe Austrian research promotion organization (“ÖsterreichischeForschungsförderungsgesellschaft mbH”), in which the fulfil-ment of the pre-conditions regarding research and experimentaldevelopment is evaluated. The basis of the RD premium canbe checked by an auditor.EducationAn education allowance is granted at a rate of 20 per cent oftraining expenses paid to specific external institutions. Thetraining expenses subject to this education allowance have to beaccrued in relation to training measures (for employees) whichare in the company’s interest.Moreover, an education allowance is granted to cover internaleducation and training measures if the latter are taken by inter-nal research and education institutions comparable to a separatedivision that does not offer its educational programme to thirdparties (apart from group members). The internal educationallowance may only be claimed if the expenses per education ortraining measure do not exceed €2,000 per calendar day.Alternatively, an education premium amounting to 6 per cent ofeducation expenses can be claimed. The premium is credited tothe taxpayer’s tax account.
  • 13. www.investinaustria.at14Summary of tax incentivesDesignation Amount Prerequisites In force / time limitResearch and develop-ment premium § 108cSection 1 No. 1 IncomeTax Act10% of researchexpensesExpenses can be included for research and experi-mental development carried out systematically and byusing scientific methods.Granted in connection with research and experimen-tal development activities assigned to institutions.Limited to € 1,000,000 of the research expenses peryear.As of assessment2011Education allowance 20% of direct educa-tion expenses§ 4 Section 4 No 8Income Tax ActFor computation of the education allowance expensesof certain external training and of ongoing traininginstitutions can be taken into account.Expenses as ofcalendar year 200220% of direct educa-tion expenses§ 4 Section 4 No 10Income Tax ActExpenses for internal training and ongoing traininginstitutions can be used as an evaluation basis.For internal training, the allowance is limited to€ 2,000 per calendar day in an internal division.As of assessment2003Education premium§ 108c Income Tax Act6% of external directtraining and ongoingtraining expensesFor expenses invoiced to the employer by externaltraining and ongoing training institutions and notconstituting the basis of an education allowance, aneducation premium can be applied for.As of calendar year2002New incentiveprogramme forapprenticeshipBased on the year ofapprenticeship1styear of apprenticeship: 3 apprentice salaries2ndyear of apprenticeship: 2 apprentice salaries3rdand 4thyear of apprenticeship: one apprenticesalary each; with an apprenticeship duration of3.5 years: half an apprentice salaryApplicable forapprenticeshipswhich begin after27 June 20082.14 Restructuring measuresThe Restructuring Tax Act allows changes to the legal form ofa company with respect to almost any form of incorporationlargely without any tax impact. This is achieved in the fieldof taxes on income by waiving the taxation of hidden reservesof assets to be reincorporated (continuation at book value).Existing loss carry forwards can be transferred under certainconditions. The act covers corporate mergers, special conver-sions, contributions, demergers, consolidations and spin-offs. Inaccordance with the EU Merger Directive, cross-border restruc-turing also includes EU companies of other Member States. Asa result, it is possible to modify a company’s form of incorpo-ration at any time without an impact on taxes. Cross-bordermergers are only possible between companies which would beallowed to merge according to their individual national law.2.15 Taxation of private foundationsA private foundation is a legal entity under private law to whichthe founder has dedicated assets to achieve the purpose of thefoundation. The foundation purpose need not be charitable butcan, for instance, be the support of members of a family or ofdescendants (so called “family foundations”). Payments by suchfoundations to beneficiaries and ultimate beneficiaries (indi-viduals) are subject to a withholding tax of 25 per cent (as withdividends). Until their distribution, certain types of income (e.g.certain capital earnings and investment earnings) are subject toso called “interim taxation” in the amount of 25 per cent. Thisinterim tax is subsequently credited to withholding tax incurredby payments made to beneficiaries. All in all, there is no doubletaxation (which means that an average tax rate of 25 per cent isapplied for certain capital yields) but the taxation of the capitalincome cited above is brought forward in time. Payments origi-nating from the contributed substance are not subject to taxa-tion. Only considerations originating from the generated profitsare to be subject to 25 per cent taxation. Payments originating
  • 14. 15www.investinaustria.atfrom the contributed substance are exempt from taxation.However, these payments are only exempted from taxation ifthey exceed the total balance sheet profit of the financial year(increased by deductions made according to the fair marketvalue approach), earned surplus and tax based hidden reservesof the capital contributed. Moreover, the balance sheet profitshown in the annual financial statement must be confirmed byan auditor. Payments made by the foundation to corporationsdo not fall under the remit of the participation exemption, butare taxable in the usual manner.2.16 Withholding taxesWithholding taxes under double tax treatiesRecipient: Dividends 1 2in % Interest 3in % Royalties, licences in % 4Resident corporations 0 / 25 50 / 25 0Resident individuals 25 60 / 25 0Non-resident individuals:Non-treaty:Corporations and business enterprises 25 0 20Individuals 25 0 20Treaty:Albania 715 / 5* 0 5Algeria 15 / 5+ 0 10Argentina 8(DTC was recalled by Argentina in 2008)Armenia 15 / 5+ 0 5Azerbaijan 5 / 10 / 15 90 5 / 10 10Australia 15 0 10Bahrain 110 0 0Barbados 1215 / 5+ 0 0Belarus 15 / 5* 0 5Belgium 15 0 0 /10**Belize 15 / 5* 0 0Bosnia and Herzegovina 1310 / 5 0 5Brazil 15 0 10 / 15 / 25 14Bulgaria 150 / 5 0 5Canada 15 / 5+ 0 10China 10 / 7* 0 10 / 6 16Croatia 15 / 0+ 0 0Cyprus 10 0 0Czech Republic 1710 / 0+ 0 5 18Cuba 15 / 5* 0 5 / 0 19Denmark 2015 / 0+ 0 0Egypt 10 0 0 / 20 filmsEstonia 15 / 5* 0 10 / 5 21Finland 10 / 0+ 0 5France 15 / 0+ 0 0Georgia 10 / 5+ / 0** 220 0Germany 15 / 5+ 0 0Greece 2315 / 5* 0 7Hong Kong 2410 / 0+ 0 3
  • 15. www.investinaustria.at16Recipient: Dividends 1 2in % Interest 3in % Royalties, licences in % 4Hungary 10 0 0India 10 0 10Indonesia 15 / 10* 0 10Iran 10 / 5* 0 5Ireland 10 0 0 / 10**Israel 25 0 10Italy 15 0 0 / 10**Japan 20 / 10** 0 10Kazakhstan 15 / 5+ 0 10Kyrgyzstan 15 / 5* 0 10Korea 15 / 5* 0 10 / 2 25Kuwait 0 0 10Latvia 2610 / 5* 0 10 / 5 27Libya 28Liechtenstein 15 0 10 / 5 29Lithuania 15 / 5* 0 10 / 5 30Luxemburg 15 / 5* 0 0 / 10**Malaysia 10 / 5* 0 10 / 15 filmsMalta 15 0 0 / 10 31Macedonia 3215 / 0+ 0 0Mexico 10 / 5+ 0 10Moldova 15 / 5* 0 5Mongolia 10 / 5+ 0 5 / 10 33Morocco 3410 / 5* 0 10Netherlands 15 / 5* 0 0 / 10**Nepal 15 / 10+ / 5* 0 15New Zealand 3515 0 10Norway 15 / 5* 0 0Pakistan 3615 / 10+++ 0 10Philippines 25 / 10+ 0 15Poland 15 / 5+ 0 5Portugal 15 0 5 / 10 37Qatar 380 0 5Romania 5 / 0* 0 3Russia 15 / 5* 390 0Russian Federation 400 0 0San Marino 15 / 0+ 0 0Saudi Arabia 415 0 10Serbia 4215 / 5* 0 5 / 10 43Singapore 10 / 0+ 0 5Slovakia 4410 0 5Slovenia 15 / 5* 0 5South Africa 15 / 5* 0 0Spain 15 / 10** 0 5Sweden 10 / 5* 0 0 / 10**Switzerland 15 / 0+++ 450 0Syria 46Thailand 25 / 10* 0 15Tunisia 20 / 10* 0 10 / 15 filmsTurkey 4715 / 5* 0 10Ukraine 10 / 5+ 0 5United Kingdom 15 / 5* 0 0 / 10**United Arab Emirates 0 0 0USA 15 / 5+ 0 0 / 10 filmsUzbekistan 15 / 5+ 0 5Venezuela 4815 / 5++ 0 5Vietnam 4915 / 10* / 5*** 0 10 / 7.5 50
  • 16. 17www.investinaustria.atNotes:1 Dividends – Dividend distributions attributable to a prior release of paid-in surplus or other shareholder contributions (classified as capital reserves)are deemed to be a repayment of capital, i.e. no withholding tax is incurred.At the shareholder level, dividends received and those classified as contri-bution refund will reduce the tax basis assessment for investments. To theextent to which the tax basis would become negative, such dividends aretreated as taxable income (unless taxation is eliminated by a tax treaty).2 Under certain treaties, the amount of the withholding tax is dependent onthe extent of the proportion of issued share capital held by the recipient.Where this is the case, all rates are given. Those marked with + refer to aninvestment of 10%, ++ to 15%, those marked with +++ refer to an invest-ment of 20%, those marked with * refer to an investment of 25%, thosemarked with ** refer to an investment of 50% and those marked with ***refer to an investment of 70%.3 Interest – Interest on cash deposits in Euro or foreign currency in bank ac-counts and fixed interest bearing securities in foreign currency (issued after31 December 1988) and on fixed interest bearing securities denominatedin Austrian Schillings or Euro (issued after 31 December 1983) are sub-ject to a 25% withholding tax. If the recipient is an individual, this with-holding tax is final (no further income taxation and inheritance taxation).Companies receiving interest payments may obtain an exemption fromwithholding tax if they provide the bank or other custodial agent with awritten confirmation from the recipient that such interest payments con-stitute a part of the recipient’s operating revenues (exemption statement).Interest payments to non-residents without a permanent establishment inAustria are generally not subject to withholding taxation. With respect tointerest payments between affiliated companies, the regulations stipulatedby the EU Interest Directive have to be taken into consideration.4 Royalties, etc. – In case of payments to countries marked with “**”, therate is nil unless more than 50% of the issued share capital of the companypaying the royalties is held by the recipient, in which case the rate givenapplies. With respect to royalty payments between affiliated companies,the regulations stipulated by the EU Interest Directive have to be takeninto consideration.5 If the recipient holds a participation of less than 10% (FY before 2011:25%) in the distributing company, the dividends are subject to a 25%withholding tax. Since dividends distributed by an Austrian corporationto another Austrian corporation are generally not subject to taxation (see“Determination of income”), the withholding tax is credited against cor-poration income tax upon assessment of the recipient corporation for therespective tax year.6 Withholding tax on dividends from Austrian companies is final, i.e. nofurther income tax is collected from the recipient (provided the recipientis an individual).7 The treaty was signed on 14 December 2007 and entered into force on 1September 2008. It is applicable as of the beginning of fiscal year 2009.8 The treaty was recalled by Argentina in 2009. Austrian tax citizens areprotected by §48 BAO against double taxation. Austria will try to enterinto new negotiations with Argentina.9 5% for shares of at least 25% and a value of a minimum of $250,000,10% for shares of at least 25% and a value of at least $100,000, 15% in allother cases.10 5% for industrial licences and know-how not more than three years old;10% in all other cases.11 The treaty entered into force on 1 February 2011 and is applicable as of thebeginning of fiscal year 2011.12 The treaty entered into force on 1 April 2007 and is applicable as of thebeginning of fiscal year 2008.13 The treaty entered into force on 1 January 2012 and is applicable as of thebeginning of fiscal year 2012.14 10% for copyright licence fees in connection with literature, science andart; 25% for trademarks licence fees; 15% in all other cases.15 The treaty entered into force on 3 February 