Robert Haunschmidt
In spring 2019, the upcoming XLNC Conference will take place in Vienna and, once again, you can be sure that a great number of interesting topics will be up for discussion. Our daily lives are constantly changing; Brexit and digitalisation are only a couple of examples. Even in Austria, intensive work is being carried out to devise a new version of the tax laws, followed by an overview of planned amendments.
Key points include simplifications and reductions in income taxes, as well as social security contributions. According to the media and politicians, this new tax reform in Austria is expected to bring relief in the amount of EUR 5 billion. The tax reform should be completed and constitute a quorum by around the middle of 2019.
Tariff levels for personal income tax will be revised and the rates in the medium range will be slightly lowered.
|
Tariff level 25% |
Reduced to 20% |
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Tariff level 35% |
Reduced to 30% |
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Tariff level 42% |
Reduced to 40% |
Higher tariff levels of 50% or 55% are to remain unchanged.
For small businesses, flat-rate taxation could be adopted. Various types of business income are to be combined. The general flat rate for advertising costs will be significantly increased. Social security contributions are to be reduced for those with low and middle incomes.
The Family Bonus Plus was implemented at the beginning of 2019 as part of the tax reform. This means that families can receive a deductible amount of up to EUR 1,500 per child per year, which can be deducted directly from their personal income tax.
Amendments in the area of corporation tax
The planned reduction in corporation tax is particularly interesting. This tax concerns the profits of limited companies (GmbHs, stock companies) and other corporations. The tax rate is to be reduced to 20% from the current 25%.
Profits from foreign subsidiaries
If foreign subsidiaries do not distribute their profits to the Austrian parent companies, in future these profits will be subject to corporation tax in Austria. Further regulations on additional taxation will be introduced, which will apply to certain adverse categories of income.
Digital tax
Austria just presented a new tax for online advertisement income at a rate of 5%. It affects big businesses with turnover over EUR 750 million worldwide, and over EUR 25 million in Austria.
Horizontal monitoring
For companies with a turnover of EUR 40 million or more, horizontal monitoring means closer interaction between the taxpayer and tax authorities on an ongoing and regular basis. In this way, large-scale tax audits are largely avoided. A monitoring system is set up with the involvement of an auditor.
Binding legal information
By extending the so-called Advanced Ruling, companies can obtain binding legal information from the tax authorities in advance. It is already possible for companies to obtain this information; however, this will be extended for issues concerning VAT and international tax law.
Land transfer tax
Properties are only considered assets of a company if land transfer tax has already been incurred at the time of acquisition. Additionally, there shall be an exemption for gifts in the event of death between spouses, if the property served as the main residence of the purchaser at the time of death and the living space of the property does not exceed 150 square metres.
Multilateral Agreement on the Implementation of Measures Relating to Tax Agreement to Prevent the Reduction and Transfer of Profits (MLI)
The MLI agreement fundamentally changes the regulations of double taxation agreements (DTAs). With the MLI, the OECD has created a new instrument to simply amend agreements between groups of states. Austria was the first country to ratify the MLI on 22 September 2017. Eighty-five states have been covered by the MLI since 01 January 2019 and it is effective for 47 DTAs in 15 states.
The MLI covers many measures of the OECD BEPS Action Points. The MLI makes these measures directly effective for the DTAs of the signatory states. In this way, the “Cafeteria System” was implemented, according to which a binding basic standard is specified, and each state can also choose individual additional provisions. The regulations only apply between two states if these two states agree on the chosen provisions.
In practice, you must first see how the DBA amendments will be determined. Checking the positions of the partners is essential. The positions of the signatory states can be found at the following link: http://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf.
The OECD has already coordinated the positions regarding the respective double taxation agreements: http://www.oecd.org/tax/treaties/mli-matching-database.htm
Additional tools will be generated to show the documents of the old agreements with the MLI amendments.
XLNC MAGAZINE | No. 03 | May 2019