Tax & Legal News in English | July & August

High Administrative Court on the calculation of the maximum deductible acquisition costs of e-cars  

According to a recent decision of the Austrian High Administrative Court, the maximum tax deductible (adequate) acquisition costs for cars used for business purposes, which is EUR 40,000, is based on the gross price of the car. In case the buyer has the right to deduct the VAT on a purchased e-car, the adequate maximum cost, on which the calculation of the depreciation for income tax purposes is based, is therefore reduced to EUR 33,333.33 (based on the Austrian standard VAT rate of 20%). The Court also addressed the qualification of a right to charge an e-car free of charge (in the case at hand to charge a Tesla e-car at Tesla “Superchargers”) as an independent asset for purposes of income taxation.

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Partial suspension of tax treaty between Austria and Belarus

On 27 March 2024, the Belarussian government partially suspended the double taxation treaty with Austria via verbal note. On 27 June 2024, the Austrian federal government reacted by announcing that the treaty has now also been partially suspended by Austria. As a result of the suspension, both states are free to tax income according to the Articles 10 (dividends), 11 (interest) and 13 (income from the sale of assets) according to their national law. In some cases, this might lead to double taxation. 

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Tax treatment of break up costs in connection with a non-utilized loan

The Austrian Administrative Court (VwGH) recently ruled on the tax treatment of break up costs for a loan that was intended for the acquisition of a shareholding but was eventually not utilized. The VwGH ruled that the break up costs were not to be classified as interest expenses, since the loan was not utilized by the borrower. Since the share purchase in the present case was ultimately financed with equity, the court ruled that the break up costs can be deducted as business expense. The decision shows the complexity and diversity of tax issues that may arise in connection with financing share acquisitions in Austria.

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Austrian Ministry of Finance publishes new decree regarding the suspension of the double tax treaty with Russia

On 8 August 2023, Russia announced the partial suspension of the double tax treaty with Austria, including the protocol. In response, Austria also (partially) suspended the double tax treaty by way of an official announcement dated 6 December 2023. Due to the suspension, double taxation with regard to income from and to Austria/Russia may occur. Hence, the Austrian Ministry of Finance published a new decree dealing with the possibility for granting unilateral relief from double taxation if certain requirements are fulfilled.

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TP in Poland: Shorter deadlines for Polish TP compliance obligations in 2024

Polish transfer pricing (TP) regulations require annual documentation and reporting obligations, such as submitting a Local File with corresponding benchmark studies, a Master File, and a TPR form with a statement on the preparation of the Local File and the application of arm's length prices. In previous years, the deadlines for these obligations were regularly extended. In 2024, the Polish tax authorities are expected not to extend the deadlines in Poland.

Therefore, preparations for the TP documentation should start early, as the creation and processing of new database studies can take several months. 

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Reform of the VAT exemption for small entrepreneurs

The Austrian regulations for the VAT exemption for small entrepreneurs will be effective   from 1 January 2025 onwards. Although the threshold for applying the exemption remains the same, the consequences of exceeding the threshold are changed: VAT will need to be applied to the turnover exceeding the threshold as well as all subsequent turnovers. Turnovers that occurred up until the threshold is reached will remain tax exempt. In addition, it will also be possible for entrepreneurs situated in other EU-member states to apply for the VAT exemption for small entrepreneurs in Austria under certain conditions.

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First increase in deductibility of church contributions starting with 2024

Certain private expenses can reduce the taxpayer's income tax. Such expenses are for example contributions to legally recognized churches and religious communities. The respective maximum deductible amount has remained unchanged since 2012 and has now been increased from  2024 onwards to EUR 600. 

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ECJ to vouchers in VAT law

In its most recent judgement, the ECJ did not explicitly state whether all sales of a single-purpose voucher in a B2B-retail chain must lead to the same result with regard to the place of supply. If this is the case, the fiction rule, which treats every transfer of single-purpose vouchers as an execution of the underlying service, would also apply to cross-border transactions. This would mean that foreign sellers of corresponding vouchers for services to be provided in Austria would be subject to registration and reporting obligation in Austria or, conversely, that domestic sellers for services to be provided in another EU Member State would be subject to registration and reporting obligation there, unless the OSS procedure is used.

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OECD: Pillar One – Amount B

Within the framework of Amount B, the OECD intends to simplify the arm's length pricing of intra-group distribution activities in future. While the implementation of Amount B is basically at the discretion of the individual countries, the countries of the “Inclusive Framework”, including Austria, have agreed to accept its application by certain low- and middle-income countries (“covered jurisdictions”). The OECD has now published a list of these countries. 

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Sanctions in connection with exports and intra-Community deliveries from Italy

If, in the case of exports and intra-Community deliveries from Italy, proof of transport is not sent to the supplier within 90 days in the event of collection, the deliveries will lose their VAT exemption. In addition, a penalty of 50% of the VAT due owed can be imposed on the supplier if the VAT due is not paid within 30 days of the expiry of the 90-day period. For this reason, it is advisable to send the proof of transport to the supplier as soon as possible in cases of collection from Italy so that a VAT liability can be avoided. Otherwise, the supplier can pass on the Italian VAT due to the customer, for which an input VAT deduction may be excluded, and which consequently becomes a cost factor for the customer.

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VAT exemption for donations of groceries

Austria introduces a new VAT exemption for the donation of groceries to charitable organizations effective from 1 January 2025 onwards. The donation of groceries and non-alcoholic beverages to certain charitable organization will be VAT exempt and will also have no adverse effect on the preceding input-VAT deduction for the acquisition of these goods. 

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Deductibility of expenses for a home office

Under certain conditions, expenses for a home office are tax deductible. In order to assess the deductibility, a distinction must be made as to whether the workroom is located inside or outside the residential premises. Expenses for a home office that is located outside the residential premises can only be treated as income-related expenses if the home office is absolutely necessary for the exercise of the profession. In addition, the office must be used (almost) exclusively for professional purposes. These criteria also apply to expenses for a home office that is located within the residential premises. In addition, however, the criterion must be proven that the home office represents the center of all professional and business activities. The mere storage of private items in a home office does not preclude (almost) exclusive professional use.

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Administrative High Court on the admissibility of a horizontal tax group

In its recent decision of 27 March 2024 (Ro 2023/13/2018), the Administrative High Court (VwGH) decided that the provision according to which a foreign company can only be a group parent if it has a domestic branch office is to be qualified as contrary to EU law, as the provision violates the freedom of establishment. The formation of a corporate tax group between two domestic sister companies with a foreign group parent without a branch in Austria was deemed permissible by the Administrative High Court in the present case. However, the function of group parent must remain with the foreign parent company.

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Tax Deadlines in September 2024

For an overview of all Tax Deadlines in September click here...