Corporate Tax 2024 Comparisons

Businesses in Austria are typically carried out via a limited liability company (Gesellschaft mit beschränkter Haftung or GmbH) or – to a lesser extent, typically in the case of a listed company – via a joint-stock company (Aktiengesellschaft or AG).

Under a GmbH, the shareholders are authorised to give instructions to a managing director, there is typically a low degree of fungibility of shares and a wider range of possibilities for the design of the articles of association.

Under an AG, a supervisory board and a management board are mandatory, with both operating independently from the shareholders regarding the business decisions. There is typically a higher degree of fungibility of shares.

A GmbH or AG are separate taxpayers for Austrian corporate income tax purposes.

With the Corporate Amendment Act 2023, a new legal form, the so-called “flexible company” (FlexCo) was introduced in 2024. A simplified internal decision-making process of the shareholders and the possible creation of so-called “company value shares” intends to facilitate the corporate participation of employees. The legislator describes the FlexCo as a hybrid form between a GmbH and an AG since the FlexCo provides for the possibility of holding own shares as well as certain flexible capital measures.

Generally, shareholders of corporations are not liable for the liabilities of the companies, unless in very exceptional cases (eg, in case of effective management of the corporation by a shareholder).

In Austria, tax-transparent entities typically used are the general partnership (Offene Gesellschaft or OG) and the limited partnership (Kommanditgesellschaft or KG).

An OG is a type of partnership entity consisting of at least two individuals or legal entities. Each of the partners in an OG bears personal, unlimited, direct and joint liability to the partnership’s creditors for its obligations. In contrast to incorporated entities, OGs may be set up without any initial capital. An OG comes into legal existence as soon as it is entered into the Commercial Register. The OG possesses a legal identity from a civil law perspective (whereas it is transparent from a tax law perspective) and constitutes an independent entity with rights and obligations vis-à-vis external parties.

In contrast to an OG, in a KG not all of the partners bear full and unlimited liability for the partnership’s obligations. Rather, it is only required that there be (at least) one general partner (Komplementär) who – just as in the case of an OG – bears unlimited liability to the partnership’s creditors (the “general partner”). The remaining partners can have limited liability vis-à-vis the creditors; they are referred to as limited partners (Kommanditisten). The liability of each limited partner ends as soon as their limited partnership share (liability share) has been fully paid in. Only the liability share is registered and public.

A special form of KG is that of the GmbH & Co KG: The characteristic of this form is that its sole personally liable general partner is a GmbH. In a typical setup, the shareholders of the GmbH are, at the same time, also limited partners of the KG. In a typical GmbH & Co KG, sole management and representation authority over the KG is vested in the GmbH acting as the general partner. The GmbH, in turn, is represented by its managing director(s). This means that the duty of the GmbH’s managing director(s) is/are to manage the affairs of the GmbH & Co KG and fulfil all the related obligations.

According to Austrian corporate income tax law, a corporation with its registered seat or place of management in Austria is subject to unlimited tax liability. The registered seat of a corporation is deemed to be located at the place stipulated in the articles of association and registered in the commercial register. The place of management is deemed to be where the corporation’s senior management takes its executive decisions.

Double taxation treaties (DTTs) regulate that the place of effective management is decisive in the case of a dual residence of a corporation (the “tie-breaker rule”). Important elements for determining this place are, for example, the residency of board members and the location of board meetings.

Taxation of Corporations

The income of a corporation is qualified as business income that is subject to corporate income tax (Körperschaftsteuer) to a tax rate of 23% (since 2024). If the remaining income is subsequently distributed to the shareholders (as distribution of profits/dividends), then those already taxed profits are taxed again at the level of the receiving shareholders (principle of separation or Trennungsprinzip).

Taxation of Partnerships

Partnerships such as an OG or KG are transparent for income tax purposes (no taxation at the level of the partnership) so that profits and losses are directly taxed at the partners’ level and the applicable tax rate depends on whether the partner is a corporation (23% corporate income tax) or an individual (progressive tax rate up to 55%). The assets, liabilities and income of the partnership are generally allocated to the partners in proportion to their partnership interests.

Individuals

The taxation of the income of individuals (who own a business or are a partner in a transparent partnership carrying out a business), generated by themselves or through the partnership, generally depends upon their personal tax rate; the progressive tax rates range with the following brackets and rates for 2024:

• up to EUR12,816 – 0% tax rate,
• EUR12,816 to EUR20,818 – 20% tax rate;
• EUR20,818 to EUR34,513 – 30% tax rate;
• EUR34,513 to EUR 66,612 – 40% tax rate;
• EUR66,612 to EUR99,266 – 48% tax rate;
• EUR99,266 to EUR1 million – 50% tax rate; and
• over EUR1 million – 55% tax rate (until 2025).

