Austria

Market overview

Compared to the past couple of years, 2017 has been a much quieter period for Austrian tax legislation. Even so, the changes of recent years continue to reverberate. Austria has adopted the OECD recommendations, and the BEPS measures have generated a lot of work for transfer pricing professionals in the country.

The biggest changes are the introduction of new documentation requirements. For instance, Austria is adopting country-by-country reporting (CbCR), complete with master file and local file standards. Firms falling short of the new measures face a maximum penalty of €50,000 ($56,000).

Tax authorities are much more vigilant than they have been in the past and they have taken on extra staff for pursuing such cases. Practitioners have seen more disputes, litigation and new investigations, but few expect more legislative change in the near future.

"Apart from the Austrian Transfer Pricing Documentation Act, which also implements the CbCR, we are looking at minor changes in the legislation," said Gerald Schachner, a senior partner at BPV Hügel Rechtsanwälte.

Austria has undertaken significant reforms of its banking secrecy laws. The Capital Outflow Reporting Act was passed in 2015 as part of softening Austria's once formidable banking secrecy laws. All capital outflows and inflows exceeding €50,000 from Switzerland and Liechtenstein now have to be registered with the Austrian Ministry of Finance.

"With regard to capital repayments, we have to keep everything on file," said Schachner. "There are some preconditions to be met so that taxpayers are still free to choose between dividend payments and capital payments."

This was a major shift given the financial ties between Austria and Switzerland, and it is not the only change to throw up questions for Austria's relations with its neighbours. Agreeing to participate in the multilateral instrument (MLI) has reinforced Austria's commitment to the BEPS project. The MLI facilitates the renegotiation of existing double taxation treaties (DTT) and the introduction of two BEPS minimum standards on treaty abuse and dispute resolution.

Austria has more than 90 DTTs in place and the MLI obliges Austria to modify 38 of these, including agreements signed with France, Germany and Spain, in order to bring these treaties in line with OECD guidelines. These talks will have implications for years to come.

Meanwhile the EU Anti-Tax Avoidance Directive (ATAD) is coming into effect in January 2019. The Austrian government has moved quickly to implement these measures, however, the rules with regard to controlled foreign companies and interest limitation have yet to be adopted by domestic law. The former might not be imposed until as late as 2023.


Tax authorities

Federal Ministry of Finance
Johannesgasse 5, 1010 Vienna
Tel: +43 (0)1 51433-500005
Email: michaela.berger@bmf.gv.at
Website: english.bmf.gv.at


Tax rates at a glance

(As of July 2017)

Corporate income tax rate 25% (a)
Capital gains tax rate 27.5%
 
Withholding tax
Dividends 27.5% (b)
Interest (from bank deposits and securities only) 0/25%
Royalties from patents, know-how, etc. 20% (c)
 
Net operating losses (years)
Carryback 0
Carryforward Unlimited (d)

  1. This rate applies to distributed and undistributed profits.
  2. In general, this withholding tax applies to dividends paid to residents and non-residents. An Austrian corporation is generally required to withhold tax at a rate of 27.5%. However, if the distributing company has evidence of the corporate status of the investor, it may withhold tax at a rate of 25%. Certain dividends paid to Austrian and European Union (EU) companies are exempt from tax. In addition, a reduction in or relief from dividend withholding tax may be possible under double tax treaties.
  3. This withholding tax applies to non-residents.
  4. The offset of loss carryforwards against taxable income is limited to 75% of taxable income in most cases.

Source: EY and Deloitte