Tax & Legal News in English | September 2024

The EU Pay Transparency Directive

The new EU Pay Transparency Directive aims to strengthen the right to equal pay for men and women for equal work and work ofequal value. This is to be guaranteed by means of a series of binding measures.

In general, there are three main objectives that characterize the Directive. The first is to enable employees to enforce their right to equal pay – before, during and after employment. In addition, there will be a general increase in the transparency of pay systems, and the enforcement of rights and obligations regarding equal pay for men and women is to be improved.

The Directive came into force in June 2023 and obliges member states to implement the regulations into national law by 7 June 2026.

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New ECJ judgment regarding fixed establishments

In general, the place of supply for VAT purposes that are subject to the B2B general rule for services is the place where the taxable person is established. By contrast, the connection to the taxable person’s fixed establishment is a secondary point of reference. In the present case, it was questionable in particular whether the recipient of the service has a fixed establishment at the supplier’s premises if they are part of the same company group and have concluded a service contract.

The ECJ confirms that it must be examined on a case-by-case basis whether the conditions for the existence of a fixed establishment are met. The service recipient must have personnel and technical equipment that has a certain degree of permanence and that enables the receipt of services that are provided for the fixed establishment's own needs. In addition, the ECJ clarifies that it does not automatically lead to the existence of a fixed establishment if the supplier and the recipient are part of the same company group and have concluded a service contract. 

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Official secrecy vs freedom of information?

On January 31, 2024, the National Council passed the new Freedom of Information Act (“IFG”) and thus the end of official secrecy under federal constitutional law. The new IFG is due to come into force in stages in just about a year. It is to be expected that not only the number of requests for information will increase in the future, but that these will also increasingly affect every day administrative work due to their growing complexity and increasing requirements for justification. Smaller administrative units, such as municipalities, will notice this increase in administrative activities in their daily business.

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Relief measures in case of economic and juridical double taxation according to sec 4 para 5 Federal Fiscal Code

In its decision of 13 March 2024, RV/7100082/2022, the Austrian Administrative Court rejected the elimination of double taxation within the meaning of Sec 48 para 5 of the Federal Fiscal Code. The cause of the double taxation was, on the one hand, a conflict of allocation of income and, on the other hand, a conflict of residence. A ‘Anstalt’ (a legal form under Liechtenstein law) was treated as non-transparent and a Trust (Trust under Liechtenstein law) as transparent under Austrian tax law. Thus, the Trust's income was attributed directly to the appellant, while the ‘Anstalt's’ income was attributed to the corporation itself. The Liechtenstein tax administration assessed the allocation of income in the opposite way. The ‘Anstalt’ was treated as fiscally transparent and the Trust as non-transparent (‘allocation conflict’). Furthermore, both Contracting States have attributed the residence of the appellant to their own State under the applicable Double Tax Treaty (‘conflict of residence’). Since the Administrative Court (‘Bundesfinanzgericht’) is of the opinion that measures under Sec 48 para 5 Federal Fiscal Code can only be granted in the case of juridical double taxation (‘juristische Doppelbesteuerung’) and not in the case of economic double taxation (‘wirtschaftliche Doppelbesteuerung’), the appeal was dismissed. The Administrative Court (‘Bundesfinanzgericht’) ruled that the appeal to the Supreme Administrative Court was admissible because there is no explicit supreme court ruling on the legal question of whether mere economic double taxation fulfils the application criteria of a unilateral measure within the meaning of Sec 48 para 5 Federal Fiscal Code. Apparently, no appeal was filed with the Supreme Administrative Court against the decision. 

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Red-White-Red-Card Plus for displaced persons from Ukraine

The latest amendment to the Austrian immigration law provides for some simplifications for displaced persons from Ukraine in connection with Austrian immigration law. Displaced persons from Ukraine should now receive the “Red-White-Red-Card Plus” if they have been employed above the limit of employment on a minor basis for at least 12 months in the last 24 months and are able to support themselves. This regulation also covers self-employed persons.