However, special tax rates apply for income from capital investments and income from the alienation of private real estate:

Income from capital investments (eg, dividends or capital gains from the sale of shares in a corporation) are taxed with 27.5%. The application of this special tax rate has the disadvantage that income-related expenses or operating expenses which are directly connected with the income from capital investments may not be deducted.

Income from the alienation of private real estate is taxed with 30% real estate sales tax (with certain tax exemptions and reductions being available).

Corporations determine their income through the comparison of business assets and annual financial statements. Business profits and expenses are not calculated in the period in which they are actually received or paid, but rather are attributed to the specific period in which goods are delivered or services rendered (“accrual method”).

Corporations are legally obliged to keep books according to the accounting standards set in in commercial law and these standards are generally also binding for tax purposes (Grundsatz der Maßgeblichkeit). However, there are some deviations between commercial law rules and tax law rules, especially in terms of the main principles of asset valuation and the depreciation of assets.

In Austria an R&D tax credit (so-called Forschungsprämie) is available for companies that have project-related R&D expenses. The maximum tax credit is EUR1 million per year.

Its evaluation is carried out by the Austrian Research Promotion Agency (Forschungsförderungsgesellschaft or FFG), based on the project proposal.

This tax credit is being acknowledged as a high incentive to undertake R&D activities by Austrian companies as this grant is treated as an immediate cash credit on a company’s tax account.

Austria allows an investment allowance (Investitionsfreibetrag) for depreciable fixed assets acquired after 31 December 2022. Pursuant to this rule, 10% of the acquisition or production costs of such assets can be deducted as a tax allowance. In case the asset qualifies as being related to greening or environmental measures, the investment allowance is 15%. The maximum acquisition or production costs of EUR1,000,000 per year can be used as the basis for this allowance.

The utilisation of losses as special expenses is possible for corporations.

Firstly, the positive and negative income of one year is netted. Secondly, corporations may choose to carry forward the losses indefinitely. However, only 75% of the total amount of income of the taxable year is tax deductible and the remaining losses can be carried-forward to the following years.

A special restriction for corporations using carried-forward losses exists in case of buying unprofitable “shell companies”: The utilisation of losses will be denied in case significant changes (i) in the shareholder structure (eg, >75% of the shares in the corporation are sold), (ii) in the organisational structure (eg, new managing board) and (iii) in the economic structure (eg, new business model) of a corporation are made within a short period of time.

As a measure against the COVID-19 crisis, a temporary carry-back of losses was implemented. Operating losses for the year 2020 could be used for the tax assessment of the year 2019 and remaining losses for the year 2020 could be deducted from the income of the year 2019 (up to a maximum of EUR5 million) and 2018 (up to a maximum of EUR2 million). The 75%-limitation rule did not apply.

At arm’s length interest expenses are in principle be deductible for Austrian corporate income tax purposes. A number of interest deduction limitation rules have to be observed to determine if interest expenses are deductible in the case at hand. The most important rules are:

• Interest arising from the leveraged financing of acquisition of participations is tax deductible, as long as the participation is part of a corporation’s business assets. Interest is not deductible if the participation is acquired by corporation from the same consolidated tax group.
• Interest deduction is not allowed in case the corporation receiving the interest payment is a member of the same group of companies or significantly influenced by the same shareholder, such as the corporation paying the interest and at the level of the receiving corporation, the interest income is not subject to taxation at all or only subject to a tax rate of less than 10%.
• With effect from 1 January 2021, Austria implement the EU Anti-Tax Avoidance Directive and introduced a new interest limitation rule (so-called “Zinsschranke”). This new rule cap the deduction of borrowing costs (net interest expenses) at 30% of the taxable result (the tax-relevant EBITDA). The new interest limitation rule covers all borrowing costs, irrespective of whether these are incurred in relation to unrelated third parties or within a group.

Austrian tax law recognises consolidated tax grouping for corporate income tax purposes by enabling groups of corporations to offset the losses and profits within a group of subsidiaries at the parent company level.

Group taxation requires a group parent. Regarding group members, a share in the statutory capital and the voting rights of that group member of more 50% is necessary. The participation may be either held directly or indirectly through another group member or a partnership. All Austrian corporations as well as comparable foreign corporations which are resident in the EU or in a state which has concluded an agreement for exchange of information and mutual assistance in the collection of taxes with Austria may qualify as a group member. An application for group taxation must be submitted to the group parent’s competent tax authority and the tax group needs to exist for a period of at least three full years.

