Facts of the case concerning leasing personnel 

A UK provider of personnel had leased personnel to an Austrian company. The Austrian company had deducted 20% WHT of the providers’ remuneration including the charged costs for the accommodation of the leasing personnel. The UK provider then applied for a refund of the WHT insofar it did not concern the wages of the personnel, hence the WHT on his profit, overheads and the accommodation costs.

The competent tax authority denied the refund of WHT as the total WHT was lower than the wage tax calculated by the tax authority. The Austrian Fiscal Court rejected the argumentation of the tax authority and agreed to the refund request of the UK provider. The Fiscal Court clarified that Austria does not have a taxing right for the profit of the provider and for the accommodation costs. As the tax authorities appealed against the decision of the Fiscal Court, the Austrian Supreme Administrative Court (VwGH) was engaged with the case at hand.

Decision of the Austrian Supreme Administrative Court

The Austrian Supreme Court based its decision (23. 4. 2021, Ra 2020/13/0089) on the purpose of the WHT, which is to indemnify the underlying tax claim of Austria. In regard to the leasing of personnel the purpose of the WHT is not only to indemnify the tax in regard to the (first) receiver of the income (the UK provider), but also to the employees who receive their wages from the (first) receiver of the income.

According to the Supreme Administrative Court the refund of the WHT therefore requires that no reason for an indemnity of the tax regarding the income of the leasing personnel exists. This would only apply if the tax had been paid otherwise, e.g. via a voluntary payroll or by the leasing personnel filing individual income tax returns. Otherwise, the WHT can only be refunded if the deducted WHT exceeds the income tax that would arise if all employees would file an income tax return in Austria.

Conclusion 

This decision of the Austrian Supreme Administrative Court shows once more the complexity of the Austrian WHT rules regarding the leasing of personnel. To receive the WHT on the part of the remuneration Austria does not have a taxing right on, the provider of personnel must go to great lengths. Proofing that the WHT exceeded the income tax due of the leasing personnel will be costly and the provider might not have all relevant information (e.g. deductible income-related expenses of his personnel). One will have to wait and see how the tax authorities will apply this ruling in practice. Nevertheless, in order to avoid the Austrian WHT on personnel leasing remunerations for personnel working in Austria, implementing a payroll and applying for an exemption certificate beforehand currently seems to be the most efficient and safest option.

If you would like to know more about the rules on leasing personnel working in Austria, please contact the experts of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!

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New tax payment deadline and payment details

In order to ease administration for Latvian companies, since 1 January 2021, all tax payments, including VAT, must be paid to a new unified tax account of the Latvian tax authorities (State Revenue Service, SRS). According to the new Latvian VAT rules, the payment deadline for all regular domestic taxes administered by the SRS is the 23rd day of the month. It means that since 1 January 2021, the new payment deadline also for VAT (which is calculated by submitting regular VAT returns) is the 23rd day of the month following the reporting period (it was previously the 20th day of the following month). When submitting a VAT payment notification (e.g. for purchasing a new means of transport from another EU country or for VAT payable to the budget after deregistration from the Latvian VAT register), VAT must be paid within three working days.

Regarding the tax payments administered by the Latvian customs authorities (import duty, import VAT and excise duty), the existing budget accounts still have to be used. The respective payments to the unified tax account will have to be made only as of 2023.

Input VAT refunds

According to the new VAT rules also a new overpayment refund procedure has to be applied. In the event of an excess of input VAT over output VAT, a refund of VAT must be made by the tax authorities to a taxpayer within 30 days after filing a VAT return. Only in certain cases do the tax authorities have the right to delay the refund of the overpaid VAT. (For example in cases of tax audit or request for additional information).

Reduced VAT rates

The period of application of the reduced VAT rate of 5% for the supply of certain types of fresh fruit, berries and vegetables, including washed, peeled and packaged types, uncooked or otherwise prepared (for example, frozen, salted, dried) is extended until 31 December 2023. Previously, it was set until 31 December 2020.

Pursuant to the new Latvian VAT rules, since 1 January 2021, a reduced rate of 0% VAT applies to the supply of the COVID-19 vaccine, registered in accordance with pharmaceutical regulations and in vitro tests recognised in the European Union and to the supply of services closely related to that vaccine and tests. The provision will be valid until 31 December 2022.

