International Tax Newsletter - Spring/Summer 2012 - Austria
To consolidate its budget, the Austrian government recently drafted an austerity budget, to which no substantial changes are expected:
1. Solidarity contribution for higher earners
Employees earning more than EUR 185,000 gross per year will lose the preferential tax rate of 6% on 1/6th of their annual income. The tax on these earnings will be raised on a sliding scale up to 50%.
The equivalent in the self-employed sector (13% tax-free allowance) will, accordingly, be reduced on a sliding scale down to zero for profits of EUR 175,000 or above.
These measures are planned for a limited period from 2013 to 2016.
2. Property sales tax
To date, taxes on property sales profits in the private sector were untaxed after expiry of a speculation period of ten years. From 1 April 2012 these profits will be taxed at 25%.
In terms of constitutional law, the new regulation appears to be problematic regarding its retroactive applicability, as even those properties that were already outside this speculation period – and therefore tax-exempt – would, under this ruling, be liable for taxation if sold after 1 April 2012. A lower tax rate would, however, apply in these cases.
Under the new ruling, it will be possible to balance losses from the profits of property sales only with gains from property sales and not with profits from other income. Furthermore, expenses will not be offsettable.
As before, tax exemptions are to apply for speculation with principal residences and self-erected buildings.
This property sales profits tax is to apply to tax payers both with full and with limited tax liability (i.e., tax payers who own property but do not have a residence or habitual abode in Austria).
In the commercial sector, sales profits from property were already taxable. Here, the tax rate will be reduced from the previous level of up to 50% down to 25% to equalise property sales tax in the private and commercial sectors.
Following the introduction in 2011 of the general taxation of sales profits from capital assets, this almost completely removes any options for keeping the profits from the sale of private assets free from taxation.
3. Group taxation
For foreign group members, the options for utilisation of losses will be limited. Foreign loss must already be converted to Austrian conditions. As of 2012, the loss is to be limited with the foreign sum, i.e., even if the loss as converted to an Austrian scale is higher than the foreign loss, only the foreign loss can be utilised.
In letting business premises it was, to date, possible to opt for VAT liability on the rent income to take advantage of an input tax deduction from the purchase or erection of the property. After the expiry of the ten-year observation period, a switch to tax-free letting was possible without losing the input tax deduction applicable at the time.
As of 1 April 2012, the option of tax liability is to be possible only if the tenant qualifies for full tax deduction. Furthermore, the period in which the input tax must be paid back aliquot will be extended from currently 10 years to 20 years.
5. Research premium
Stricter reviews of the eligibility for receipt of the premium are planned; in this context contract research (research carried out not in-house but subcontracted to another organisation) is to be raised from currently EUR 100,000 p.a. to EUR 1 million p.a. (as of 2012).
More information on these developments can be provided by Michaela Moosburger, PKF Corti & Partner GmbH, through the EisnerAmper contacts listed at the end of this Newsletter.
International Tax Newsletter - Spring/Summer 2012 Issue