As a consequence of group taxation, the total profits or losses of the group members are attributed to the group parent corporation. In relation to local group members, the degree of participation of the latter is not relevant, ie, the total profits or losses of a group subsidiary are subject to attribution even if the participation is less than 100%. However, profit attribution rules for foreign group members to Austrian group members are different. If a foreign subsidiary generates a loss, this loss has to be allocated to the group parent corporation on a pro-rata basis depending on the percentage of the participation in the foreign subsidiary.

Capital gains (and losses) realised on assets of an Austrian corporation are considered normal business income that is taxable at the statutory tax rate (23% corporate income tax), unless it concerns a capital gain on a shareholding that meets the requirements to apply the participation exemption.

Under the international participation exemption, capital gains and dividend income from qualified shareholdings are fully exempt from the Austrian corporate income tax base.

Under the domestic participation exemption, profit distributions of domestic corporations are exempt from taxation and this exemption applies without any minimum holding requirements and holding periods. However, capital gains realised on the alienation of shares in domestic corporations are subject to regular taxation.

Enterprises, be it transparent or opaque, may become subject to value added tax (VAT) when providing services or selling goods in Austria.

Real estate transfer tax (RETT) applies to an exhaustive list of domestic real estate transactions. The main rule covers purchase contracts or similar transfer agreements. RETT also applies where the right to dispose of 95% or more of the shares or the accumulation of 95% or more of the shares of a corporation or partnership holding immovable property in Austria is transferred to one hand or to a tax group.

Incorporated businesses are generally subject to VAT. However, they are usually able to claim input VAT as well. The general VAT rate is 20%, but a reduction to 10% is available for some products and services.

Closely held local businesses are mostly structured as limited liability companies (GmbH) in Austria.

The income from self-employment (ie, business profit) is subject to the overall progressive income tax rate of up to 55%.

The income (profit) of a corporation is subject to 23% corporate income tax (first level) and profit distributions are subject to 27.5% capital gains tax at shareholder level (second level). In case the shareholder also acts as a managing director of the corporation, the directors’ fees are subject to the progressive tax rate and only an at arm’s length remuneration is deductible at the level of the company. Excessive fees or benefits to shareholders (eg, directors’ or management fees) or affiliates are treated as non-deductible hidden profit distributions.

There are currently no measures in place to prevent corporations from accumulating earnings for investment purposes.

There are no special taxation rules for closely held corporations; the general rules apply.

Where shares are part of the private assets of an individual, capital income from dividends and the alienation (eg, sale) of shares are taxed at a flat tax rate of 27.5%. Capital gains on the sale of shares are also taxed at this flat tax rate if the individual’s stake is below 1%.

These rules also apply for shareholdings in not publicly traded corporations.

The withholding tax (WHT) is principally levied on dividends at the applicable tax rate for individuals (27.5%) or corporations (23%).

EU corporations that are subject to a limited tax liability benefit from the Parent-Subsidiary Directive, under which they may obtain a 100% tax exemption for dividends.

• There is no obligation to withhold and pay WHT in Austria (so-called “relief at source”) if (i) a profit distribution is made by an Austrian corporation, (ii) the EU recipient corporation holds at least one tenth of the share capital of the Austrian subsidiary and (iii) a minimum holding period of one year is observed.
• There is nevertheless an obligation to withhold and pay WHT in Austria if there are reasons to suspect abuse. Abuse is assumed, in particular, if the EU recipient corporation has no function and its sole purpose is to avoid Austrian WHT. In order to rule out such a suspicion of abuse, the EU recipient corporation must submit a written declaration to the Austrian corporation that it (i) carries out an activity that goes beyond the scope of asset management, (ii) employs its own staff and (iii) has its own business premises (so-called “proof of substance”). These declarations can be submitted on a form provided by the Austrian Federal Ministry of Finance. On this form, a certificate of residence of the EU recipient corporation must also be obtained from the competent EU tax office promptly after the profit distribution.
• If proof of substance cannot be provided by the EU recipient corporation (which will often be the case with a holding company or an acquisition vehicle), relief at source is generally not possible and the Austrian corporation would have to withhold WHT on the distribution and pay it to the Austrian tax office. The EU recipient corporation would then still have the option of an application for a refund of the WHT to the Austrian tax office from the following year. In such a refund procedure, the Austrian tax office would check whether there is actually abuse or whether the conditions for an exemption from withholding tax are met and therefore the WHT is to be refunded to the EU recipient corporation. As soon as a refund is granted, relief at source can subsequently be granted for three years under certain conditions. 

