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TAX REFORM | Austrian Tax Reform 2019/20

Before the last Austrian government was brought down by the revelations of the so called “” the then ruling parties had agreed on a tax reform for 2019 and the following years and already published draft bills. Regarding the measures planned for 2019, a bill has been filed in early July 2019 and a decision of the national assembly is expected in September. Already in July, Austria implemented regulations regarding dispute resolution and cross-border VAT fraud. 

Amendments to Austrian tax law already implemented

Just before the summer break of the Austrian National Assembly the “EU-Finanz-Anpassungsgesetz 2019” was passed. This included among others the following amendments:

  • Transposition of council directive (EU) 2017/1852 on tax dispute resolution mechanisms in the European Union into the EU-Besteuerungsstreitbeilegungsgesetz.

  • Amendments to the General Fiscal Law in regard to the implementation of solutions reached in mutual agreement procedures and arbitration proceedings based on the EU-Besteuerungsstreitbeilegungsgesetz, double taxation treaties or other international agreements.

  • Amendment of the fiscal penal law to include cross-border VAT fraud – national transposition of council directive (EU) 2017/1371 on the fight against fraud to the Union's financial interests by means of criminal law.

Outstanding amendments to Austrian tax law

The main features of the current draft bills outstanding to be passed in September, are as follows:

  • From 2020 onwards, the threshold of low value fixed assets will be raised from EUR 400 to EUR 800. Such assets can be depreciated entirely in the year of acquisition.

  • Introduction of a lump sum taxation for small businesses with a yearly turnover of up to EUR 35,000, starting 2020. The expenses of such businesses will be calculated at a rate of 45% of total earnings. In case of service businesses, the expenses will be 20%.

  • Starting 2020, taxpayers with small income can apply for a refund of social security contributions.

  • Foreign tax residents, subject to limited tax liability in Austria, will be obliged to file an Austrian tax return if
    • additionally to their employment income, they earn other Austrian income of more than EUR 730, or
    • they have had two or more sources of income, subject to Austrian wage tax, at least partly simultaneously in the respective calendar year.
  • Foreign employers will be obliged to establish an Austrian payroll and deduct Austrian payroll tax in the following cases:
    • Where an Austrian permanent establishment for payroll purposes of the employer exists (1 month term), or
    • NEW, starting January 1, 2020: Where no such permanent establishment exists, but the foreign employer employs employees subject to unlimited tax liability in Austria. This is the case if the employee either has a domicile or his habitual abode (generally a presence of more than 183 days) in Austria.
  • Implementation of the anti-hybrid provisions of the EU Anti-Tax Avoidance Directive 2 (ATAD 2) in the Corporate Tax Act, applicable 2020.

  • Adaption of the existing interest limitation rule
    Under the current law in place, interest and royalty payments are not deductible if they are paid to related parties and are subject to low or zero taxation at the level of the recipient. The tax reform clarifies, that the deduction will not be denied, where a CFC regulation applies to the payments in question in Austria or another country, effectively eliminating the non-/low taxation.
    Generally, Austria would have had to implement the ATAD interest limitation rules until December 31, 2018. Contrary to the European Commission – see commission notice of December 7, 2018 – the Austrian Ministry of Finance (MoF) is of the opinion, that the current law in place does qualify for the so-called “grandfathering” of the ATAD, i.e. the ATAD interest limitation rules would not have to be implemented before 2024 in Austria. Therefore, the draft bills do still not include an ATAD transposition. Nevertheless, on July 25 the European commission decided to send a letter of formal notice to Austria, requesting Austria to implement ATAD interest limitation rules and started an infringement procedure against Austria. It is currently unclear, how the MoF will react on this measure.
  • Implementation of DAC 6 regarding mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements in the EU-Meldepflichtgesetz.

  • The threshold for the small business exemption in the VAT act will be raised from EUR 30,000 to EUR 35,000, applicable 2020.

  • The VAT tax rate for electronic publications will be lowered to 10% starting 2020.

  • The treatment of consignment warehouses will be harmonized, applicable 2020.

  • Digital tax act 2020: starting 2020 online advertising will be taxed at a rate of 5%, where the advertising company has a global turnover of more than MEUR 750 and an Austrian online advertising revenue of at least MEUR 25. This is an extension of the already existing advertising tax, that until now did not include online advertising.

  • Introduction of detailed documentation obligations in the VAT act for online-mail order dealers. Introduction of a liability for online-mail order dealers and brokerage platforms for breaches of the duty of care of any of the entrepreneurs involved.

  • Organizational reform of the tax administration.

  • Amendments to various other tax laws such as the insurance tax act, automobile tax, tobacco tax and others. 

Please do not hesitate to contact us in case of any questions on this matter or in case you need assistance with your Austrian tax obligations.