2011 and is applicable as of thebeginning of fiscal year 2011.16 Industrial, commercial or scientific equipment – 6%, 10% in all othercases.17 The treaty entered into force on 22 March 2007 and will be applicable asof the beginning of fiscal year 2008.18 5% for licence income from copyrights, brands, plans, secret formulas orprocedures, computer software, industrial, commercial or scientific use ofequipment and information.19 0% for copyright royalties in connection with the production of literary,dramatic, musical or artistic work – 5% in all other cases.20 The new treaty was signed on 25 May 2007 and entered into force on 27March 2008. It is applicable as of the beginning of fiscal year 2009.21 5% for leasing of mobile goods and 10% for other licences.22 0% for shares of at least 50% and a minimum value of €2,000,000, 5%for shares of at least 10% and a value of at least €100,000, 10% for sharesin all other cases.23 The treaty entered into force on 1 April 2009 and is applicable as of thebeginning of fiscal year 2010.24 The treaty entered into force on 1 January 2011 and is applicable as ofthe beginning of fiscal year 2012 (Austria: 1 January 2012, Hongkong: 1April 2012).25 2% for licence income from industrial, commercial or scientific use and10% for other licences.26 The treaty entered into force on 16. May 2007 and is applicable as of thebeginning of fiscal year 2008.27 For the use of commercial or scientific equipment – 10% in all other cases.28 The treaty was signed on 16 September 2010. It has not yet been decidedwhen it will enter into force.29 5% in case of direct (or indirect over a patent-realization-company) pay-ments of royalties by companies of the other Member State (with an indus-trial establishment in the other Member State) and 10% for other licences.30 5% in case of licence income from industrial, commercial or scientific useand 10% for other licences.31 0% for copyright licence fees in connection with literature, art and scien-tific use and 10% for other licences.32 The treaty was signed on September 7, 2007 and entered into force on 20January 2008. It is applicable as of the beginning of fiscal year 2008.33 10% for the right of use of copyrights to artistic, scientific or literary as wellas cinematographic works and 5% for other licences.34 The new treaty was signed on 13 September 2006 and entered into force on13 November 2006. It is applicable as of the beginning of fiscal year 2007.35 The treaty was signed on 21 September 2006 and entered into force on 1December 2007. It is applicable as of the beginning of fiscal year 2008.36 The treaty entered into force on 1 June 2007 and is applicable as of thebeginning of fiscal year 2008.37 For Portugal, the rate of withholding tax is 5%, but it is 10% if more than50% of the issued share capital is owned by the recipient.38 The treaty entered into force on 7 March 2012 and will be applicable as ofthe beginning of fiscal year 2013.39 5% if the capital share amounts to at least 10% and its value is at least$100,000; 15% in all other cases.40 The treaty applies to Tajikistan and Turkmenistan. With Russia, a newtreaty has been ratified.41 The treaty entered into force on 1 June 2007 and is applicable as of thebeginning of fiscal year 2008.42 The treaty entered into force on 17 December 2010 and is applicable as ofthe beginning of fiscal year 2011.43 5% for copyright licence fees, 10% for other licences.44 Until a new treaty will be established, the treaty with Czechoslovakia re-mains applicable.45 For dividend distributions retroactive as of 1 January 2000.
  • 17. www.investinaustria.at18means of a decision announced by the tax office after filing thetax return.Payment of taxesCorporate income tax is paid in quarterly advance paymentsduring the year and a final payment is made when the assess-ment decision is available. The quarterly advance payments areusually calculated on the basis of the most recently assessedcorporate income tax year.The difference between income tax or corporate income tax asper the final assessment and prepayments bears interest from1 October of the year subsequent to the year when the tax claimarose up to the date when the assessment is released.Sample of a corporate income tax calculation(Calculation for the business year ending on 31 December 2012)AssumptionBelow you will find a sample calculation of corporate incometax for a GmbH (limited liability company) based on the fol-lowing assumptions:1. The GmbH’s income is estimated at € 100,000 after de-duction of all expenditures and taxes, excluding corporateincome tax.2. Research expenses amount to € 10,000; a premium of ten percent can be claimed in addition to deducting the researchexpenses.3. Losses carried forward from 1991 onwards are € 80,000.Tax computation € €Net income before taxes 100,000plus:Compensation for members of theSupervisory Board (50% of € 8,000) 4,000Entertainment costs 2,400Taxable income before losses are carried forward 110,400thereof 75% 82,800Losses creditable -80,000Taxable income 30,400thereof 25% corporate income tax 7,600RD premium 10% 1,000remaining tax expense after consideration of theRD premium 6,60046 The treaty was signed on 3 March 2009. It has not yet been decided whenit will enter into force.47 The new treaty was signed on 28 March 2008 and entered into force on1 October 2009. It is applicable as of the beginning of fiscal year 2010.48 The treaty entered into force on 17 March 2007 and is applicable as of thebeginning of fiscal year of 2008.49 The new treaty was signed on 2 June 2008 and entered into force on 1January 2010. It is applicable as of the beginning of fiscal year 2011.50 7.5% for fees for technical services, 10% for royalties.Relief-at-source ordinanceIf the income of a non-resident is to be relieved fully or partiallyfrom Austrian withholding tax in accordance with a doubletaxation agreement, such relief can be effected through theimmediate application of the provisions of the double taxationagreement (relief-at-source) provided certain conditions aremet. Examples of payments qualifying for relief-at-source aredividends, interest, licence fees, consulting fees, distributions byAustrian private foundations and payments to supervisory boardmembers. To claim relief at source the payee has to pro¬videa certificate of residence issued by the foreign tax administra-tion using the forms provided by the Ministry of Finance (formZS-QU1 for natural persons and ZS-QU2 for legal persons).If the payment to a foreign payee does not exceed € 10,000(USD 12,600) a year the certificate of residence can be replacedby a statement from the payee giving the details of his residenceand confirming that he is the beneficial owner of the paymentsreceived and that he is not passing on the payments to a thirdparty. Alternatively, the non-resident payee can claim relief-at-source if he has successfully applied for a refund of Austrianwithholding tax within the three preceding years.2.17 Purchase of a corporate shellIf the identity of a corporation no longer exists because ofmaterial changes in the organizational and economic structurein connection with a considerable change in the structure ofthe shareholders on a remunerational base, the corporation isno longer allowed to offset prior losses (so called “purchase of acorporate shell”). From the point of view of the supreme admin-istrative court, only the losses prior to the year of the structuralchanges were affected by the prohibition to offset losses.2.18 Tax administrationIn Austria the fiscal year is equivalent to the calendar year.Companies can apply for deviating fiscal year. In such case thebasis for the calendar year’s tax assessment is the different fiscalyear ending during that calendar year. Assessment occurs by
  • 18. 19www.investinaustria.at2.19 Electronic filing of annual corporateincome tax returnsThe annual corporate income tax return has to be filed byelectronic means. Only in case the company cannot reasonablybe expected to file tax returns electronically due to the lack oftechnical prerequisites and of a tax representative in Austria, fil-ing of the tax return may be done with pre-printed forms.3. Incorporation and financingof a company3.1 IncorporationThe most important types of companies in Austria are the lim-ited liability corporation (GmbH) and the joint stock corpora-tion (AG). Foreign investors generally choose the GmbH since itprovides a higher degree of corporate law control and allows forlower equity provision. We will therefore largely concentrate onthe GmbH below.As a legal entity the GmbH exists upon registration with theCompanies’ Register. The application for registration mustcontain the notarised signatures of all managing directors. Thearticles of association must be drawn up in the form of a notarialdeed (written document executed by a public notary) and mustas minimum requirements include the name of the company aswell as its seat, the business purpose, the amount of registeredcapital and the capital contribution of each of the various owners.Since 2004 the Societas Europea (SE) company type has beenavailable in Austria. The SE is a stock corporation based on com-munity law, which means that its legal form is accepted through-out the EU. The advantages of this legal form are a simplifica-tion of organizational structures (in particular for internationalgroups), the possibility of cross-border transfers of corporationseats without loss of the legal identity as well as the possibility ofmaking cross-border mergers. The SE allows choosing a businesslocation from an economic point of view as well as choosing themost favourable legislation. The minimum share capital requiredfor the incorporation of an SE is € 120,000 and the statutoryseat of the corporation must be located in the same country inwhich the place of management is located.3.2 Start-up Subsidization ActUnder certain conditions, corporate start-ups as well as alreadyexisting companies involved in the transfer of small-sized andmedium-sized companies do not have to pay stamp duties andfederal administration fees, various payroll fees, real estatetransfer tax for the contribution of real estate, court fees for reg-istration with the Companies’ Register as well as capital transfertax for acquisition of corporate rights. More­over, certain ben-efits are granted to start-ups in connection with the payment ofhealth insurance fees.3.3 Nominal capital / premiumA GmbH’s minimum registered capital amount is € 35,000.Generally, one half of the registered capital must be raised incash while the remainder may be contributed in the form ofassets (contributions in kind). Of the original capital contribu-tions to be paid in cash one fourth – however at least € 17,500– must actually be paid upon incorporation. Under certainconditions, the capital can be provided exclusively in the formof assets (incorporation in kind). The articles of associationmay provide for additional capital contributions payable by theowners on the basis of a resolution adopted by the shareholdermeeting. The minimum share capital of an AG is € 70,000. Foran AG, the same payment regulations apply as for a GmbH.But the owners can agree upon a further capital contributiongoing beyond the nominal value of the shares (premium). Thepre­mium is shown on the company’s balance sheet as a capitalreserve.3.4 Incorporation costsThe amounts made available to the company (including thepremium) are subject to capital transfer tax at the rate of one percent. In addition to the capital transfer tax, a registration feebetween € 400 and € 750 must be paid upon incorporation.Start-ups may under certain conditions be exempt from capitaltransfer tax and registration fee (see 3.2). Total incorporationcosts (including taxes, attorney’s and notary’s fees) normallycome to € 3,500 for a GmbH and to € 5,000 for an AG. In-corporation costs may be borne by the company in the amountindicated in the articles of association.
