Tax & Legal News in English February 2025

Non-taxation of foreign continued remuneration after relocation to Austria

The Austrian Tax Appeals Court (BFG) ruled on 25 April 2024, that vacation remuneration received after relocating the tax residence to Austria remains taxable in the USA as the former employment state. According to the Court, the principle of causality - emphasizing the economic source of the payment - overrides the principle of inflow. This means payments tied to work performed in the USA, even if received after returning to Austria, are subject to US taxation and should be exempt from taxation in Austria due to the applicable double tax treaty. Nonetheless, due to Austrian domestic law, these foreign income payments must be included as progression income to calculate the applicable tax rate in Austria. The Court's decision ensures such income is exempt from Austrian tax but influences the tax rate through progression.

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Tax assessments must be received by the “formal” recipient to become legally enforceable

In general, tax assessments enter into force and become legally binding when they reach the area of disposition of the recipient. This means, that a tax assessment must be successfully delivered to the recipient to become legally enforceable. However, the taxpayer (the individual or entity to whom/which the document belongs too) is not always the same person as the “formal” recipient. Especially, when issuing tax assessments of a legal entity the tax office names the representative of the entity (e.g. the managing director) on the assessment as “formal” recipient of the document. 

According to a decision  by the (Tax) Administrative High Court, electronically issued tax assessments must be delivered to the (electronical) Databox in FinanzOnline of the “formal” recipient (e.g. the managing director), and not to the Databox of the entity, to enter into force and become legally binding. However, the only way to remedy a wrongdoing in the delivery process (e.g. if the electronical tax assessment was not delivered to the correct Databox) and to make a tax assessment legally enforceable is, if the “formal” recipient logs-in into the FinanzOnline account of the legal entity and downloads the document from the databox. Downloading and forwarding the document by e-mail or printing the document and passing it to the “formal” recipient would not lead to a removal of the wrongful delivery.

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No “free of charge loan” due to an interest escalation clause formulated in violation of consumer protection law

Key Take AwaysA formulation of a clause that is contrary to consumer protection law does not always lead to the inadmissibility of a clause – it depends on the actual intention of the parties, even if this is not reflected in the wording of the contract.

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New Decision: COVID-19 Bonuses for Seconded Workers

The Austrian Supreme Court (OGH) has fundamentally changed  its line of jurisprudence  regarding the entitlement of seconded workers to collective bargain agreement based bonuses, such as the COVID-19 bonus for 2021. The new case law, based on the EU Temporary Agency Work Directive extends the entitlement to such bonuses for temporary agency workers. This decision emphasizes equal treatment with permanent employees and asserts that seconded workers are entitled to both periodic and one-time payments that are provided by a collective bargain agreement. However, significant changes in payroll handling are not expected, unless specific internal or regulatory exceptions apply.

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Foundation entrance tax equivalent and share consolidation

In a ruling the Tax Appeals Court had to decide whether the foundation entrance tax equivalent also applies in the case of a share consolidation in the event of a subsequent donation of 100% of a (property-owning) corporation to a private foundation. The Tax Appeals Court ruled that the foundation entrance tax equivalent is not to be applied in the case of a share consolidation in connection with a situation subject to foundation entrance tax.

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Additional UBO-reporting obligations

 The Financial Market Anti-Money Laundering Amendment Act (FM-GwG-Anpassungsgesetz) published on 13 December 2024 also amended the UBO Register Act (WiEReG). The center piece of the amendment is the reporting, documentation and due diligence obligations of nominee agreements. Those also apply to cases were the nominee agreement is not material for the beneficial ownership. Correspondingly, further fiscal penal offences were introduced. Fiscal penalties may also be imposed in cases where the wrongdoings are in no connection with the definition of the beneficial ownership. The majority of the new regulations enter into force on 1 October 2025.

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Negative Equity – What you need to know

In Austria, a significant number of companies face negative equity, a situation that does not necessarily indicate insolvency but requires careful assessment. While over-indebtedness occurs when liabilities exceed assets, over-indebtedness as a ground for insolvency also requires a negative going-concern forecast. In such cases, companies must provide detailed disclosures in their financial statements explaining why no over-indebtedness in the sense of a ground for insolvency exists. Given the legal and financial risks, seeking expert advice is crucial when negative equity arises.

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Important changes at a glance

The final ordinance 2024 was included in the VAT guidelines in December last year. The amendments result in particular from the incorporation of various Austrian higher court rulings respectively ECJ judgements as well as – amongst others – from the incorporation of the Tax Amendment Act 2024, the Progression Settlement Act 2025 and the Budget Accompanying Act 2024.

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Changes to travel expense reimbursements from 2025

According to Sec 26 nr 4 of the Austrian Income Tax Act, payments made by the employer as reimbursement of travel expenses or as daily allowances and overnight accommodation allowances in connection with a business trip do not count as income from employment and are therefore not taxable up to the statutory maximum amounts. These tax-free allowances remained unchanged for many years and will now be raised for the first time in recent history as of 1 January 2025.

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Digital Group Application

Strict formal requirements applied in connection with the application forms for a CIT group in Austria. In the past, it was especially not possible to effectively submit group applications via FinanzOnline. With the Tax Amendment Act 2024 (AbgÄG 2024), which came into force on 1.1.2025, the possibility of filing electronic applications for a CIT group was standardized by law. Applications must be signed using a qualified electronic signature.

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