On 11 July 2018, the Federal Council of Austria adopted the text of the Annual Tax Act 2018 as approved by the National Council (lower house) on 4 July. The legislation includes simplifications of tax laws, the abolishment of various fees and measures in the fight against tax avoidance.

The legislation includes following measures:

Anti-Tax Avoidance Directive:

An adjustment of the current exit tax rules to bring them in line with the Anti-Tax Avoidance Directive (ATAD1), which includes reducing the number of tax payment installments from seven to five and new conditions for the immediate recovery of outstanding tax, including cases where:

• The assets or business of permanent establishment are sold or otherwise disposed of or transferred to a State outside the EU/EEA;
• The place of management of a company is transferred to a State outside the EU/EEA;
• The taxpayer declares bankruptcy or is wound up; or
• The taxpayer fails to make an installment payment within 12 months from the due date.

CFC rule:

In accordance with the ATAD1, CFC taxation will be introduced in Austria for the first time. Accordingly, foreign companies may be considered CFCs where an Austrian company itself or with associated companies holds directly or indirectly more than 50% of the capital or voting rights of the foreign company or is entitled to more than 50% of the profits of the foreign company (associated means 25% direct or indirect ownership or entitlement to profits).

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 implementation of Council Directive (EU) 2017/2455 to allow small undertakings to apply the VAT rules used in their home country if yearly cross-border online sales are below EUR 10,000;

The introduction of horizontal monitoring as an alternative to tax audits for larger companies and groups, subject to certain conditions; and

The introduction of rules in relation to financial account information reporting for the purpose of exchange under EU law and the OECD Common Reporting Standard.

The above all measures are generally effective from 1 January 2019.