  • 19. www.investinaustria.at20In case of the registration of a branch office in Austria, totalcosts in the amount of approximately € 3,400 will be incurred.Incorporation costs AG GmbH Branch officeRegistration fees € 400 - €750 € 400 - €750 € 200Consultancy fees (tax consultant, advocate, notary) € 4,250 - € 4,600 € 2,750 - € 3,100 € 3,200Total costs € 5,000 € 3,500 € 3,4003.5 Shareholder contributions and shareholderloansCapital contributions and loans by shareholders may be used asinstruments to finance the company. In principle neither contri-butions nor loans need a specific form. Such contributions haveno impact on the tax burden, as they do not raise the company’staxable income. They are subject to a capital transfer tax at therate of one per cent.In accordance with established case law in Austria, under cer-tain conditions an owner loan is ranked below other liabilities(e.g. if the company was unable to raise the necessary financesin the market during the period when the loan was granted).3.6 Capital transfer taxCapital transfer tax is levied on capital contributions made toAustrian corporations, in particular subscription to ownershiprights in corporations (upon formation or capital increases),payments by the stockholder (supplementary contributions, ad-ditional payments) and voluntary payments by the stockholder(contributions, release of a debt as well as gratuitous transfer ofassets to the company). The tax is levied at a rate of one per cent.In Austria, grandparent company contributions are not subjectto capital transfer tax.3.7 Bank loansA company is in most cases financed by taking out a bank loan.The owners may provide guarantee statements that are not sub-ject to any tax or fee as collateral on such loans.3.8 Real estate transfer taxReal estate transfer tax is charged on legal transactions (pur-chase agreements, property acquisitions, assignments andacquisitions of rights to realize the value of property) relatingto Austrian real estate. The base rate of the real estate transfertax is 3.5 per cent of the value of the consideration (propertyacquisitions), but is reduced to 2 per cent in case of an acquisi-tion being made by spouses, parents or children. In addition tothe real estate transfer tax, a registration fee of 1.1 per cent willbe levied if ownership is changed in the real estate register.4. Austria’s VAT system4.1 General informationThe Austrian VAT Act is based on the EC VAT Directive.VAT is a tax on expenditures of end-consumers. VAT levied toentrepreneurs does usually not constitute a cost factor. This isachieved by deduction of input VAT. However, input VAT mayonly be deducted if the goods or services purchased are usedfor business purposes (at least ten per cent). Entrepreneurs thatsell goods or render services in Austria are obliged, regardless oftheir location, to invoice VAT. This obligation only lapses if taxexemptions or the reverse-charge procedure apply.Resident and non-resident (foreign) entrepreneurs are entitledto claim input VAT paid by deducting it from their monthly orannual VAT debt assessment. Where the input VAT amountsexceed the VAT payable, the difference is either refunded bythe fiscal authorities or credited against other tax liabilities.Entrepreneurs without a seat or a fixed establishment in Austriaor not providing any taxable supplies or services in Austria canapply for a VAT refund. The relevant application must be filedwith the competent tax authority by 30 June of the followingyear for non-EU businesses respectively by 30 September of thefollowing year for EU-businesses.
  • 20. 21www.investinaustria.at4.2 Sales within the European UnionSupplies of goods between EU Member States (of the EuropeanUnion) are neither subject to customs procedures nor to importVAT.In general, purchases by an Austrian entrepreneur from asupplier resident in another EU Member State are subject toacquisition tax. This VAT on intra-EU purchases must be cal-culated by the Austrian buyer on the basis of the purchase priceand must be reported on the monthly and annual VAT returns.Generally, this amount is deductible as input VAT. Supplies byAustrian businesses to entrepreneurs subject to tax in anotherMember State are treated in Austria as zero-rated intra-EU sup-plies within the EU provided that the intra-Community pur-chase is subject to VAT in the country of destination. Moreover,the Austrian supplier has to prove in a comprehensible way tothe tax authorities that he himself or the recipient of the goodshas transported or dispatched the goods to another EU country(by providing adequate documents like invoices, written receiptsissued by the costumer or his contractor, shipping documents,etc.). Furthermore, the supplier has to meet additional book-keeping requirements as far as tax-exempt intra-Communitysupplies are concerned. The specific rules can be found in adecree.This system is only applicable if both the buyer and the sellerare taxable persons within the meaning of the Value Added TaxAct, have a VAT identification number (UID) that is shownon the invoice and supply or acquire the goods in the course oftheir business operations. For supplies to private individuals orbusinesses, which do not have a VAT identification number, thedeliveries are usually subject to VAT in the country of origin.This provision also applies to mail order deliveries if the annualdistance selling threshold of the EU destination country inquestion is not exceeded and if the supplier does not opt fortaxation in the country of destination. In Austria the distanceselling threshold is € 35,000 with regard to supplies made toAustria.4.3 Taxable sales and servicesTaxable transactions are defined as follows:1. The supply of goods and/or the rendering of services for con-sideration by a taxable person in Austria in the course of hisbusiness. The tax is not limited to sales connected with thenature and objective of the business.2. Self-supply (private use or withdrawal of corporate assets orservices), usually treated as supplies of goods or services.3. Imports of goods from non-EU countries to Austria (importVAT). This tax is raised on goods and raw materials, im-ported into Austria at the same rate that applies to domesticproducts but is deductible in connection with the monthlyand annual VAT assessment if paid by an taxable person.Import VAT is collected by customs authorities (import VATold) or directly debited to the tax account (import VAT new).4. Intra-Community acquisitions of goods.The supply of goods is deemed to have taken place in Austriaif the economic ownership is transferred in Austria. In general,the place of supply is in Austria if dispatch or transport of thegoods commences in Austria.Special regulations apply to imports from non-EU countries anddistance sales (mail order deliveries) to Austria.The place of supply for services rendered between businesses (B2B- rule) is the place - with few exceptions - where the recipient isestablished. For supplies to non-taxable persons (B2C- rule) the place of supply of services is the place where the supplier has estab-lished his business. The following table contains an overview about the new regulations:B2B-services rendered to taxable personsKind of service Place of supply newServices connected to immovable property Where the immovable property is locatedTransport Services• Persons• GoodsWhere the transport takes placeWhere the recipient of the supply is established (B2B general clause)*Cultural, scientific, educational etc activitiesincluding events• Admission• OthersWhere the services are physically carried out,Where the recipient of the supply is established (B2B general clause)*
  • 21. www.investinaustria.at22Kind of service Place of supply newHandling, storing etc. in connection with goods Where the recipient of the supply is established (B2B general clause)*Work on and valuation of movable tangible property Where the recipient of the supply is established (B2B general clause)*Former “Art 56-services” Where the recipient of the supply is established (B2B general clause)*Services in connection with restaurants and catering• On board of a ship / plane/ train in the EC• remainingPoint of departure of the passenger transport operationWhere the services are physically carried outHiring out of means of transport• Short-term• Long-termWhere the means of transport is effectively provided*Where the recipient of the supply carries out his business (B2B general clause)*Services of agents (intermediary services) Where the recipient of the supply is established (B2B general clause)*General clause Where the recipient of the supply is established (B2B general clause)**) For these services, the Ministry of Finance is entitled to decree that the place of supply is shifted to the place where the service is used or enjoyed.B2C-services rendered to non-taxable personsKind of service Place of supply newServices connected to immovable property Where the immovable property is locatedTransport Services• Persons• Goods-- Within EC-- remainingWhere the transport is effectedwhere the transport is effectedwhere the transport startsArtistic, scientific etc activities including events Where the supplier exclusively or predominantly carries out the supplyHandling, storing etc. in connection with transports Where the supplier exclusively or predominantly carries out the supplyWork on and valuation of movable tangible property Where the supplier exclusively or predominantly carries out the supplyFormer “Art 56-services”• Recipient inside EC• Recipient outside ECWhere the supplier exclusively or predominantly carries out the supplyWhere the recipient is domiciledElectronic services to recipient inside the EC• Rendered by suppliers outside the EC• Rendered by suppliers inside the ECWhere the supplier carries out his business (B2C general clause)Where the recipient is domiciledTelecommunication, broadcast and television services• to recipient outside the EC-- Remaining EC-- Remaining non-EC• To recipient inside the EC-- Remaining EC-- Remaining non-ECWhere the recipient is domiciledWhere the means of service is effectively provided*Where the supplier carries out his business (B2C general clause)*Where the means of service is effectively provided*To domestic public bodies rendered by suppliers outside theECIn Austria, when the service is used or enjoyed in AustriaServices in connection with restaurants and catering• On board of a ship / plane/ train in the EC• RemainingPoint of departureWhere the supplier exclusively or predominantly carries out the supplyHiring out of means of transport• Short-term• Long-term• Recreational craftWhere the means of transport is effectively provided*Where the recipient is domiciledWhere the means of transport is effectively provided, if the supplier carries outhis business from thereServices of agents (intermediary services) Where the intermediated service is carried outGeneral clause Where the supplier carries out his business (B2C general clause)**) For these services, the Ministry of Finance is entitled to regulate that the place of supply is shifted to the place where the service is used or enjoyed.
