Doing business in Austria - PKF

expenses that are necessary to generate income are deductible. A
number of major items that are relevant to determine taxable gross
income (according to the Austrian tax regime) are set forth below:
• Capital contributions:
Open and constructive capital are generally treated as nontaxable
income. However, write-offs of receivables against
subsidiaries will be tax effective in the amount of the nonvaluable
part (at the level of the subsidiary this part is
considered taxable income).
• Cost of formation of a company:
is deductible for corporate income tax purposes unless they
exceed the maximum amount fixed by the articles of
association. The excess amount constitutes a constructive
dividend and is therefore not tax deductible.
• Dividends:
Dividends (whether declared or hidden profit distributions) to
shareholders constitute non-taxable income appropriation and
are not tax deductible for the distributing company.
• Interest:
In general, interest expenses are tax deductible. However,
interest payments to related parties may be qualified as
constructive dividend to the extend that the consideration is not
at arm’s length or the underlying debt is qualified as hidden
equity.
• Royalties:
As a rule, royalties are deductible. Corresponding to the rules
on interest expenses, excessive royalty payments the
shareholders or their affiliates are treated as hidden profit
distributions insofar as they do not meet the arm’s length
criteria.
• Write-down of participations:
In principle, participations may be written down to a lower
going-concern value, if necessary. The write-down or a capital
loss in case of the sale of a participation are not tax deductible.
14 PKF - Doing business in Austria - Taxation