Tax & Legal News in English April 2025

Buildings in the EU are becoming greener 

Buildings play a crucial role in climate protection, as they are responsible for more than a third of greenhouse gas emissions in the European Union. To achieve climate neutrality by 2050, a significant reduction in energy consumption in the building sector and the promotion of renovation measures are essential. In this context, the European Union has revised the EPBD (Energy Performance of Buildings Directive, EPBD) as part of the ‘Fit for 55’ climate policy project. The directive sets out key requirements for the public and private building sector to significantly increase energy efficiency and ultimately enable the transition to zero-emission buildings.

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CIT guidelines – ordinance 2024
Important changes at a glance

The final ordinance 2024 was included in the CIT guidelines in January 2025. The amendments result in particular from the incorporation of various Austrian higher court rulings as well as – amongst others – from the incorporation of the Tax Amendment Act 2024 and the Non-Profit Reform Act 2023.

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Deductibility of voluntary severance payments 

In the light of Austrian case law in recent years, the provision regarding the deductibility of termination-related payments (eg voluntary severance payments) has been specified. Accordingly, other remunerations accrued upon or after termination of the employment relationship is only tax deductible to the extent that it does not exceed the limits of the “quarter and twelfth rule” (“Viertel-“ und “Zwölftelregelung”) – regardless of whether it is subject to the old or new severance payment scheme (“Abfertigung Alt” or “Abfertigung Neu”). In case severance payments have already been received during the period of employment, these will reduce the tax-favorable extent of the “twelfth rule.” Since there is no legal entitlement regarding the severance payment in the new severance payment scheme (“Abfertigung Neu”), an alternative reduction component must be calculated and considered. To the extent that both limits are exceeded, the voluntary severance payment is taxed as a regular income according to the income tax rate. The prohibition on deducting voluntary severance payments does not apply to payments as part of social plans resulting from operational changes, such as the restriction or relocation of operations as well as rationalization and automation measures.  
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Filing of Financial Statements: Higher Sanctions!
Overview

Corporations in Austria are required to submit their annual financial statements to the Commercial Register Court on time. Missing the disclosure deadline can lead to high coercive fines, which may be imposed repeatedly. 

The deadline for disclosure is nine months after the balance sheet date. If this deadline is not met, an initial coercive fine amounting to EUR 700, - for both the company and each of its managing bodies is stipulated. For micro-companies, this amount is reduced to EUR 350, -. Starting from the second fine, the amounts increase to EUR 2.100, - for medium-sized companies and their executives, and to EUR 4.200, - in the case for large corporations.

With the Sustainability Reporting Act (NaBeG), whose ministerial draft was published on 13 January 2025, these penalties are expected to become even stricter. In cases of repeated violations, the minimum fine for medium-sized companies and their executives will rise to EUR 4.500, - and to EUR 20.000, - for large corporations. If a penalty is challenged and the case proceeds to a formal procedure, the maximum fine may increase to up 5% of the company´s annual revenue – provided that the filing is still not made within two months after the decision is served. The enactment of the current ministerial draft remains to be seen.

It is therefore recommended to carefully plan the disclosure process.   

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Exchange of information and legal confidentiality

The ECJ’s decision Ordre des avocats du barreau de Luxembourg (C-432/23) deals with clarifying the scope of legal professional privilege in the context of the exchange of information based on the Mutual Assistance Directive in tax matters. The case involved the Luxembourg tax authorities’ request for information from a lawyer regarding his client’s tax matters. The lawyer refused to provide the information, citing legal confidentiality. The ECJ emphasized that attorney-client privilege is an essential part of the right to effective legal assistance, protected by the EU Charter of Fundamental Rights, and applies in tax matters. The Court also confirmed that while the EU Mutual Assistance Directive governs member state obligations, national laws determine obligations for those possessing the information. 

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Centre of vital interest in case of employment abroad

An employee was sent to the United States for 3 years by his Austrian employer. Therefore, he moved to the USA together with his family (wife, children, pets). The assignment ended prematurely after 1.5 years due to external circumstances and the entire family returned to Austria. According to the decision of the Administrative High Court the complainant had closer personal ties (apartment, relatives, employment relationship) to Austria during his entire stay in the USA. Subsequently, the center of vital interest (and thus also the tax residency) did not shift to the USA despite the assignment in the USA but remained in Austria.

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FFC regarding income from software distribution under DTT AT-CHN and AT-IND

In its decision from 22 July 2024 (RV/5100103/2022), the Tax Appeals Court ruled that income from the distribution of individual software may not be qualified as royalty income within the meaning of the relevant distributive rules under the DTT Austria-China and Austria-India since there was no transfer of the use of  copyright including the right to duplicate, use, modify or publish the software in the case at hand. Rather the relevant income from individual software was qualified as business income and, hence, the taxes withheld in China and India could not be credited against the Austrian corporate income tax liability of the taxpayer. 

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Update TP Guidelines: clarifications for intra-group financing

With the 2025 Update of the Transfer Pricing Guidelines 2021, the Federal Ministry of Finance clarifies certain topics in the area of intra-group financing. The focus is on the specification of the implicit group support, the determination of the maturity of deposits to and withdrawals from cash pools, and the tax treatment of payments arising from the utilization of guarantees.

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