  • 22. 23www.investinaustria.at4.4 Exemption regulationsVarious exemption regulations are provided. Most entail the lossof the right to deduct input VAT.4.5 Basis of VAT computationFor supplies of goods and services VAT is charged on all remu-neration paid for the goods or services (exclusive of VAT). If theremuneration is not paid in money then VAT is determined ac-cording to the general value of the goods or services (fair marketvalue). According to a draft legislation for supplies of goods andservices carried out by taxable persons for purposes outside ofthe business or for their staff the standard value has to be usedunder certain circumstances. The standard value is either thevalue for self supplies or the sales price to third parties.The basis of tax computation for imported goods is the purchaseprice plus any customs duties or fees, consumption taxes wherethey obtain as well as shipping costs to the first point of deliverywithin the European Union, unless this is included in thepurchase price.4.6 VAT ratesThe standard tax rate is at 20 per cent.The reduced tax rate of 10 per cent is applicable, inter alia,to foodstuffs, animal husbandry, agricultural machinery andcapital goods, books and antiques, accommodations, privatelymanaged cinemas, theatres and museums, transport of persons,supply of pharmaceutical products4.7 VAT returns and payment of VATBasically, taxable persons must submit a monthly tax return (=preliminary VAT return) and pay the relevant amount to the taxoffice by the 15thof the second month following to the monthconcerned. Any tax credit can be credited against other tax li-abilities or upon replied to a bank account request.In addition, an annual VAT return must be submitted aggre-gating the business year’s VAT and import VAT. The monthlypayments are deemed to be advance payments on the annualtax charge. The annual VAT return in principle must be filed inelectronic form by 30 June of the following year. Extension ofthe deadline by one year is generally possible if the entrepreneuris represented by an Austrian tax advisor in relation to the fiscalauthorities.For supplies within the EU summary reports (EC Sales Listings)must generally be filed electronically (list of intra-EU deliveriesof goods) on a monthly basis by the end of the month follow-ing the month concerned. Furthermore, intra-EU supplies andintra-EU acquisitions – if they exceeded € 500,000 in the previ-ous year – have to be reported to “Statistik Austria” (so called“Intrastat-declaration”). The relevant report has to be filedmonthly by the tenth business day of the month following themonth concerned. Also services subject to the B2B general rulewhich are rendered to a taxable person in another EU-MemberState must be reported in the EC Sales Listings.4.8 VAT groupingGrouping is possible for VAT purposes if one taxable personcontrols subordinate legal entities in financial, commercial andorganisational matters. The companies are then considered tobe a single taxable person for VAT purposes. Supplies or otherservices between the members of the VAT group are non-taxableinternal sales. Deduction for input VAT may be claimed by theparent. However, the VAT grouping is only applicable to domes-tic companies or domestic parts of companies.4.9 Reverse charge procedureFor supplies of services and for installation supplies of goodstaxable in Austria which are rendered by a non-resident busi-nesses to a taxable person for an entrepreneur or a public bodythe reverse charge procedure applies. The reverse charge systemis also applicable, if the non-resident supplier has a fixed estab-lishment in Austria, but the fixed establishment does not inter-vene in the service. The non resident taxable person does notinvoice VAT and is not required to register for VAT purposes inAustria. The Austrian recipient has to declare the reverse chargeVAT but is basically entitled to deduct the same as input VAT.Reverse charge for construction servicesFor construction services, the VAT liability is shifted to therecipient of the services if construction services are carried outto a taxable person who himself was subcontracted to render therespective construction services or usually performs construc-tion services. Construction services in this connection meansthe production, repair, maintainance, alteration, removal and,since January 1, 2011, cleaning of building. Where the VAT
  • 23. www.investinaustria.at24liability is shifted to the recipient (reverse charge) the invoicemust be issued without VAT. In addition as a consequence ofthis, separate records of remuneration for sales subject to reversecharge must be kept for construction services by the serviceprovider and by the service recipient.Reverse-charge for other servicesThe reverse-charge system is generally applicable to• Assigned retention of title• Management of security property• Sales of land, building rights buildings on leasehold land inforeclosure proceedings• Supply of electricity and natural gas• Supply of scrap• Sales of greenhouse gas emission certificates in Austria and• Sales of mobile devices over € 5,000.If certain –different - requirements are met.4.10 Non-resident businessesNon-resident businesses without a fixed establishment or statu-tory seat in Austria who do not effect taxable supplies in Austriarespectively render services subject to the Austrian VAT or onlyservices for which the VAT liability is being transferred to therecipient of the services (reverse charge) usually have the pos-sibility to apply for the refund of incurred Austrian input VATwith the Austrian tax authorities. The deadline is 30 June of theyear subsequent to the year in question for businesses not estab-lished in the EU. Businesses from another EU Member Statehave to file refund claims electronically in their home countryby 30 September of the year following the year concerned.Basically, the import of goods with a subsequent intra-EU sup-ply in Austria is exempt from import VAT. However, foreignbusinesses would have to be registered for VAT purposes inorder to benefit from this clause. To avoid the registration, asimplification scheme is provided (issue of a special VAT num-ber to the freight forwarder) so that the foreign entrepreneur isable to conduct an intra-EU supply and additionally to claimthe exemption from the import VAT without a VAT registra­tion in Austria. From 1 October 2006 this simplification isonly applicable if the VAT number of the recipient of the goodsis issued by the EU Member State in which the transport orconsignment of the goods ends.5. Taxation of individuals5.1 Territoriality and residenceAll persons residing in Austria are subject to Austrian incometaxation for their worldwide income. This includes income fromany agricultural or forestry activity, income from self-employ-ment, any trade or business activity, income from salaried em-ployment, income from capital assets, income from rental andleasing as well as other income. Persons not resident in Austriaare only taxed on income from certain sources in Austria. A per-son is generally deemed to be a resident if he/she has a domicileor habitual abode in Austria, in any case after a six-month stay.A person whose centre of vital interest has been abroad for atleast five calendar years is deemed to be resident in Austria fortax purposes only in those years when the taxpayer uses this andother domiciles more than 70 days a year.Nationality itself is not a criterion for judging residence or taxliability. However, it may serve as an indication of residence.5.2 Income from salaried employmentEmployment incomeIncome from salaried employment comprises money as well asbenefits in kind which the individual receives from an employeror a third party. Benefits in kind are evaluated according tospecial regulations, which in certain cases provide for generalallocations (especially for motor vehicles). Company flats are tax-able at 75 per cent of the gross rent actually paid by the company;compensation for privately paid lodgings is fully taxable. Certainminor benefits in kind are tax-free. Reimbursement of de factomoving costs of employees caused by transfers for operationalreasons and intercompany transfers are exempted from taxation;lump-sum moving costs within certain limits are tax-exempt.Any compensation paid for tax payments is fully taxable.Special payments (e.g. 13th and 14th monthly salary, i.e. holidayand Christmas remuneration) up to an annual amount equal totwo average monthly salaries are taxed at a standard tax rate ofsix per cent; the first € 620 being tax-free. . On 1 April 2012, theso called “solidarity charge” became effective, leading to a highertax rate for special payments for a certain salary level. Dependingon the gross salary, the tax rate rises up to 50 per cent.