There are also new regulations for displaced minors from Ukraine under 18 years of age. These regulations are intended to enable them to receive continuous training as a prerequisite for successful integration into the Austrian labor market.

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Declaratory Action on the Validity of Arbitration Clauses Ruled Inadmissible: Key Decision by the Austrian Supreme Court

On June 25, 2024, the Austrian Supreme Court (OGH) issued a landmark ruling (4 Ob 46/24d) clarifying that state courts are not authorized to rule on the validity of arbitration clauses through declaratory actions. This ruling significantly impacts how arbitration clauses are handled in disputes, reaffirming that the assessment of such clauses falls within the scope of arbitration proceedings rather than state court jurisdiction.

The decision distinguishes between two legal approaches: (i) an objection to jurisdiction (Schiedseinrede), which allows state courts to review an arbitration clause within the context of an ongoing legal case, and (ii) a declaratory action, which seeks a court ruling on the clause’s validity before a specific dispute arises. The court ruled that the latter is inadmissible under Austrian procedural law.

This decision underscores the importance of drafting precise arbitration clauses and limits judicial intervention in alternative dispute resolution, enhancing Austria’s position as a preferred arbitration hub.

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Tax measures in connection with the current flood disaster damage

The Federal Ministry of Finance (BMF) has published information on tax measures in response to the catastrophic damage caused by the recent floods and landslides. This information is updated on an ongoing basis. It includes, among others: Extension of deadlines, payment relief, extension of the deadline for the reduction of advance payments for income tax and corporation tax, information regarding instant deduction of expenses in connection with disaster damage etc.

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Inflation Adjustment Law 2025

The automatic inflation adjustment already compensates for two-thirds of the inflation rate. On 18 September 2024, the Austrian National Council passed the Inflation Adjustment Law 2025 (“Progressionsabgeltungsgesetz 2025”) to compensate for the remaining third. In particular, this law contains relief measures in the area of income tax.

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Statistics on fiscal penal offenses

The Anti-Fraud Office (ABB) recently presented the facts and figures regarding the audit and control measures as well as the administrative and judicial fiscal penal law proceedings carried out for the past calendar year 2023. Around 23,300 external audits were carried out. In addition, one can observe an increase in fiscal penal law proceedings. In summary, it should be noted that findings of an external audit can often directly lead to fiscal penal investigations. Based on the data available, there is a clear trend towards an increase of fiscal penal law proceeding. The threat of penalties is often considerable. Tax audits, appeal proceedings and financial criminal proceedings also represent a highly unpleasant burden for those affected. Therefore, the right support in those situations is quintessential.
 

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Grace-Period Act: Austria introduces new procedural provisions in relation to business transfers

Austria has enacted new legislation (“Grace-Period Act”) which aims to ensure greater legal certainty in relation to potential tax risks for business transfers (especially in the form of asset deals) within the family by introducing mutual cooperation obligations between the relevant taxpayers and the competent tax office. 

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Austrian Ministry of Finance: Reduction of interest rates by 0.85%
Applicable interest rates as of 18 September 2024

• Deferral interest rate pursuant to Sec 212 para 2 Austrian Federal Fiscal Code: 7.53% 
• Interest on arrears (“Anspruchszinsen”) according to Sec 205 para 2 Austrian Federal Fiscal Code: 5.03%. 
• Interest for suspension (“Aussetzungszinsen”) according to Sec 212a para 9 Austrian Federal Fiscal Code: 5.03%. 
  Interest for appeal (“Beschwerdezinsen”) according to Sec 205a para 4 Austrian Federal Fiscal Code: 5.03%. 
• VAT interest according to Sec 205c para 5 Austrian Federal Fiscal Code: 5.03% 
• Interest on refund claims regarding COVID-19-grants (“Rückerstattungszinsen”) according to Sec 16 para 1 first sentence COFAG-NoAG: 5.03% 
• Interest on refund claims regarding COVID-19-grants (“Rückerstattungszinsen”) according to Sec 16 para 1 second sentence COFAG-NoAG (applicable in state aid cases): 4.03% 
  
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