12.11.2019

Austrian Tax Reform 2020 adopted

It includes the introduction of digital tax and the implementation of DAC6 among others

Austrian Tax Reform 2020 adopted

In autumn 2019 the Austrian Parliament adopted a package of tax reforms, the so-called Austrian Tax Reform 2020, including the introduction of digital tax and the implementation of DAC6 among others.

The then ruling parties had agreed on an Austrian tax reform and published draft bills already in April 2019, but after the so-called “Ibiza affair” the future of the bill became quite unsure. Nevertheless, as we have written in an earlier article, in July the parliamentary groups voted for the implementation and on 19 September the lower house and on 10 October, the upper house of the country’s Parliament approved the Austrian Tax Reform 2020.

The most important changes of the Austrian Tax Reform 2020

According to the accepted changes of the Austrian Tax Reform 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.

A lump sum taxation for small businesses with a yearly turnover of up to EUR 35,000, will be introduced, also 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.

Changes for foreign tax residents and employers

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 (one-month-term), or
  • starting from 1 January 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 EU Directives and rules

The Austrian Tax Reform 2020 implements the anti-hybrid provisions of the EU Anti-Tax Avoidance Directive 2 (ATAD 2) in the Corporate Tax Act, applicable 2020 as well.

It also includes the adaptation 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 Austrian 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 31 December 2018. Contrary to the European Commission – see commission notice of 7 December 2018 – the Austrian Ministry of Finance (MoF) was 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 tax reform still does not include an ATAD transposition. Nevertheless, on 25 July 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.

The Austrian Tax Reform implements also the DAC6 Directive regarding mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements in the EU-Meldepflichtgesetz.

Digital Tax Act 2020 and other digital issues

As we wrote before, starting in 2020 online advertising will be taxed at a rate of 5%, where the advertising company has a global turnover of more than EUR 750 million and an Austrian online advertising revenue of at least EUR 25 million. This is an extension of the already existing advertising tax, that until now did not include online advertising.

A detailed documentation obligation will be introduced in the VAT Act for online-mail order dealers and a liability for online-mail order dealers and brokerage platforms for breaches of the duty of care of any of the entrepreneurs involved will be also introduced.

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

Other changes

Other changes of the Austrian Tax Reform 2020 include:

  • Rise of the threshold for the small business exemption in the VAT Act from EUR 30,000 to EUR 35,000
  • Harmonisation of the treatment of consignment warehouses
  • Organizational reform of the tax administration.
  • Amendments to various other tax laws such as the insurance tax act, automobile tax, tobacco tax and others.

Apart from the changes of the Austrian Tax Reform 2020, Austria also implemented regulations regarding dispute resolution and cross-border VAT fraud already in July. For these amendments (EU-Finanz-Anpassungsgesetz 2019) please click here and read the original article on the website of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!

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