  • 24. 25www.investinaustria.atAmount of special paymentsup to € 620 0%€ 620 to € 25,000 6%€ 25,000 to € 50,000 27%€ 50,000 to € 83,333 35.75%over € 83,333 50%Voluntary severance payments are also taxed (for periods whereno entitlement to an employee pension fund exists) at a standardtax rate of six per cent, as long as these payments do not ex-ceed one quarter of the regular payments within the last twelvemonths.Non resident persons are subject to limited tax liability forincome from Austrian sources at the regular tax rates. During taxassessment an amount of € 9,000 p.a. will be added to the taxableincome.Special regulations for expatriatesIn order to reduce taxes for the growing number of foreign topexecutives working in Austria and to facilitate payroll accounting,an ordinance was issued granting expatriates lump-sum allowanc-es to be taken into consideration in ongoing payroll accounting.According to this ordinance, “expatriates” are individuals whohave not been resident in Austria within the most recent ten yearsand who work for a fixed period of time for an Austrian employer(group company or permanent establishment for payroll tax pur-poses) in Austria on the basis of an expatriation agreement withtheir foreign employer. The intention must not be to maintainthis working relationship in Austria for more than five years andthe employees must maintain their residence in their home coun-try and not rent it out.The following allowances are taken into account:1. Moving costs: lump-sum payments for moving due to expa-triation are tax-free up to one 15thof the annual gross salary.2. Costs for maintenance of a double household: appropriaterent costs for lodgings in Austria are tax deductible for theemployee and his family up to a monthly amount of € 2,200.3. Expenses for home leave: if the expatriate visits his foreignemployer during his home leave, then the trip is regarded asa business trip and costs incurred may be treated as tax-freetravel costs. No per diem allowances may be claimed for tripsto the parent company or for home leave. In addition, costreimbursements for home leave used for the maintenance ofthe principal residence are tax-free for the employee up to amonthly amount of € 281.4. Education costs for children (tuition): if children of expatri-ated employees accompany their parents to Austria and ifthey have to attend a private international school instead ofa public school in order to continue their education, then amonthly amount of € 110 per child is tax deductible.The employer must send a written confirmation to the relevanttax office at the beginning of the assignment and thereafter atthe beginning of every calendar year; this statement must listthe name of the employee for whom special tax advantagesare being sought and it must provide the tax authorities withpersonal data including both the employee’s address in Austriaand his address abroad.In addition, special expenses, income-related expenses andextraordinary financial burdens may be claimed on the annualtax return under certain conditions. Alternatively the allow-ances cited above may be taken into consideration in the annualassessment.5.3 Capital incomeCapital income encompasses inter alia interest income, divi-dends, capital gains as well as income from investment funds.5.3.1 Interest earningsBank interest and interest from securities held in Austriandeposit accounts and derived by a person resident in Austriaare subject to the 25 per cent withholding tax deduction by theAustrian depositary bank. With this withholding tax deduction,income tax is in general deemed to be satisfied (final or defini-tive taxation). For final taxation of bonds, a “public placement”is required.Interest income from securities in foreign deposit accounts orforeign bank interest which is not subject to the withholdingtax deduction must be included in the income tax return and istaxed at a 25 per cent special tax rate.If the individual’s average tax rate is less than 25 per cent, thena reduction to the lower average tax rate is possible upon as-sessment application, which is to include all definitively taxableincome as well as income subject to the special tax rate.5.3.2 Dividend earningsDomestic earnings from dividends are definitively taxed forincome tax purposes with the 25 per cent withholding tax de-duction by the corporation distributing the dividend.Foreign dividend earnings paid to a domestic deposit accountare also subject to final taxation through the 25 per cent with-
  • 25. www.investinaustria.at26holding tax deduction. In this case, however, banks are onlyliable for withholding tax insofar as they know the nature of thecapital income.Dividend income paid to foreign deposit accounts must beincluded in the tax return. Such income is subject to the special25 per cent tax rate.If the investor applies for assessment of the capital income,dividend income is subject to the average tax rate (as from 2011,for prior calendar years half of the average tax rate applies).Regardless of a double tax treaty with the corresponding sourcecountry, foreign taxes paid on foreign dividends can be creditedup to a maximum of 15 per cent (by the Austrian depositarybank).If disposal profits or income from capital assets are derived fromabroad then the corresponding double taxation convention mustbe taken into account.5.3.3 Capital gainsOn 30 December 2010, a new law (“Budgetbegleitgesetz 2011”– in the following “BBG 2011”), was published in the FederalLaw Gazette, which provides for changes in the taxation ofcapital income. Due to the BBG 2011 the taxation of capitalgains derived from the sale of securities (capital gains tax) willbe amended significantly.Before the BBG 2011 came into force, capital gains of indi-viduals from the sale of securities were taxable only under thefollowing two conditions:• Speculative capital gains: Profits from the disposal of both do-mestic and foreign capital assets are deemed to be short-termcapital gains and are subject to income tax at standard taxrates if the period between the purchase and the sale amountsto less than one year. Speculative capital gains up to a maxi-mum of €440 per year are tax-free (tax-free limit). The usageof tax losses resulting from such transactions is limited.• Disposal of investments: Capital gains from the disposal ofinvestments in corporations (in particular AG or GmbH) arealso subject to half of the average tax rate (as from 1 April2012 they are subject to a 25 per cent tax rate) if the sellerowned, prior to disposal, at least one per cent of the com-pany’s registered or authorised capital within the previous fiveyears. The gains are taxed with one half of the individual’saverage tax rate. The usage of tax losses resulting from suchtransactions is limited.From 1 April 2012 onwards, ordinary earnings and gains fromthe sale, redemption or termination of capital held by a privateinvestor (shares in AGs or GmbHs, securities, fund units, de-rivatives) – so called realised capital gains – will be subject to atax deduction of 25 per cent.For the calculation of taxable capital gains, the acquisition costsof those securities with the same ISIN or WKN have to becalculated according to the weighted average price procedure.If the investment is held by a private investor, income-relatedexpenses in connection with income subject to 25 per cent taxare generally not deductable. If investments are held as the indi-vidual’s business assets, only incidental acquisition expenses canbe considered. The Austrian depository bank or paying agent isobliged to withhold the 25 per cent tax on realised capital gainsand capital gains derived from derivatives. With regard to lossesderived from sales of securities and derivatives, the following isapplicable:• Losses can only be deducted in the course of an assessment.• Losses can only be offset against capital income of the samecalendar year, except with interest income from bank depositsand other receivables from financial institutions, contribu-tions from private foundations and interest income from debtsecurities acquired before 1 April 2012.• If investments are held as business assets, capital losses fromsales and derivatives shall primarily be offset against real-ised capital gains from sales and derivatives. If capital lossesexceed capital income, one half of the excess amount can beoffset against other operative income.• For private investors, a loss carry forward is not possible. Ifinvestments are held as business assets, one half of the excessamount can be carried forward.Generally, the new regime on the taxation of capital gains isapplicable to investments held by individuals as private assetsand as business assets. Therefore, also for investments held asbusiness assets, realised capital gains shall be taxed with the flattax rate of 25 per cent instead of the individual’s average tax ratepreviously applicable.The new capital gains taxation regime is not applicable to allcapital gains realised from the future sale of capital assets. Thetaxation of the capital gain with 25 per cent (either withheld bythe Austrian depository bank in case of a domestic deposit or byway of assessment in case of a foreign deposit) applies to• equity and shares in investment funds or real estate invest-ment funds bought after 31 December 2010 and sold after 31March 2012 and• debt securities and derivatives bought and sold after 31 March2012.
  • 26. 27www.investinaustria.atOriginally Austrian depository banks were obliged to deduct 25per cent on realised capital gains from 1 October 2011. How-ever, due to a legal action filed with the Constitutional Courtby 14 Austrian banks, the obligation to deduct the withholdingtax was postponed to 1 April 2012. Due to this postponement aprolongation of the speculative period was imposed:• Capital gains from equity and shares in investment funds orreal estate investment funds bought and sold between 1 Janu-ary 2011 and 31 March 2012 are subject to the average taxrate, even though the one-year speculative period is exceeded.• If debt securities and derivatives are bought between 1 Octo-ber 2011 and 31 March 2012, the following applies: In caseof a sale before 31 March 2012, the average tax rate applies.In case of a sale after 31 March 2012, the capital gains haveto be included into the investor’s income tax return and aresubject to a 25 per cent special tax rate.The deduction of the 25 per cent tax on capital gains leads tofinal taxation for private investors. Due to this final taxation ex-penses in connection with these investments such as safe-custo-dy fees, transaction costs, etc. are not tax deductable. Incidentalacquisition expenses can still be considered if investments areheld as business assets.If the individual’s average tax rate is less than 25 per cent, thena reduction to the lower average tax rate is still possible uponassessment application. In this case, the total capital incomesubject to 25 per cent tax must be included and taxed with theindividual’s average tax rate.5.3.4 Income from investment fundsThe amendments to the taxation of capital gains have a signifi-cant impact on the taxation of investment funds. Both the cur-rent and the prospective tax status in Austria are summarizedbelow.Tax regime before BBG 2011Taxable incomeDistributions and accumulated income (“deemed distributedincome” (DDI); taxed once a year) are taxable. Private investorsare taxed at a 25 per cent flat rate on net investment income(interest, dividends and other income less expenses) as well ason 20 per cent of the realised capital gains resulting from thedisposal of equities and derivatives linked to equities derivedfrom investment funds. Alternatively, the investor may choosetaxation at progressive tax rate (generally recommendable ifthe personal average income tax rate is lower than 25 per cent).Capital gains realised from the disposal of bonds and derivativesdirectly linked to bonds are tax-free.Fiscal categories of investment fundsInvestment funds are divided into:• Austrian investment funds and foreign reporting funds(“brighter than white” funds)• Foreign white (non-reporting) funds• Foreign black fundsAustrian investment funds and foreign reporting fundsPrivate investors investing in Austrian investment funds andforeign brighter than white funds have the benefit to be subjectto complete and immediate final taxation if the fund follows acertain reporting procedure to Oesterreichische Kontrollbank(OeKB) and the fund certificates are held on an Austrian de-posit. For such reporting funds, 25 per cent Austrian withhold-ing tax on distributions and also on deemed distributed income(“DDI”) is levied on the reported taxable portions. If the certifi-cates are not held on an Austrian deposit (i.e. no withholdingtax is deducted), the investor has to include the reported incomein his tax return.White (non-reporting) fundsGenerally, foreign funds are classified as white funds if theyhave a tax representative in Austria, who calculates the DDIand files an electronic tax return with the Austrian Ministry ofFinance on an annual basis. DDI from white funds is coveredby a special 25 per cent tax rate and must be included in theinvestor’s annual income tax return, regardless of whether thecertificates are held on an Austrian or foreign deposit.Black fundsIf the fund has no local tax representative, who files a tax returnfor the foreign investment fund within four months after thefund’s year-end, the income is subject to very unfavourablelump-sum taxation. The lump-sum taxation is based on thehigher of the following two amounts: 90 per cent of the dif-ference between the first and the last redemption price of thecalendar year or 10 per cent of the last redemption price of thecalendar year. Such lump-sum taxation can be avoided if thetaxpayer provides evidence on the amounts and composition ofactual income of the black fund (self-calculation according tothe method issued by the Austrian Ministry of Finance).Taxation in case of purchase or sale of fund certificatesIf fund certificates of Austrian investment funds and foreignbrighter than white funds are purchased or sold, the investorwill receive a 25% withholding tax credit/deduction on netinterest income. The withholding tax on net interest income isreported to OeKB on a daily basis.