New VAT rules on e-commerce

Latvia has implemented new VAT rules of e-commerce, in accordance with the amendments to Directive 2006/112/EC and will start to apply them as of 1 July 2021. The new rules also include that import VAT will be due on all low-value goods imported into Latvia from non-EU countries (currently, the importation of goods for personal use with a value not exceeding EUR 22 is exempt from VAT).

If you would like to know more about the new VAT rules in Latvia, please visit the homepage of Sorainen, the exclusive partner of WTS Global in Latvia.

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• of the high refund flexibility;
• it is a sort of self-financing, with no negative effect on credit ratings, and
• in comparison to loans granted by associated companies, they are unlimited.

Financing via additional capital contributions 

Additional capital contributions are additional payments made by company owners. Usually, these kinds of payments are foreseen in a company agreement, but this is not mandatory. If there is no clause regarding additional capital contributions in the company agreement, company owners have following options:

• amend the company agreement with a clause on additional capital contributions, or
• amend the company agreement with a clause that foresees a unanimous decision from the company owners that additional capital contributions have to be paid. This is the alternative normally used by company owners.

In compliance with Art. 491 of the Slovene Corporate Law (hereinafter referred to as: ZGD-1), company owners can contribute money, movable or immovable assets, rights, shares or a complete company as an additional capital contribution into their company. Additional capital contributions can only be paid by directly involved associates, and they do not increase common capital stock, shareholdings or initial contributions.

Returning additional capital contributions to company owners 

Additional capital contributions may only be refunded when all material and formal requirements are met. Moreover, in compliance with Art. 495 ZGD-1, refunds are only allowed if the equity capital is positive.

Furthermore, a decision on the refund must be published on the AJPES official website three months before the additional capital contribution is transferred back to the company owners. If an initial contribution of a company owner has not been paid, or at least not fully, the additional contribution is offset against the missing amount of the initial contribution.

Taxation of additional capital refunds since 2020 

The changes regarding additional capital refunds relate to:

• all refunds that are about to be paid back and
• refunds that have already been transferred back to owners.

Refunds can be paid back at the same or at a higher amount than the additional contributions. The amount of the refund is important for taxation purposes.

A) Refund at same amount as contribution

If the refund is the same as the contribution, the company owner gets the invested money back and no benefit has been achieved. Therefore, this kind of refund is tax free. Furthermore, it does not matter if the refund is paid in one or multiple amounts.

B) Refund is higher than contribution

The additional capital refund can be higher than the previous additional capital contribution. In this case, the difference between the refund and the contribution is considered a dividend and is charged with 27.5% tax.

The company paying the dividend has to determine the tax and pay it to the Slovene tax authorities (Form REK-2, income nr. 1923). If the refund is paid to a legal entity, there is no need to assess the tax or report a refund to the tax authorities. Moreover, it does not matter if the refund is paid in cash or not.

C) Sale of shares and additional capital refunds

If an owner decides to sell his share in the company and his additional capital contribution has not been refunded, or no decision about a refund has been made, then the amount of the additional capital contribution is included in the acquisition costs.

Given that a decision about a refund has already been made and this decision has been published on the AJPES website in compliance with ZGD-1, the (previous) owner has a claim against company in the amount of the additional capital contribution.

D) Buying shares and additional capital refunds

In some cases, a new shareholder can get a refund even though the previous shareholder paid the additional capital contribution. This is most common in cases of inheritance or gifts. It rarely happens that a share is sold without refunding the previous additional contribution.

In such a case, the refund is treated as if the additional capital contribution was paid by the new owner. The implications are the following:

• If the refund is the same as the previous additional capital contribution, there is no tax liability.
• If the refund is higher than the previous additional capital contribution, the difference between the two is taxed at 27.5%.

When the additional capital contribution is refunded to the new shareholder, his purchase cost of the share is reduced by the amount refunded. Moreover, the taxpayer (new shareholder) has to assess and pay the tax to the authorities. An income tax return has to be filed by 28 February of the following year.

New rules from 2021: refund reports 

From 2021 all companies have to submit automated refund reports to the Slovene tax authorities. The reporting obligation only applies to refunds of additional capital contributions on the part of individuals. Companies with additional capital contributions on their balance sheet have to submit the following information to the Slovene tax authorities:

• name and surname of the person,
• date of birth,
• tax number,
• country of residence,
• date and amount of additional capital contribution and
• date and amount of additional capital contribution refund.

