Tax & Legal News in English December 2023

Tax Appeals Court on beneficial ownership in the case of trusteeships

In its decision of 29 September 2023 (RV/7106049/2019), the Tax Appeals Court (BFG) decided that the establishment of a CIT group is not possible if the required financial connection between the group parent and group member does not exist due to a lack of beneficial ownership in a trust situation. A majority of voting rights and ownership of more than 50 % of the share capital, nominal capital or cooperative capital in a company are essential for financial integration. In addition, this may also be relevant regarding the transfer of beneficial ownership of shares in M&A transactions. The criterion of thexercisee of voting rights regarding the (economic) attribution of shares to the seller or already to the acquirer must therefore be carefully monitored.

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Changes to the Non-Monetary Remuneration Ordinance

Changes are planned for 2024 regarding charging costs for electric cars and interest on employer loans and salary advances. On the one hand, the cost reimbursement for the electricity price for charging a company car will be increased to 33.182 cents/kWh. On the other hand, employers will be given the opportunity to lease charging equipment and make it available to their employees. In addition, proof of allocation of the charging quantity to the employer's own vehicle is to be sufficient in future, based on records of the charging location and the charging quantity by the vehicle itself.

Furthermore, when calculating remuneration in kind for employer loans and salary advances, a distinction is to be made in future as to whether the loan or advance is granted at a fixed or variable interest rate or without interest.

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Directive on the processing of “late applications” adopted

Initial applications for the granting of Loss Compensation III (Verlustersatz III), and Default Bonus III (Ausfallsbonus III) for the month of March 2022, which were submitted after 30 June 2022 exceeded the deadlines permitted under European aid law ("Spätanträge"). The Ministry of Finance and the European Commission have now reached an agreement on how to deal with such late applications. Companies shall be contacted by COFAG and are requested to file an application between 4 December 2023 and 1 April 2024. The amount of the subsidy is limited to the amount which was initially applied for and to either the amount in accordance with the De-Minimis regulations or the “damage” incurred. We are of course happy to assist you in case of any questions regarding the new regulations.

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Selected topics on the interest barrier

Since 1 January 2021, the interest barrier rule within the meaning of Section 12a CITA is applicable to companies and corporate groups in Austria in implementation of the corresponding EU directive on the interest barrier ("ATAD"). Accordingly, an interest surplus is generally only deductible to the extent of 30% of the EBITDA for tax purposes, but in any case up to an allowance of EUR 3 million. Within a group of companies and irrespective of the size of the group, however, this allowance can only be claimed up to a maximum of EUR 3 million, i.e. the allowance is only available to the group parent and all group members together. In view of the persistently high interest rate environment, it may be worthwhile for corporate groups to evaluate the composition of the group before the end of the financial year and, if necessary, consider adjusting the size of the group.

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Zero VAT rate respectively VAT exemption for photovoltaic modules in Austria

Changes from 1 January 2024

For the period from 1 January 2024 to 31 December 2025, a temporary VAT exemption (tax rate of 0 % without loss of input VAT deduction) will apply to supplies, intra-community acquisitions, imports and installations of photovoltaic modules, provided certain conditions are met. In the spirit of greening and the energy transition, this is intended in particular to exempt purchasers of photovoltaic modules who are not entitled to deduct input VAT (eg small businesses and private individuals) from VAT.

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Administrative High Court: Letting of luxury real estate

In the decision of 21.6.2023, Ro 2023/15/0008 of the Administrative High Court (VwGH), it dealt with the question of the conditions under which the letting of a particularly prestigious residential property to a person related to the company constitutes a hidden distribution. The decisive factor in this case is the return resulting from the investment of the total amount of the acquisition and production costs in high-yield real estate, whereby a range of 3 to 5 % applies. Any subsequent (including actual) sales proceeds are not to be included in the expected return.

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Share Transfer Agreement: Non-Fulfilment of Conditions

The Austrian Supreme Court has most recently confirmed and specified existing case law regarding the duty to co-operate when fulfilling conditions agreed under a share transfer agreement. Accordingly, there is a fundamental obligation of contracting parties to do everything necessary to fulfil the agreed condition and to refrain from doing anything that would prevent fulfilment. The limit of this obligation is the frustration of the fulfilment of the condition in bad faith. In certain cases, the non-fulfilment of a condition by the obligated contracting party may be justified by its economic interests in the management of the company. Therefore, special diligence must be taken when drafting conditions in a share transfer agreement to prevent subsequent ambiguities in the event of non-fulfilment of the condition.

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Austrian Administrative High Court rejects appeal for capital gains tax reimbursement

In a case regarding an Austrian subsidiary (SE) that distributed dividends to its Cypriot parent company (Ltd), the Austrian Administrative High Court decided that the appeal of the Cypriot parent to challenge a decision of the Tax Appeals Court eventually denying the application for repayment of Austrian dividend withholding tax is to be rejected. In its essence, the Tax Appeals Court considered “Directive-Shopping” by way of tax abusive interposing of Cypriot conduit entities without substance and function. The Administrative High Court rejected the taxpayer`s extraordinary appeal, concluding that the decision of the Tax Appeals Court is neither in conflict with former (deviating) decisions of the Administrative High Court nor are former decisions of the Administrative High Court on this topic in conflict to each other not at least considering that decisions on anti-tax abusive considerations must always reflect individual facts and circumstances. Although the Administrative High Court had to deal with such formal/ administrative questions regarding the admissibility of solely the appeal, the Court decision also comprises some essential material indications of (deemed) tax abusive Directive‑Shopping.

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Tax Deadlines in January 2024

• Intrastat-declaration for December 2023.
• Advance VAT declaration for November 2023.
• Standardized Consumption Tax for November 2023.

For an overview of all Tax Deadlines in January click here...