  • 27. www.investinaustria.at28As no withholding tax on net interest income is reported toOeKB on a daily basis for white and black funds, white andblack funds are subject to the lump-sum taxation in the year ofthe purchase or sale. Alternatively, the DDI figures for the totalfinancial year of the fund can be chosen as tax basis or the exactDDI for the period between the beginning of the fiscal year ofthe fund and the date of sale might be calculated.Safeguard taxFor private investors, safeguard tax (which is only applicableto non-reporting and black funds) in the amount of 1.5 percent p.a. of the net asset value at year-end (0.125 per cent permonth of the net asset value as at the date of disposal in casethe fund certificates are sold or transferred to a foreign deposit)must be levied by the Austrian bank if the fund certificates arenot disclosed to the tax office. The safeguard tax is treated as aprepayment of income tax.Capital gains at investor level caused by the sale of fundcertificates within one yearIf fund certificates are sold within one year since acquisitionby a private investor, in addition to the current taxation, thedifference between the acquisition price and the redemptionprice (reduced by any taxed portions, i.e. non-distributed butalready taxed DDI) is subject to the progressive income tax rate(maximum 50 per cent) as speculative income.Tax regime according to BBG 2011Taxable IncomeTaxation of income generated within the fundFrom an Austrian tax point of view, investment funds are stillconsidered transparent, which implies a direct allocation ofthe income of the fund to its investors. Therefore, income fromfund certificates will from now on be taxed in accordance withthe transparency principle at investor level. With regard to thetaxation of income generated within investment funds, theBBG 2011 stipulates the following:As before, not only the fund’s distributed income is taxable,but the investor also has to tax accumulated income generatedwithin an investment fund as deemed distributed income once ayear. For private investors, the taxable DDI is subject to a 25 percent withholding tax deducted by the Austrian depository bankor has to be included within the individual’s personal incometax return and is subject to a special 25 per cent tax rate. Thetaxable DDI consists of• the ordinary income (interest income, dividend income andother ordinary income) minus the fund’s expenses and• 60 per cent of the accumulated realised capital gains and100 per cent of the distributed capital gains from the saleof securities and of the income from derivative instruments(regarding the increase of the tax base to 60 per cent and 100per cent, respectively, see the table below).Beginning of thefund’s financial yearRealised capital gains and derivativeslinked to equity andfrom equity from debtsecuritiesbefore 01.07.2011 20% tax-freeas from 01.07.2011 30% tax-freeas from 01.01.2012 40% tax-freeas from 01.01.201350% if accumulated100% if distributedas from 01.01.201460% if accumulated100% if distributedIf fund certificates are held as business asset, 100 per cent of re-alised capital gains from the sale of securities and of the incomefrom derivative instruments are taxable.Sale of fund certificatesIn case individuals sell their fund certificates, the differencebetween the sales price and the purchase price less alreadytaxed DDI is subject to 25 per cent tax irrespective of theholding period. If the fund certificates are held on Austriandeposits, the 25 per cent tax shall be withheld by the Austriandepository bank. In order to avoid a double taxation of realisedcapital gains, the fund certificate’s acquisition costs have to beincreased by the annually taxed DDI. If the fund certificates areheld on a foreign deposit, the capital gain on disposal has to beincluded within the individual’s personal income tax return andis subject to a special 25 per cent tax rate.Abolition of daily withholding tax reporting for Austrianfunds and brighter than white fundsAs from 1 April 2012, the difference between the sales price andthe purchase price less already taxed DDI shall be taxable. Thedaily reporting of the withholding tax on net interest incometo OeKB was abolished on 1 April 2012. Therefore, as from1 April 2012, there are only two fiscal categories of investmentfunds:• investment funds which have a tax representative, whocalculates the 25 per cent withholding tax on distributionsand DDI and reports the tax figures to the OeKB (reportingfunds) and• investment funds, which do not have a tax representative andwhich are therefore subject to the lump-sum taxation (blackfunds).
  • 28. 29www.investinaustria.atProof of taxable incomeThe tax on distributions and on the DDI has to be calculatedand reported to the OeKB by an Austrian tax representative.The filing of electronic tax returns for foreign investment fundswith the Austrian Ministry of Finance on an annual basis is nolonger applicable. Investment funds, for which the annual DDIis not reported to the OeKB on an annual basis by an Austriantax representative, are subject to lump-sum taxation as in thepast (calculation formula see above).The BBG 2011 sets out that the Austrian depository bank isobliged to withhold the Austrian 25 per cent tax on the DDIcalculated according to the lump-sum method. If fund unitsare held on a foreign deposit, the DDI calculated according tothe lump-sum method must still be included in the income taxreturn and is taxed at a 25 per cent special tax rate.Investors still have the possibility to avoid the lump-sum taxa-tion by calculating the taxable income themselves. In case theAustrian depository bank has already withheld Austrian 25 percent withholding tax on the DDI calculated according to thelump-sum method, the Austrian depository bank is generallyobliged to correct the withholding tax deduction based on thecalculated figures provided by the investor.Safeguard taxAs – according to the new investment fund taxation regime –the income from fund certificates is always subject to a with-holding tax deducted by the depository bank (as far as the fundcertificates are held on Austrian deposits), the safeguard tax willbe abolished.OverviewProducts Tax regime before BBG 2011 Tax regime according to BBG 2011EquityCapital gains Sale within one year (speculative taxation):average tax rate up to 50 per centSale after one year:Holding 1 % tax-freeHolding = 1 % half the average tax rateWithholding tax deduction by the Austriandepository bank (except for shares in Gm-bHs), irrespective of holding period andcapital ownershipHolding: 25 %Debt securitiesCapital gains Sale within one year (speculative taxation):average tax rate up to 50 %Sale after one year: tax-freeWithholding tax deduction by the Austriandepository bank, irrespective of holdingperiodInvestment fund certificatesRealised capital gains resultingfrom the disposal of equi-ties and derivatives linked toequities20% of capital gains are taxed at a 25% flatrate60% of capital gains are taxed at a 25% flatrate (step-by-step increase till 2014)100% of distributed capital gains are taxed ata 25% tax rateRealised capital gains resultingfrom the disposal of bonds andderivatives linked to bondsTax-freeTaxation in case of purchaseof Austrian or foreign brighterthan white fund certificates25% withholding tax credit on net interestincomeNo withholding tax credit on net interestincome; the total DDI of the fund’s financialyear is taxableTaxation in case of purchaseof foreign white or black fundcertificatesNo withholding tax credit; DDI has to becalculated according to the lump-sum methodfor the period from the date of purchase to thefund’s financial year end
  • 29. www.investinaustria.at30Products Tax regime before BBG 2011 Tax regime according to BBG 2011Taxation in case of sale of Aus-trian or foreign brighter thanwhite fund certificates25% withholding tax deduction on net inter-est incomeIf fund certificates are sold within one year,up to 50% income tax on capital gains minusalready taxed DDI falls due additionally25% withholding tax on capital gains minusalready taxed DDI (irrespective of holdingperiod)Capital losses can only be deducted in thecourse of an assessmentTaxation in case of sale offoreign white or black fundcertificatesNo withholding tax deduction; DDI has to becalculated according to the lump-sum methodfor the period from the fund’s financial yearend to the date of saleIf fund certificates are sold within one year,up to 50% income tax on capital gains minusalready taxed DDI falls due additionallyTaxation of black funds DDI has to be calculated according to thelump-sum method and must be included inthe income tax returnAustrian depository bank is obliged to with-hold Austrian 25% tax on the DDI calculatedaccording to the lump-sum methodSafeguard tax for white andblack fundsIn order to guarantee that the investorincludes the DDI in the income tax return,safeguard tax must be levied by the AustrianbankNo safeguard tax, as the income from fundcertificates is always subject to a withholdingtax deducted by the Austrian depository bank5.4 Real estate taxationDue to the tax reform in 2012, the sale of real estate has beensubject to taxation since 1 April 2012.Old tax regimeTaxable incomeReal estate held as private property is only subject to income taxif the period between acquisition and sale does not exceed tenyears (15 years in exceptional cases). The profit is taxed with thestandard progressive income tax rate (up to 50%).Exceptions to tax liabilityBoth