Companies have time to report information on the above, more precisely, the deadline is 31. January 2021 for the year 2020. Furthermore, companies have to share the status of all additional capital contributions paid by individual associates. The status of additional capital contributions has to be reported via E-davki (Slovenian electronic tax program).

Please note that there is no reporting obligation for refunds handled for legal entities.

If you would like to know more about additional capital contributions and refunds in Slovenia, or you are interested how your company can profit from it, please visit the website of WTS Slovenia and contact the local experts of WTS Global for Slovenia.

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Austria levies withholding tax (WHT) on certain capital income (eg dividends), income of artists, sportsmen, lecturers, architects, technical and commercial consultants, leasing of personnel and certain other items. The procedure for refund of Austrian WHT has been changed in 2019, and at the beginning of the year the Austrian Ministry of Finance (MoF) issued a decree which details the changes for foreign applicants. These are also relevant for foreign companies leasing personnel to Austria when applying for a relief of Austrian WHT and for the refund of Austrian payroll taxes by foreign tax residents as well.

Introduction of the two-step procedure for refund of Austrian WHT 

According to the new regulation in sec 240a General Fiscal Law (BAO) foreign applicants have to file a pre-application using the provided online forms before applying for a refund of Austrian WHT. The following steps have to be taken in order:

• Go to the website of the Austrian MoF and search for “ZS-RD” and you will receive a list of all available forms – all of them are available in English. In case different items of income have been obtained by the applicant, different applications and forms might have to be used.
• Use the respective online form and file it electronically (pre-application).
• The pre-application and the respective delivery confirmation have to be printed out and signed by the applicant. Then the certificate / confirmation of residence has to be obtained from the foreign tax authorities on the printed and signed form.
• The signed and confirmed documents including any supporting documents have to be sent via post to the Austrian Tax Office Bruck, Eisenstadt, Oberwart.

In case the applicant files his first refund request, he will receive an identification number (ABZ-number). This identification number must be used on all future refund requests.

Changes in the deadlines

Until 31. December 2018 foreign applicants were able to file their application during the same year, in which the Austrian WHT was deducted. Now the pre-application and consequently also the actual application can only be filed after the end of the year the WHT has been deducted, leading to respective liquidity costs for the foreign receiver of the income.

The application can be filed until the end of the fifth year following the deduction of the Austrian WHT. However, a shorter term in a treaty might be relevant. This depends on whether the respective treaty was signed before the five-year term entered into force for the first time. For treaties signed before 1975, the five-year term will be relevant, even if the treaty provides for a shorter term. Nevertheless, where a treaty was signed after that date and provides for a shorter statute of limitation – eg 4 years in article 27 (2) of the Austrian-German treaty –, the shorter term of the treaty will be relevant. As the treaty with Hungary does not contain any statute of limitation in this regard, the five-year term of the Austrian national law will be relevant for Hungarian applicants.

Leasing of personnel to Austria

Remunerations for leasing of personnel to Austria are subject to a 20% WHT if paid to foreigners. In order to obtain a WHT relief in such cases, special requirements have to be fulfilled. Among others there has to be an Austrian payroll for the leasing personnel. The payments can only be exempt from Austrian WHT, if the foreign receiver of the income has obtained and provided a notification of relief (Befreiungsbescheid) from the Austrian tax office Bruck, Eisenstadt, Oberwart. In the past it was possible to obtain this Befreiungsbescheid formless. Since 1. January 2019 the electronic forms provided by the Austrian MoF have to be used for this application. Furthermore, the foreign applicant now also has to file a pre-application for the application of the Befreiungsbescheid.

In case a WHT relief at source was not possible – as no Befreiungsbescheid was provided –, the foreign receiver of income can apply for a refund. This application follows the same procedure as for WHT in general.

If you would like to know more about the Austrian WHT or about other tax issues which could be of high importance to foreigners doing business in Austria, please visit the homepage of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!

The post New formalities for refund and relief of Austrian WHT appeared first on WTS Klient | adótanácsadás | könyvelés | bérszámfejtés | HR szolgáltatások | digitális megoldások | állami támogatások.