Corporate Tax 2010 - BMR Advisors

Wolf Theiss Attorneys-at-Law
Austria
Austria
22
The top-tier company in a tax group may be:
a company with its legal seat or place of management in
Austria;
a company with its legal seat and place of management
outside of Austria (non-resident company), provided the nonresident
company has a permanent establishment in Austria
registered in the commercial register and the required
participations are attributable to such permanent
establishment; or
a consortium consisting of two or more companies as
specified above (whether structured on a company law basis
or on a purely contractual basis), provided that one
consortium partner has a participation of at least 40% and
each of the other consortium partners has a participation of at
least 15%.
Members of a tax group may be:
resident companies; or
non-resident companies, if the participations in such nonresident
companies are exclusively held by resident
companies in the tax group or the top-tier company in the tax
group (i.e. whereas resident companies of all tiers may be
included in a tax group, only first-tier non-resident
companies are allowed).
The formation of a tax group results in 100% of the taxable income
of each resident member of the group being attributed to the top-tier
company in the tax group. In the case of non-resident companies
that are members of a tax group, only the negative income (i.e.
losses) of such companies is attributed (on a prorated basis) to the
top-tier company (the utilisation of foreign losses is only of a
temporary nature, with a claw-back provision applying).
4.6 Is tax imposed at a different rate upon distributed, as
opposed to retained, profits
No, there is no difference in the tax rate in this respect.
4.7 What other national taxes (excluding those dealt with in
“Transaction Taxes”, above) are there - e.g. property taxes,
etc.
Immovable property located in Austria is subject to real estate tax.
The real estate tax is levied at a basic federal rate (0.2%), multiplied
by a municipal coefficient (up to 500%). The tax basis is the tax
value of the property, which is generally substantially below its
actual fair market value.
4.8 Are there any local taxes not dealt with in answers to
other questions
There are no other significant local taxes.
5 Capital Gains
5.1 Is there a special set of rules for taxing capital gains and
losses
In Austria, there is no separate capital gains tax. Rather, capital
gains are considered as normal business income and are thus subject
to corporate income tax.
One of the exceptions to the general rule of the taxability of capital
gains relates to participations in foreign subsidiaries falling under
the international participation exemption (as defined below in
question 5.3). Capital gains realised by a parent company on the
disposal of shares in an international participation, as well as capital
losses realised by a parent company on the disposal or writing-off
to the lower fair market value of such shares, are tax neutral, i.e.
capital gains are not taxable and capital losses as well as writedowns
are not tax-deductible. However, capital losses resulting
from the liquidation or insolvency of a non-Austrian subsidiary
remain tax deductible to the extent they exceed the amount of any
tax-exempt dividends received during the last five business years.
Alternatively, instead of tax neutrality, the Austrian parent company
may opt to treat capital gains and capital losses as tax effective, i.e.
capital gains are taxable and capital losses tax deductible. Such
option may be exercised separately for each participation held, in
the corporate income tax return filed for the year in which the
participation is acquired. Once the option has been exercised it
cannot be revoked.
5.2 If so, is the rate of tax imposed upon capital gains
different from the rate imposed upon business profits
Capital gains are considered as normal business income and thus
subject to a corporate income tax rate of 25%, unless they are
exempt under the international participation exemption.
5.3 Is there a participation exemption
As already mentioned above in question 5.1 capital gains realised
by a parent company on the disposal of shares in an international
participation, as well as capital losses realised by a parent company
on the disposal or writing-off to the lower fair market value of such
shares, are tax neutral. The following conditions must be fulfilled
for the international participation exemption to apply:
either an Austrian company, e.g. a limited liability company
or a stock corporation, or a comparable foreign company
subject to Austrian unlimited corporate income taxation (i.e.
a dual-resident company);
demonstrably holds a participation, whether direct or indirect
(i.e. through a tax-transparent partnership), in the form of
(voting or non-voting) shares (or, alternatively, of equitytype
profit participation rights);
of at least 10% of the stated share capital of the foreign
subsidiary;
for a minimum duration of one year; and
with the foreign subsidiary having one of the legal forms
listed in the annex to the Directive 90/435/EEC or being
legally comparable to an Austrian corporation.
In certain cases, where there are reasons to suspect tax avoidance or
abuse of law, the exemption does not apply, namely if (i) both of the
following two criteria are fulfilled or (ii) one of the following two
criteria is “strongly” fulfilled and the other is “nearly” fulfilled:
the foreign subsidiary predominantly focuses on earning,
directly or indirectly, interest income, income from the
letting of moveable tangible or intangible assets or income
from the sale of participations; and
the foreign subsidiary’s income is not subject to foreign tax
comparable to the Austrian corporate income tax in respect
of the calculation of the taxable basis or in respect of the tax
rates.
For the sake of completeness it should be noted that there is also an
exemption for dividends received from Austrian and certain non-
Austrian corporations.
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