homes and owned flats including the property are notsubject to taxation as long as they have been used as the mainresidence since the acquisition and throughout at least twoyears. This also applies to self-built buildings.New tax regimeTaxable incomeThe sale of real estate is always subject to taxation in the newregime. The standard tax rate is basically 25% and the taxablebase is the capital gain.Exceptions to tax liabilityBoth homes and owned flats including the property as well asself-built buildings are not subject to taxation as long as theyhave been used as the main residence since the acquisition andthroughout at least two years or throughout at least five withinthe past ten years and as long as they did not serve for gainingincome. In addition, the sale of real estate due to an imminentofficial expropriation is tax exempt.With respect to taxation, a differentiation is made between1. “Old property” without rededicationThese assets comprise real estate acquired before 1 April 2002that has not been rededicated into land for building after 31December 1987. The sales revenue of these assets is deductedby fictional acquisition costs in the amount of 86%. Theremaining 14% are taxed with the standard tax rate of 25%,resulting in an effective tax rate of 3.5% of the sales revenue.Example:Land was acquired in 1970 for 100 and rededicated into landfor building in 1985. In June 2012, the land is sold for 1,500.14% of the sales revenue is taxed with 25%: 1,500 x 14% = 210 210 x 25% = 52.5 or: 1,500 x 3.5% = 52.5
  • 30. 31www.investinaustria.at2. “Old property” with rededicationThese assets comprise real estate acquired before 1 April 2002that has been rededicated into land for building after 31December 1987. The sales revenue of these assets is deductedby fictional acquisition costs in the amount of 40%. Theremaining 60% are taxed with the standard tax rate of 25%,resulting in an effective tax rate of 15% of the sales revenue.Example:Land was acquired in 1986 for 100 and rededicated into landfor building in 1990. In 2024, the land is sold for 1,500.60% of the sales revenue is taxed with 25%: 1,500 x 60% = 900 900 x 25% = 225 or: 1,500 x 15% = 2253. “New property”These assets comprise real estate acquired on 1 April 2002 orlater. The taxable base is the capital gain, i.e. the sales revenueless acquisition costs, maintenance and construction expensesand certain costs for sale.In case of “old property”, if the capital gain is actually lowerthan the taxable base calculated as illustrated above, this willbe deemed the taxable base upon request. The capital gain iscalculated as for “new property”.Inflation allowanceFor “new property” (and in case of the above mentioned requestbeing made, also for “old property”), the following rule applies:The taxable income is decreased by 2% per year calculated fromthe eleventh year after the acquisition. However, the maximuminflation allowance amounts to 50% of the taxable income.Example:Land was acquired in 2004 for 100 (“new property”) and soldin 2024 for 1,500.The capital gain will be reduced by 2% per year, starting in2015:1,500 - 100 = 1,400 1,400 - 280 (280 = 1,400 x 10 x 2%) = 1,120 1,120 x 25% = 2805.5 DeductionsIncome-related business expensesExpenditures for the “acquisition, securing or maintenance” ofincome are deductible from the taxable income from the rele­vant source of income. All employees are, however, entitled to alump-sum tax allowance in the amount of €132. Expendituresexceeding this amount may be claimed if they can be provenwith written documents (e.g. office space, ongoing training;for those temporarily resident, see the Expatriate Ordinance asexplained in Section 5.2 under “Income from salaried employ-ment”).The employee portion of obligatory contributions to Austrianand/or foreign social security is tax deductible.Special (non business) expensesCertain special expenses are deductible from income, butonly if the annual income does not exceed € 60,000. Thesespecial expenses comprise contributions to voluntary healthinsurance, accident insurance and retirement pensions, vol-untary contributions to pension funds set up by the employerand/or government social security, expenses for obtainingand renovating a residence in Austria. For such expenses ageneral allowance of € 60 per year is granted unless higherpayments can be proven. In the latter case the deductibleamount is limited to 25 per cent of the expenses up to amaximum amount of € 2,920 per year for the individualtaxpayer and € 5,840 per year for sole salary earners who aremarried/single parents with at least one child. For taxpay-ers with at least three children the amount is increased to €4,380 or to € 7,300 for sole earners/single parents. Taxpayersearning between € 36,400 and €60,000 per year may onlyclaim a portion of these special expenses.Church contributions up to an amount of € 400 and dona-tions to certain institutions up to 10 per cent of taxableincome from the previous year are deductible. Tax consultantcosts as well as pensions and permanent charges are deduct-ible up to the full amount.Exceptional heavy financial burdensIf taxpayers are involuntarily affected by heavy financial bur-dens then these may be deducted from taxable income. Regard-less of the actual kind of financial burden, they are deductibleeither in the amount of de facto expenses (e.g. natural disasterdamages) or to the extent to which such expenses exceed an ownrisk amount, i.e. a certain percentage of income up to which adeduction is not allowed (e.g. medical costs, funeral expenses).The percentage of the own risk amount is a function of thetaxpayer’s income and financial situation.
  • 31. www.investinaustria.at323)In case alimony is paid for children not living in the same home, entitle-ments are € 29,20 per month for one child, € 43,80 for the second childand € 58,40 for each additional child.4) In case allowance is claimed by two taxpayers € 132 p.a. per child can beclaimed by each taxpayer5) The pensioner deduction is continuously reduced to zero between pensionamounts of € 17,000 and € 25,000.In case the following conditions are fulfilled the pensioner deductionamounts to € 764 per year:• The taxpayer has been married or in a civil union for more than 6 monthsand does not live separately from the spouse or partner.• The pension income must not exceed € 13,100 in the calendar year.• The spouse or partner has income of maximum € 2,200 per year.• The tax payer is not entitled to the sole earner deduction. The allowances are granted in the form of a tax credit, i.e. in the form ofdeductions from the tax burden. By contrast, the child allowance reducesthe tax basis.Tax creditAustria has double taxation conventions with all of its majortrading partners. Some of these conventions provide for com-plete or partial avoidance of double taxation by crediting foreigntaxes paid (e.g. Canada, Japan, Italy, Great Britain and theUSA). Under most of these conventions, however, complete orpartial double taxation is governed by tax exemption with reser-vations being made for progressive tax rates. As an exception tothis rule, dividends and interests are in general fully taxed andthe tax paid abroad is credited.5.6 Social security contributionsThe monthly instalments of mandatory contributions (beforetaxes) as applicable from 1 January 2012 onwards are as follows:1. Retirement, health, unemployment, accident insurance andcertain minor amountsTypes of socialsecuritycontributionsEmployer’sportionin %Employee’sportionin %Total in %Health 3.83 3.82 7.65Unemployment 3.00 3.00 6.00Retirement 12.55 10.25 22.80Accident 1.40 – 1.40Miscellaneous 1.05 1.00 2.05Social securitycontributions(total)21.83* 18.07* 39.90* Social security contributions will be calculated from the gross salary. Themonthly maximum calculation base is € 4,230.Annual income in € Retention in %0 to 7,300 67,300 to 14,600 814,600 to 36,400 10over 36,400 12This percentage is reduced by one per cent for sole earners/singleparents with at least one child and for every minor child.Irrespective of the retention, expenses for child care in theamount of € 2,300 per child per year are tax deductible asexceptional heavy financial burden under the following condi-tions:• A child is entitled to child allowance or alimony tax credit anddoes not live abroad permanently.• At the beginning of the calendar year, the child has not com-pleted the age of 10 (with increased family allowance, the ageof 16).• Child care will be carried out by a public or private child carefacility or a pedagogically qualified person.Direct expenses for child care are deductible; expenses for mealsor school fees for private schools are not deductible.In case the taxpayer receives a subsidy, e.g. from the employer,only the amounts borne by the taxpayer which exceed the sub-sidy are deductible.Personal allowancesAllowances are available as follows € Employee deduction amount 54.00Deduction for travel expenses 291.00Sole earner deduction: for married couples orfor single earners in a permanent relationshipeach with at least one dependent child 1) 2)494.00Alimony tax credit per child3)350.40Children allowance per child4)220.00Pensioners5)400.001) The sole earner deduction can only be asserted if the spouse’s or co-habit-ant’s income is not higher than € 6,000 per calendar year.2) The sole earner deduction will be granted as follows:• with one child, total deductible amount of € 494;• two children, total deductible amount of € 669;• For each further child the amount rises by € 220.