The dividend WHT can also be reduced at source under the applicable double taxation treaties (DTTs) in accordance with the formal requirements laid down in the DBA-Entlastungsverordnung. A recipient seeking to reduce the dividend WHT will have to provide a certificate of residence issued on Austrian forms “ZS-QU1” (for individuals) or “ZS-QU2” (for legal entities). Additionally, legal entities must also satisfy the relevant substance requirements as mentioned above. The DBA-Entlastungsverordnung limits the dividend WHT exemption at source in certain cases – for example, foreign foundations, trusts and investment funds do not qualify for dividend WHT exemption at source. Austrian corporate income tax law further includes a special provision that allows a foreign entity to apply for a refund of the total Austrian WHT – including the share of WHT that Austria is entitled to tax under the relevant DTTs – if the foreign entity is unable to credit the Austrian WHT in its country of residence (eg, because the dividend income is exempt).

At EU level, further provisions and limitations regarding WHT are expected under the new rules of the Unshell Directive and the FASTER Directive.

The most common tax treaty countries are Germany, Luxembourg, UK and Switzerland.

Austrian tax law has several anti-treaty shopping clauses to prevent the abuse of DTTs. Austrian tax authorities check whether an entity claiming tax relief with reference to a tax treaty generates its income through its own activities and whether there are considerable reasons to act via the tax-privileged entity in question. Furthermore, there are subject-to-tax clauses that prevent certain income from being taxed in either of two treaty countries.

The main issue in tax audits regarding transfer pricing is ensuring compliance with the arm’s length principle. Other issues are the examination of the transfer pricing methodologies chosen, the assessment of the attribution of beneficial ownership in the companies’ assets as declared, and ensuring the fulfilment of formal requirements when issuing the obligatory reports.

The Austrian tax authorities strictly apply the at arm’s length principle as included in Austrian tax law, in most double taxation treaties and elaborated on in the OECD’s Transfer Pricing Guidelines, as amended under BEPS. Therefore, transactions between affiliated companies should be at arm’s length, while proper documentation should be available to substantiate the at arm’s length nature of the transactions.

All transactions within a group of companies must meet the requirements of the arm’s length principle.

Austria makes explicit reference to the OECD standards in the guidelines issued by the Ministry of Finance.

Austria generally follows the OECD’s Transfer Pricing Guidelines.

Austria has concluded DTTs with more than 90 countries. Most of these DTTs follow the OECD Model Convention, which contains provisions on mutual agreement procedures (MAPs).

International transfer pricing disputes are usually resolved through a MAP process.

In those cases in which a taxpayer exercises economic activities in state with which Austria has not yet concluded a DTT, the Austrian Ministry of Finance may mandate that taxpayers, who are subject to double taxation may partly or fully exempt certain items of taxation.

Generally, in case a transfer pricing claim is settled, the Austrian tax authorities act in accordance with the settlement.

However, compensating adjustments must be based on a previously agreed pricing method that is applied in predefined scenarios of uncertainty and must lead to an “arm’s length” result.

Local branches (permanent establishments in fiscal terms) are generally taxed on the basis of the same rules and principles as subsidiaries of non-local corporations.

In practice, there are usually problems, or at least discussions, regarding the allocation of income/expenses and assets.

Austrian income tax law differentiates between unlimited and limited tax liability. Non-residents are subject to limited tax liability with the consequence that only that income which was generated in Austria (including domestic capital gains) is subject to Austrian income taxation. Generally, capital gains are subject to capital gains tax (27.5% for individuals and 23% for corporations).

However, in the case where the shareholder is resident in a country with which Austria has concluded a double taxation treaty, depending on the specific treaty, Austria may be prohibited from levying capital gains taxation.

In order to avoid the buying of shell companies for the purpose to make use of the losses saved up in this corporation, the utilisation of such losses is denied in case the identity of the corporation changes due to a change in the organisational, economical and shareholder structure. Thus, a change of control might result in the forfeiture of tax losses carried forward.

Furthermore, RETT applies where the right to dispose of 95% or more of the shares or the accumulation of 95% or more of the shares of a corporation or partnership holding immovable property in Austria is transferred to one hand or to a tax group.

No specific formulas are used to determine the income of foreign-owned local affiliates selling goods or providing services, but it must be ensured that the determination follows the arm’s length principle.

There are no specific rules regarding deductions for payments by local affiliates for management and administrative expenses incurred by a non-local affiliate. However, in general, the arm’s length principle and the transfer pricing rules must be taken into consideration.

Any borrowing between related parties must comply with the arm’s length principle.

