Austria – Tax legislative changes, effective January 2016
July 22: Tax legislative changes in Austria were passed by the parliament, and the effective date for most changes is 1 January 2016. Among the provisions are the following items.
Withholding tax on dividend distributions, capital gains
The withholding tax rate for dividends and capital gains will be increased to 27.5% (up from the current rate of 25%). If dividends are paid to corporations, a reduced withholding tax rate of 25% may still apply. It is expected the 25% rate would also apply for dividends paid to foreign corporations (but is subject to confirmation by the tax authorities). Interest payments on cash deposits and with respect to other loans involving banks (bank savings, transfer accounts) will continue to be subject to the 25% rate even if being paid to individuals.
New rules regarding equity repayments / profit distributions
New limitations on taxpayer ability to elect an equity repayment of capital versus a dividend distribution have been introduced. The effective date for these new rules is different—they are effective for business years starting after 30 June 2015. Under the new rules, a company having accumulated profits and “released equity” reserves can no longer elect to make a return of equity (that would not be subject to withholding tax) or to distribute profits (that would be subject to withholding tax). Instead, there will be a requirement for a profit distribution first (subject to withholding tax). Withholding tax-free equity repayments can only be made if the company does not have any accumulated profits.
Under these new rules, evidence of accumulated profits must be provided by an evidency account on internal financing, and evidence of released equity reserves must be provided by an evidency account on external financing. Both accounts must be attached to the tax return. As long as the evidency account on internal financing shows a positive amount, no equity repayments can be made.
KPMG observation
The new rules are somewhat complex, and are still being discussed by tax professionals and others. It is, therefore, possible that the rules could be amended or eased (e.g., by ordinance). The effects of these rules will need to be carefully considered, depending on the taxpayer’s situation. In some instances, it may be appropriate to effect equity repayments before the effective date (i.e., before 31 December 2015, if the taxpayer’s fiscal year corresponds to the calendar year).
Tax incentives
The tax legislation includes the following changes relating to tax incentives:
Depreciation / sale of buildings
VAT changes
Input VAT incurred in connection with the acquisition, rent, and the operation of electric vehicles will be tax deductible up to a net value of €40,000 per car.
Changes regarding real estate transfer tax (RETT)
Under the Austrian RETT law, RETT is also triggered if 100% of the shares in a company owning real estate is acquired or held by a single shareholder. In the past, taxation could be avoided relatively easily, if a minimum share holding was transferred to another person or company, or to a trustee holding a minimum share on behalf of the majority owner. This will no longer be available under the new rules. From 2016 onwards, RETT will apply if at least 95% of a company owning real estate is acquired or held by a single shareholder or by companies being part of a tax group for VAT or corporate income purposes. Further, a 95% change in the partners of a partnership owning property within a period of five years will be subject to tax as well. Shares held by a trustee will be attributed to the economic owner. If applicable, RETT at a rate of 0.5% of the Grundstückswert will be levied in these situations.
Anti-fraud provisions
Employees and fringe benefits
