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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Digital tax, digitalisation and the supply of digital services all sound similar, but mean completely different things from a taxation perspective. In our fast-paced world, companies going global probably encounter these terms more frequently, and a lack of knowledge about these concepts in each and every country where they are present can result in major tax exposures. In the second issue of the 2019 WTS CEE Tax Bridge we show you what is happening now regarding the introduction of digital tax and the digitalisation in taxation in Central and Eastern Europe: Austria, Belarus, Croatia, Czech Republic, Hungary, Poland, Romania, Russia, Serbia, Slovakia and Slovenia.

In the majority of the CEE countries digital tax is at most just a plan

The introduction of the digital tax in Austria on online advertising from 2020, or the planned Czech digital tax affecting large multinationals, which have no registered office or branch in the country but generate considerable profits from their services, are clear signs that something has started in our region. In Hungary, for example, the rate for advertising tax, a special tax applicable from 2015, fell temporarily to 0% from 1 July 2019.

Tax on digital services is also a hot topic

In other countries we cannot see any development with the introduction of digital taxes at this stage. Nevertheless, the introduction of special rules regarding the supply of digital services (e.g. in Belarus, Russia or Romania) is one of the hottest topics.

Digitalisation in taxation in Central and Eastern Europe develops rapidly

We report on several novelties in the digitalisation of tax administration too. If we look at the Slovenian eDavki, which is a platform enabling taxpayers to enjoy paperless communication and essentially to fulfil tax obligations from anywhere in the world, or the Serbian E-Taxes portal, it is clear that the tax authorities are keeping up with the changes.

We also give you some hints on how to cope with the challenges of the Hungarian online invoicing system updates, and we share some information with you regarding the Polish monthly SAF-T (JPK) reporting.

We trust that this issue of our newsletter will give you a useful overview about the changes surrounding the digitalisation in taxation in Central and Eastern Europe.

You can download WTS CEE Tax Bridge #2/2019 in PDF format here:
WTS CEE Tax Bridge #2/2019 (PDF)

The post Digital tax and digitalisation in taxation in Central and Eastern Europe appeared first on WTS Klient | adótanácsadás | könyvelés | bérszámfejtés | HR szolgáltatások | digitális megoldások | állami támogatások.

5% Austrian digital tax on online advertising

Following the recent rejection of the Council Directive on the common system of a digital services tax on revenues resulting from the provision of certain digital services, the EU has failed to reach an agreement regarding the enforcement of a bloc-wide digital tax on tech “MNE giants” such as Google, Apple, Facebook and Amazon. Therefore, Austria plans to introduce its own Austrian digital tax on online advertising services, which will enter into force on 1 January 2020.

Currently, sales of traditional advertising space, such as in print media, broadcasting, posters and billboards, are subject to Austrian advertising tax. Online advertising is not taxed by the 5% Austrian advertising tax. Therefore, the planned new digital services (advertising) tax will apply at a rate of 5% on digital advertising revenues for companies with worldwide revenues of more than EUR 750 million and Austrian digital advertising revenues of more than EUR 25 million. The new Austrian digital tax should cover digital advertising services in the domestic market. This means that the Austrian digital tax should apply to revenues generated in Austria through sales of online advertising space, such as banner advertising and search engine advertising. One main prerequisite is that the online advertising targets Austrian internet users and is displayed on an Austrian user’s device with a domestic Internet Protocol (IP) address.

The person liable for payment of the tax (tax debtor) is the online advertiser (i.e. the entity in receipt of the taxable revenues), which must calculate the tax and pay by the 15^th of the second month following the date on which the tax claim arises. The tax claim arises at the end of the month in which the taxable service is rendered. Moreover, three months after the end of the financial year, the tax debtor must submit a digital services tax return for the previous year. Furthermore, the online advertiser is obliged to keep records of the online advertising services taken over, any other companies commissioned by it in this regard, the clients and the basis for calculating the Austrian digital tax. For digital tax purposes, it is only necessary to store any personal data in anonymous form.

The new regulations will enter into force on 1 January 2020.

Implementation of the e-commerce package

 Furthermore the Austrian legislator will also implement the e-commerce package of EU Directive 2017/2455 into the Austrian Value Added Tax Act. The goal of the e-commerce package is to strengthen taxation in the destination state.

For example, one main change is that entrepreneurs – who facilitate distance sales of goods imported from third territories to a non-taxable person, where the individual value of the goods per supply does not exceed EUR 150, by using an electronic interface, such as a marketplace, a platform, a portal or something similar – shall be treated as if they had received and supplied those goods themselves. The interface will therefore owe the VAT for the distance sales themselves, whereas the deemed supply of the supplier to the interface shall be exempt from tax.

Furthermore, deliveries from third countries are currently exempt from VAT if the value of the goods does not exceed EUR 22. This tax exemption for the import of small value items will be abolished. Consequently, in future, all sales will be taxed from the very first cent. However, a new distance selling regime will be simultaneously introduced. That means the import of goods with a value of up to EUR 150 will be exempt if a VAT identification number is provided in the import declaration and the supply of goods is taxed under a special regime (Import One Stop Shop – IOSS). The IOSS will apply to all services provided by a non-EU business to non-taxable persons within the EU.

The implementation of the e-commerce package shall take effect on 1 January 2021.

Obligations for electronic marketplaces from January 2020

Operators of online platforms or electronic marketplaces enabling supplies or other services over it must record detailed information about individual traders using their site and forward the information to the Austrian tax authorities (electronically on request). One main prerequisite is that the operator does not itself become the debtor of the VAT. The recorded information must include, for example, annual turnover, customer names as well as records concerning stocks, and aims to ensure that VAT has been correctly accounted for.

Details are regulated in the Value Added Tax Implementing Regulation (“SorgfaltspflichtenUmsatzsteuerverordnung”). If the obligations are not fulfilled, the operator of the electronic marketplace or online platform will be held liable for the tax. This rule shall concern, for example, services within the framework of the “sharing economy” or distance sales within the EU. If the e-commerce package enters into force in 2021, operators who become the debtor of the VAT shall no longer be subject to this obligation. The new regulations for electronic marketplaces are due to enter into effect on 1 January 2020 just like the new Austrian digital tax on online advertising.

For more information about the Austrian digital tax please visit the website of WTS Austria. Their experts will be pleased to advise you in your individual situation.

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