Austria

Market overview

It has been a busy year for transfer pricing professionals in Austria as the demand for services has drastically increased and clients are seeking more advice than in the past.

As a result of a tax reform which came into effect on January 1 2016, the first income tax bracket was reduced to 25% and anti-fraud provisions were introduced. However one of the biggest influences on Austria's tax environment has been the OECD's BEPS project, which remains a significant challenge for many taxpayers due to its complexity and the uncertainty it has brought.

This has resulted in clients trying to adapt to the new system and looking at their structures leading to an increase in the demand for transfer pricing services and advice.

"Clients are aware of the changes, and thankfully they take it seriously and ask for advice on how to adapt to the new situation," said Michael Sedleczek, head of tax and transfer pricing at Freshfields.

As a result of the changing tax environment, the Austrian tax authorities have adopted a more aggressive approach, particularly with regards to transfer pricing. The market is coping with much more demanding tax investigations by the authorities, followed by disputes. The authorities are said to be preparing themselves by hiring extra staff and many taxpayers face regular tax audits and problems with the authorities.

Although a lot of the initiative remains policy, some measures have been implemented. On January 27 2016, Austria – and 30 other countries – signed a tax co-operation agreement to allow automatic sharing of country-by-country information as part of the BEPS initiative.

On May 9 2016, the Austrian Ministry of Finance published draft legislation to implement the OECD's three-tiered approach to TP documentation consisting of country-by-country reporting (CbCR), master file and local file. According to the draft law, the requirement will be effective for fiscal years starting from January 1 2016.

While other jurisdictions have been quick to implement the automatic exchange of information provision post-BEPS, Austria, similarly to neighbouring Switzerland, has historically maintained a high degree of banking secrecy. This is set to change as a further act was adopted in July 2015 which will result in a loosening of the banking secrecy and give tax authorities more access to banking data.

"We had quite a strict bank secrecy in Austria for quite a long time and recently it has been pretty much abolished, so it's no longer as strict as it has been," said Karin Spindler-Simader, tax manager at TJP.

A central register of bank accounts and security depots will be set up and banks will have to report all capital outflows exceeding €50,000 ($56,000) and capital inflows of €50,000 from Switzerland and Liechtenstein to and from bank accounts and security depots of individuals to the Austrian Ministry of Finance.

The legislative changes are expected to continue in the coming year. Sedleczek said: "In Austria, the implementation of the transfer pricing documentation will come sooner or later." He said other main legislative developments will relate to hybrid structures and BEPS.


Tax authorities

Federal Ministry of Finance
Johannesgasse 5, 1010 Vienna
Tel: +43 50 233 561
Website: english.bmf.gv.at


Tax rates at a glance

(As of April 2016)

Corporate income tax rate 25% (a)
Capital gains tax rate 25%
 
Withholding tax
Dividends 25/27.5% (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 2016 Worldwide Corporate Tax Guide