  • 32. 33www.investinaustria.at2. In addition, the employer must contribute an amount of 4.5per cent (no limit) from the gross salary to the Family BurdenEqualisation Fund, a local community tax in the amountof 3 per cent (no limit) of the gross salary and in the city ofVienna a public transport levy in the amount of € 0.72 perweek per employee. In addition, the Chamber of Commerceassessment is levied at a rate of about 0.40 per cent (no limit)of gross salaries.For employment entered into after 31 December 2002 theemployer is obliged to pay in a compensation of 1.53 per cent(no limit) to an employee pension fund.3. Social security contributions are charged on bonus payments(e.g. 13th/14thmonthly salary) in an amount up to € 8,460 peryear (maximum calculation base) at a total rate of 38.4 percent (employer 21.33 per cent, employee 17.07 per cent).For family members covered by the same insurance an addi-tional contribution of 3.4 per cent of the insured person’s basecontribution amount must be paid. There are exceptions mainlyfor children and spouses raising children.Austria has concluded agreements on social security with itsmost significant partner countries. Nonetheless, in most cases,exemption from Austrian social security contributions can beobtained for a certain amount of time for expatriates from non-EU countries. It is a prerequisite for tax exemption that socialsecurity in the home country continues to apply and that thisis certified to Austrian social security authorities. With respectto EU citizens, other regulations are applicable (Form A1). Sub-mission of a valid Form A1 also exempts from payment of theemployer contribution at the rate of 4.5 per cent as well as theChamber of Commerce assessment at the rate of 0.40 per cent.5.7 EU withholding taxOn 1 July 2005, the EU Savings Directive (Council Directive2003/48/EC) became effective. The aim of the Directive is asfollows: If savings income in the form of interest paymentsis made in one EU Member State (including associated andrelated territories and certain non-EU Member States) to ben-eficial owners who are individual residents for tax purposes inanother EU Member State, this savings income is to be madesubject to effective taxation in accordance with the law of thelatter EU Member State.The effective taxation in the country of the individual residentshall be ensured by an automatic exchange of informationconcerning interest payments between the EU Member States.Austria, Belgium and Luxembourg (as well as the non-EUMember States and certain territories) will not apply theautomatic exchange of information for bank secrecy reasons.In order to guarantee effective taxation, Austria withholds theso-called EU withholding tax for interest payments from anAustrian paying agent to an individual who is a resident ofanother EU Member State. The rate of this tax has increasedprogressively from 15 per cent (2005-2007) and 20 per cent(2008-2010) to 35 per cent (since 2011). No withholding taxwill be deducted if the beneficial owner provides a certificatedrawn up in his name by the competent authority in his Mem-ber State to the Austrian tax authorities.5.8 Tax proceduresTax returnsSubmission of a joint tax return for several persons is notallowed. The tax year for individuals is always the same as thecalendar year.Payment of taxIncome tax on salaries and wages, interests and dividends (seeSection 5.3 “Dividend earnings”) will generally be withheld atsource. For other types of income, advance payments for incometax have to be made every quarter and by June of the followingyear an electronic tax return has to be filed.Appeal against a tax-office decisionIt is possible to appeal against a tax office decision within onemonth after delivery. The appeal has to be filed in writing withthe tax office that issued the decision in question. There are nocharges on filing an appeal. An appeal does not suspend theprescribed additional payment; it remains due on the indicateddate. If the required additional payment is not intended tobe made for the time being, an application for suspension ofthe collection has to be filed. The tax office will issue a formaldecision on this application. As a rule, the tax office will issue apreliminary ruling on the appeal. Against this decision, a sub-mission of the appeal has to be filed to the Independent FinanceSenate (UFS).
  • 33. www.investinaustria.at34Tax ratesIncome tax 2011Annual taxableincome in €Income tax 1)2)Nominal tax ratein %Effective tax ratein %Up to 11,000 0 0 0Over 11,000to 25,000(Income - 11,000) x 5,11014,0000 - 20.44 36.50Oover 25,000to 60,000(Income - 25,000) x 15,12535,000+ 5,110 20.44 - 33.73 43.21Over 60,000 (Income - 60,000) x 50% + 20,235 33.73 501) From the resulting tax amount the tax deductions such as the sole earnerdeduction are made.2) The 13thand 14thmonthly salary or other special payments are subject todeductions for social security as explained in Section 5.6 under “Social se-curity contributions.” The first € 620 are tax-free (see Section 5.2 “Incomefrom salaried employment”). Tax is withheld (within a given limit of 1/6 ofcurrent payments) in the amount of a standard rate of 6 % (or of 27 % to50 % for gross salaries over 25,000) from the remaining income. Amountsexceeding the given limit are taxable at the progressive tax rate.Payroll withholding taxAustrian employers and foreign employers with permanentestablishments for taxes on salaries in Austria must withholdincome tax from salaries on a monthly basis and remit it bythe 15thday of the following month to the relevant authorities.Employer costs must be paid on the same day to the relevantauthorities.Persons deriving their income exclusively from salaried employ-ment are not obliged to file income tax returns. However, ifsuch persons claim income-related expenses or special expensesthen partial reimbursement of taxes can be obtained by filing atax return.Deductible amounts for low income (negative tax)If you have no or only a low taxable income, you may receive atax credit (negative tax) in the following cases: If you are enti-tled to claim employee deduction, ten per cent of the employeecontributions made to statutory social security (however, onlya maximum of € 110) will be credited. This also applies tocross-border workers. The sole-earner or single-parent deductionwill be paid out by the tax office if it did not produce its fulltax-reducing effect on account of the low income. For one childthis may, for example, amount to as much as € 494 (negativetax). Negative tax is determined in the course of the employeetax assessment. Non-taxable earnings, based on bilateral (doubletaxation agreements) or international law (e.g. UNIDO, IAEA)agreements are considered to be taxable earnings for the pur-pose of computing negative tax.Employee tax assessmentAn application for an employee tax assessment can be filedwithin a period of five years (e.g. an application for 2011 may befiled until the end of December 2016). The application has tobe filed either electronically via FinanzOnline, by mailing formL1 or by submitting this form at your tax office. The tax officeprocesses the applications in the order in which they arrive andestablishes the tax payment upon application. The tax office canonly complete an employee tax assessment if all pay slips for theyear and other disclosures (e.g. from the Labour Market Service)have been received.Family subsidiesA tax-free monthly family subsidy for children is paid in Austriaas set out below:For children aged 0-3:€ 105.40 per month for the first child€ 118.20 per month for the second child€ 140.40 per month for the third child€ 155.40 per month for the fourth and each additional childFor children aged 3-10:€ 112.70 per month for the first child€ 125.50 per month for the second child€ 147.70 per month for the third child€ 162.70 per month for the fourth and each additional childFor children aged 10-19:€ 130.90 per month for the first child€ 143.70 per month for the second child
  • 34.€ 165.90 per month for the third child€ 180.90 per month for the fourth and each additional childFor children aged over 19:€ 152.70 per month for the first child€ 165.50 per month for the second child€ 187.70 per month for the third child€ 202.70 per month for the fourth and each additional childIn addition, an amount of € 700.80 per year (€ 58,40 permonth) is granted for every child in the form of a child allow-ance deduction.The family allowance is paid 12 times per year. For every childbetween the ages of 6 and 15 the child allowance for Septemberis increased by € 100.Family subsidies are also granted in cases in which no incometax is payable. Family subsidy is paid out by the relevant author-ity together with the child allowance deduction.For persons with three or more children and a low (family)income of a maximum of € 55,000 per year, an additional sub-sidy of € 20 is granted per month for the third child and eachadditional child (large family supplement). The large family sup-plement will only be paid upon application during the annualtax assessment.Child care benefit is granted in the amount between € 14.53 perday and € 33 per day (depending on what model is chosen) andchildren are eligible if a mother-child examination certificatecan be produced (always only for the youngest child). The an-nual income limit amounts to € 16,200. The child care benefitgranted will be reduced on a pro rata basis in relation to incomeexceeding the income limit.Sample income tax computationThe following sample computation is given on the basis ofthe legislative regulations and tax rates in force under currentlegislation.AssumptionsHusband and wife both resident within the national jurisdic-tion, two dependent children; one spouse earns the entire familyincome; employment in Austria; social security in Austriamandatory; salary paid out in 14 instalments; interest incomein Austria amounting to € 11,250; foreign non-tax privilegeddividends of € 7,030 which are taxed abroad comparable to Aus-trian corporate tax (a double taxation convention is applicable);creditable foreign tax is ten per cent; tax privileged life insur-ance premiums in Austria of € 7,300 per year.
  • 35. www.investinaustria.at36Tax computation € €Salary 65,400.00minus:Tax-privileged portion (13thand 14thmonthly salaries) (€ 65,400 / 14 x 2) -9,342.86Social security contributions (12 x € 764.36 for current salary) -9,172.33Standard allowance – income-related expenses -132.00Special expenses: life insurance premiums (maximum amount) 1)-815.511. Interest income from deposits with an Austrian bank as well as bonds (gross):€ 11,250 of which 25% final tax was paid (see below) 2. Dividends under the Double Taxation ConventionGross dividend amount € 7,030 – special 25% tax rate (see below)Taxable income 45,937.30Income tax 14,157.90minusSole earner deduction -669.00Employee deduction -54.00Carfare deduction -291.0013,143.90plus income tax on 13thand 14thmonthly salaries (€ 65,400 / 14 x 2) 9,342.86minus social security contributions on 13thand 14thmonthly salaries -1,528.72minus allowance -620.007,194.14of which 6% fixed tax rate 437.3413,581.24plus withholding tax on interest (25%) and special tax rate on foreign dividends (25%) 4,570.00minus tax credits under a DTC for withholding taken outabroad on dividends (assumption: 10% of € 7,030) -703.00Total tax burden 17,448.241)(€ 60,000 - € 46,817.86) x 1,460 / 23,600 = € 815.51
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  • 37. PwC PricewaterhouseCoopers GmbHA-1030 Vienna, Erdbergstraße 200Tel: +43 (0)1 501 88-0Fax +43 (0)1 501 88-601E-Mail: BUSINESS AGENCYA-1010 Vienna, Opernring 3Tel: +43 (0)1 588 58-0Fax: +43 (0)1 586 86 59E-Mail: office@aba.gv.atwww.investinaustria.atInvest in Austria