Proposed Changes in Austrian Tax Law

Paris, 03 décembre 2010 - Visualiser l'eAlerte

The Austrian Ministry of Finance recently published a government bill, the “Budgetbegleitgesetz 2011 - 2014” (BBG 2011 - 2014). It includes numerous amendments having significant impact on Austrian tax law.

Interest Deduction

According to the current tax law interest expenses resulting from the debt financed acquisition of shares are tax deductible even if the Austrian participation exemption regime would be applicable with regard to dividend income to be received out of the shareholding or capital gains to be generated out of the disposal of the shares.
From 2011 onwards interest expenses relating to the acquisition of shares from related parties or controlling (direct and indirect) shareholders shall generally be non-deductible for tax purposes. The disallowance of the interest expenses shall also apply in case the entity acquiring the shares has received the required funds by way of a debt-financed equity contribution. The amendment will also affect interest expenses resulting from intra-group share acquisitions conducted prior to January 1, 2011.
The BBG 2011 - 2014 does not impact the deductibility of interest expenses incurred in connection with the acquisition of shares from a third party.

Financing Instruments

Another important change in the Corporate Tax Act relates to hybrid instruments used for cross-border financing activities. Income derived from financing instruments qualifying as equity style investments for Austrian corporate tax purposes will not be exempt under the Austrian participation exemption if the corresponding payments are tax deductible at the level of the foreign company. The envisaged amendment aims at eliminating double-dip structures which provide for a deduction of payments in the source state and a corporate tax exemption of the income resulting therefrom in Austria.

Research and Development Incentives

Currently an R&D premium of 8% or alternatively an allowance of 25% to 35% of qualifying R&D expenses can be claimed for R&D activities in Austria.
The draft law stipulates an increase of the R&D premium to 10% from 2011 onwards while the R&D allowances will be abolished. In addition, the R&D premium shall be limited to R&D activities performed in Austria.

Stamp Duty

Entering into loan agreements currently triggers Austrian stamp duty at a rate of 0.8% - 1.5% of the loan amount.
The BBG 2011 - 2014 shall abolish stamp duty on loan agreements to be entered into from January 1, 2011 onwards. Stamp duty will thus only apply for loan agreements made and signed prior to January 1, 2011.

Bank Tax

The BBG 2011 introduces a new bank tax: The bank tax shall be levied on banking activities of financial institutions.
The tax base shall be equal to the amount of the unconsolidated total assets less equity and secured bank deposits. For the period 2011 - 2013, the bank tax shall be computed based on the 2010 balance sheet figures, from 2014 onwards based on the figures as per the respective preceding balance sheet date.
The tax rate is 0% for an assessment basis up to EUR 1bn, 0.055% between EUR 1bn and EUR 20bn and 0.085% for any exceeding amount.

Other Changes

Other major changes relate to :

• Austrian foundations (immediate taxation of investment income at 25%)
• Taxation of investment income of individuals being tax resident in Austria (withholding tax of 25% will also be levied on capital gains out of portfolio investments)
• Taxation of investment funds (the taxation of realized capital gains will be changed substantially)
• A special excise duty shall be introduced for passenger flight tickets. The duty will be in the range of EUR 8 to EUR 35 per passenger and shall apply for all flights from April 1, 2011 onwards.
  Prospect

If and to what extent the government bill will be passed depends on the outcome of the debate in the Austrian parliament scheduled for December 20, 2010. Coming-into-force of the proposed legislation has to be observed.

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