On 9 April 2018, the Ministry of Finance (MOF) provided a draft bill for an Annual Tax Act 2018 and submitted it for final consideration. With this draft, the EU Anti-Tax Avoidance Directive (ATAD) will be implemented in Austrian domestic law and in accordance with the ATAD, CFC taxation will be introduced in Austria for the first time.
Key changes of the draft bill are:
- CFC law:
In accordance with the ATAD, CFC taxation will be introduced in Austria for the first time. Thus, income of low-taxed subsidiaries (and permanent establishments) will be allocated to the Austrian parent and will be subject to Austrian taxation at a rate of 25%. Any foreign taxes paid will be credited against Austrian taxation. CFC taxation will apply to following situations:
- Austrian corporations holding a controlling interest (more than 50% of voting rights, capital or dividend rights, alone or together with its associated enterprises);
- Passive income of a foreign subsidiary (interest, royalties, dividends, financial leasing fees, capital gains from the sale of participations, income from insurance, banking or financial activities, income from invoicing companies);
- if the passive income represents more than one third of the foreign subsidiary’s overall income; and
- The effective tax rate is 12.5% or less.
CFC taxation will not apply where the controlled foreign company carries on a substantial economic activity supported by staff, equipment, assets and premises, as evidenced by relevant facts and circumstances.
- VAT law:
The ministerial draft also comprises proposed changes to the value added tax (VAT) rules relating to:
- The VAT exemption for educational institutions;
- Travel services provided by travel agents;
- The place of supply for telecommunication services, radio and television broadcasting services, and electronically supplied services provided by “small undertakings”; and
- The ability to obtain an advance ruling from the tax authorities in the context of VAT (as well as international tax law).f
