Tax & Legal News in English | November

Reduction of the employer’s contribution to the FLAG

The reduction is an opportunity to reduce the monthly ancillary wage costs and thus to relieve the employers to some extent.

The employer's contribution to the FLAG is being reduced from 3.9 % to 3.7 % for the calendar years 2023 and 2024, provided that the reduction is stipulated in a wage-forming regulation. For the private sector, this means that the reduction must be explicitly stipulated in the collective agreement, in a company agreement entitled by the collective agreement or for all employees or certain groups of employees within the company. Without a wage-forming regulation, the contribution rate remains unchanged at 3.9 %, and will be reduced to 3.7% in 2025. 

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New Reporting Obligations for Payment Service Providers from 2024!

As early as 2007, the EU had already adopted the first version of the Payment Service Directive (PSD). Its objective was to regulate payment transactions by companies that are not part of the traditional banking sector. It was particularly intended to enable other companies to offer payment services online to stimulate as well as regulate competition in this part of the financial sector. The growth of the e-commerce and the gig economy has made it increasingly difficult to monitor and tax such transactions.

However, from 1 January 2024, such payment service providers (PSP) will be subject to new reporting obligations. In February 2020, the Council of the European Union approved new measures which will require PSP to collect and report data on cross-border payments from 2024 onwards. Hence, payment service providers shall prepare their organizations for these new obligations at an early stage in order to be able to comply with the new reporting obligations starting 1 January 2024.

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No Refund for “Cum”-Acquisitions

According to the VwGH (Administrative High Court), the right to a refund for the capital gains tax on dividends is only permitted if the applicant was (already) a beneficial owner at the time of the decision on the distribution of profits. With its decision of 28 June 2022, Ro 2022/13/0002, on the issue of the refund of capital gains tax on so called “cum-ex” transactions, the Administrative High Court introduced a new hurdle in the processing of refund procedures and refuses to refund the capital gains tax on dividends in the case of “cum”-acquisitions.

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Sale of a word and design mark by shareholder-managing directors to their limited liability company (GmbH)

In its decision of 3 March 2022, Ra 2020/15/0031, the Austrian Administrative High Court (VwGH) dismissed an appeal because, there was no legal question of fundamental importance. In its reasoning, the Administrative High Court stated that the sale of the word and design mark by the shareholders to their own corporation (limited liability company) was to be classified as no third-party transaction, as the limited has prior-ranking property rights as a result of the registration of the company name in the Austrian Companies’ Register. The lack of an arm's length principle is also to be affirmed from an economic point of view.

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Administrative High Court on the power of disposal as a prerequisite for the establishment of a permanent establishment

In its decision from 22 June 2022, Ro 2020/13/0004-7, the Administrative High Court emphasized that the possibility of using a desk at the premises of another taxpayer is not sufficient to affirm the power of disposal over a fixed place of business and thus the establishment of a permanent establishment. In literature, this decision was interpreted as a general rejection of the home office permanent establishment. Indeed, the decision provides yet another reason to take a critical view on the establishment of a permanent establishment by activities in a home office, which had already been largely rejected in the literature. However, it is questionable whether the decision will actually lead to a rethink in tax auditing practice. As long as the Federal Ministry of Finance does not indicate a change from its previously held opinion, it is still necessary to examine in each individual case whether there is a tax risk of establishing a permanent establishment by working in a home office. 

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German BFH decision on retrospective lump-sum transfer pricing adjustments for affiliated companies ("Hamamatsu Case")

In its decision of 17 May 2022 (VII R 2/19), the German Federal Fiscal Court (BFH) follows the ruling of the ECJ (C-529/18) and refuses to refund import duties if the transaction value is to be adjusted retrospectively by a lump-sum transfer pricing adjustment, whereby neither the amount is determined in advance nor whether the adjustment will be upward or downward. Furthermore, this also applies to the customs valuation according to the fall-back method.

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Invalidity of the notarial deed in case of failure to read it aloud

The Austrian Supreme Court recently ruled that a notarial deed that is not read out before signing, loses the legal character of a public deed. However, it is not necessary for all parties to be present at the same time as the notarial deed is drawn up and signed. If conditions for exercising call options are agreed upon, these are also subject to the notarial deed obligation, as they are not mere ancillary agreements.

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Application of the progression clause in the source state

In its decision of 7 September 2022, Ra 2021/13/0067-5, the Administrative High Court emphasized that the progression clause can also be applied in cases in which there is unlimited tax liability in both contracting states, but Austria is only the source state due to foreign residency according to the underlying Double Tax Treaty (DTT). According to the Court, the – in this case – relevant DTT between Austria and Turkey does not prohibit the source state from applying the progression clause. Thus, the progression clause stipulated for taxpayers with unlimited tax liability must be applied. So far, the progression clause - in the case of DTTs applying the exemption method - was only applied to taxpayer’s resident in Austria under treaty law in accordance with administrative practice. The decision of the Administrative High Court is thus in contradiction to previous administrative practice.

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UBO: Public access to UBO register is not permitted!

In a recent ruling (C-37/20, C-601/20), the ECJ declares that the legal provision for public access to the UBO registers is invalid. The ECJ justified the invalidation with the interference with the right to respect for private life (Art 7 Charta of Fundamental Rights of the EU, “CFR”) and the right to protection of personal data (Art 8 CFR). The interference is neither necessary nor proportionate. Due to the primacy of application of the CFR, Article 10 Austrian UBO law (“WiEReG”) is therefore not to be applied in its current version. Consequently, the authority responsible for the UBO register immediately suspended the public access to the UBO register. It remains to be seen whether the EU will issue a new regulation for the public access.

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Energy Crisis Contribution – electricity/fossil energy sources

A legislative draft of the Council Regulation (EU) 2022/1854 has been proposed in the Austrian National Council on 18 November 2022. Main points are as follows:

Energy crisis contribution – electricity (“Energiekrisenbeitrag Strom”)

• Various exemptions, eg for pumped storage power station or sale of electricity used for congestion management purposes

• Monthly surplus proceeds from 1 December 2022 to 31 December 2023 are used; Contribution 90 % of monthly surplus proceeds.

• Generally, upper limit for market revenues of 140 euros per MWh of electricity; if direct investment and operating costs are higher than EUR 140/MWh of electricity, costs plus surcharge of 20 % are set as upper limit for market revenues. However, capped at EUR 180.

• Deductions from energy crisis contribution for investments in renewable energies are allowed:
  • acquisition or production between 1 January 2022 and 31 December 2023
  • 50 % of actual acquisition/productions cost
  • Capped at EUR 36 per MWh of electricity

• The operator of a generation plant with an installed capacity of more than 1 MW is liable for the contribution.

• The contribution has to be calculated by the tax debtor himself and paid to the tax office

• Further details, especially regarding the consideration of investments, plausibility check by Energie-Control Austria as well as recording and transmission obligations, shall be determined in an ordinance.

Solidarity contribution: energy crisis contribution - fossil energy sources (“Energiekrisenbeitrag – fossile Energieträger”)

• Collection period: second half of calender year 2022 and calender year 2023

• Reference period: 2018 - 2021

• The contribution shall be based on taxable profits (by which it is more than 20 % of average profits of the last few years); Contribution 40% of the assessment base.

• Deductions from energy crisis contribution for investments in renewable energies are allowed:
  • acquisition or production between 1 January 2022 and 31 December 2023
  • 50 % of actual acquisition/productions cost
  • Capped at 17.5 % of contribution

• Further details, assessment for companies with different financial year or short fiscal year as well as procedure for reorganizations, shall be determined in an ordinance.

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