At the beginning of the COVID-19 pandemic the main priority of the Austrian government was to ensure the solvency of companies. Different measures like a funded short-time working model, deferred tax payments and government guarantees were implemented. Recently, the government published new tax measures in Austria to boost the economy and support investment activities. In our article we summarise the most significant latest tax measures in Austria related to the pandemic.
COVID-19 investment subsidy
One of the most important recent measures in Austria is the new COVID-19 investment subsidy, which should encourage companies to invest. Companies that commit to investing in specified assets can get up to 14% of the investment sum back as a subsidy. The basic subsidy is 7% of the invested sum. If the investment is in specific areas like digitalisation, life science/health or sustainability, the percentage of the subsidy is increased by a further 7%. The subsidy may be requested from 1 September 2020 until 28 February 2021 for new investments (first steps taken between 1 August 2020 and 28 February 2021). Climate-unfriendly investments and further specific investments such as undeveloped property, financial assets and others are excluded from the investment subsidy.
Another important element is the implementation of a new accelerated depreciation regime for investments in new fixed assets. The new degressive depreciation is optional and allows companies to depreciate fixed assets by up to 30% of the residual book value per year. However, the new regime is only applicable for fixed assets purchased or constructed after 30 June 2020. Certain assets are excluded from the new depreciation: e.g. used and intangible assets, buildings (see below), passenger cars (except for e-cars, driving schools and commercial transport use), facilities used for the production, transport or storage of fossil fuels and facilities directly using fossil fuels and airplanes.
Accelerated depreciation for buildings
Buildings acquired or constructed after 30 June 2020 can be depreciated with an accelerated depreciation rate. For the first year, the rate is three times the statutory rate applicable for buildings (7.5% or 4.5%). In the second year the rate can be up to two times the statutory rate (5% or 3%), before falling to the statutory rate in the third year (2.5% or 1.5%).
The statutory half-year rule for assets in use for six months or less will not be applicable in the context of the depreciation regime for buildings. Therefore, the full-year depreciation can be charged in this case.
In contrast to other tax regimes Austria has not had a loss carry-back regime so far. To support companies in smoothening the losses due to effects of the COVID-19-crisis, Austria is implementing a temporary loss carry-back system. According to the new regime, it is possible to offset losses of the year 2020 with gains from the past two years. Companies which have a financial year that differs from the calendar year can choose between the year 2020 or the year 2021 as the base year for the loss carry-back.
The loss carry-back is capped at EUR 5 million. It will also be possible to carry back the loss even before the tax return for 2020 has been assessed. The Minister of Finance will be providing more details on the carry-back requirements in a specific regulation.
Other tax measures in Austria
The Austrian government has reduced the starting tax rate from 25% to 20% applicable for income exceeding EUR 11,000 but not exceeding EUR 18,000. The reduction will become effective for the entire year 2020. Employees with taxable income of EUR 11,000 or less will benefit from an increased commuter deduction of up to EUR 400.
At the other end, the top income rate of 55% for income of EUR 1 million or more will be extended until the year 2025.
With the tax measures in Austria detailed above the aim of the country’s government is clearly to support the economy during the COVID-19 crisis. The new depreciation regimes and the loss carry-back can help you counter the COVID-19 crisis. However, keep in mind that the new depreciation regimes ultimately only bring the depreciation potential forward. If you are planning investments you should consider the new COVID-19 subsidy, which can lead to subsidies of up to 14%.
If you would like to know more about the latest tax measures in Austria related to the pandemic, please visit the homepage of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!