To distinguish between a shareholder loan recognisable for tax purposes (with interest deduction) and hidden equity the Austrian Administrative Court states that agreements between related parties are only recognised if they fulfill the following three criteria (so-called “relatives’ case law”). The agreement:

• must be sufficiently expressed externally (in writing);
• must have an unambiguous content; and
• must be concluded in accordance with the arm’s length principle, meaning on terms that unrelated parties would have agreed upon.

These three criteria must be cumulatively present at the time of the conclusion of the agreement and the lack of one of these three conditions results in the tax invalidity of the agreement (with the consequence that interest is not deductible).

A corporation with its registered seat or place of management in Austria is subject to unlimited tax liability, which means the corporation’s worldwide income (all domestic and foreign profits) is subject to corporate income tax in Austria.

Foreign income (eg, profits of a permanent establishment) are part of the taxable income in Austria. Since foreign income will generally also be taxed in the other state, double taxation is avoided with double tax treaties (DTT). If a DTT applies, the regulations laid down therein have priority.

In case foreign income is tax exempt in Austria, the corresponding expenses that are economically directly connected to such income are not deductible in Austria.

Under Austrian law, capital gains (eg, profit distributions in form of dividends) are generally subject to corporate income tax. However, dividends from domestic subsidiaries are tax exempt because of the participation exemption and foreign dividends as well as capital gains from foreign subsidiaries are generally tax exempt under certain conditions.

Dividend income distributed to an Austrian corporation is tax exempt under the following conditions: A minimum participation in the foreign subsidiary (which needs to be comparable to an Austrian corporation) of at least 10% and holding period of one year without interruption. The exemption is not limited to dividends from EU corporations as profit distributions from subsidiaries in third states are exempt as well the requirements are met. Austria thereby exceeds the scope of the Parent-Subsidiary Directive.

Furthermore, in case an Austrian company holds less than 10% of a foreign subsidiary, and the subsidiary is resident in the EU, profit distributions (“portfolio dividends”) are exempt from corporate income tax as well.

Intangibles may be transferred or let (royalties) at arm’s length conditions, resulting in taxable income (transfer price or royalties) at standard rates.

As part of the implementation of the EU Anti-Tax Avoidance Directive, Austria introduced a controlled foreign companies (CFC) regime on 1 January 2019, which leads to the attribution (taxation in Austria) of low-taxed passive income from foreign subsidiaries under the following conditions.

The CFC rules apply if:

• an Austrian parent corporation (subject to unlimited tax liability) holds directly or indirectly more than 50% of the voting rights or capital of a controlled foreign subsidiary or is entitled to more than 50% of the controlled entity’s profit; 
• the controlled foreign subsidiary does not conduct “substantial economic activity” supported by staff, equipment, assets, and premises; and
• more than a third of the controlled entity’s profits stem from low-taxed “passive income”.

“Passive income” is defined as:

• interest or any other income generated by financial assets; 
• royalties or any other income generated from intellectual property;
• dividends and income from the disposal of shares, insofar as they would be taxable;
• income from financial leasing;
• income from insurance, banking and other financial activities; or
• income from invoicing companies that earn sales and service income derived from goods and services purchased from, and sold to, associated enterprises, and add no or little economic value.

The income is considered low-taxed if it is taxed at an effective tax rate which does not exceed 12.5%.

In addition, Austria also has a so-called “switch-over” rule for dividends distributed from low-taxed subsidiaries to Austria. Pursuant to this rule, received dividends will not be subject to the participation exemption but (under certain conditions) will be subject to regular corporate income tax and the tax levied in the source state will be credited (switch from exemption method to credit method). The switch-over rule does not apply if the passive income has already been covered by the CFC rules mentioned above.

The CFC-rules described above only apply in case the controlled foreign subsidiary does not conduct “substantial economic activity” supported by staff, equipment, assets, and premises. Thus, it would be possible to avoid the attribution of such foreign passive income (and taxation in Austria) by providing evidence of such “substantial economic activity” supported by staff, equipment, assets, and premises (so-called “substance test”).

The gains made by local corporations on the sale of shares in non-local affiliates are tax exempt in case the two conditions mentioned above are met: A minimum participation in the foreign subsidiary (which needs to be comparable to an Austrian corporation) of at least 10% and holding period of one year without interruption.

Section 22 of the Austrian Federal Fiscal Code provides for a general anti-avoidance rule that applies in the case of abusive tax structures.

Tax planning may reach a point beyond which it cannot be tolerated, ie, where transactions are entered into, or entities are established, solely for the purpose of obtaining special tax advantages. A legal structure is inappropriate or unusual and therefore an abusive tax structure if it only makes sense when taking into account the related tax-saving effect since the main purpose or one of the main purposes is to obtain a tax advantage that defeats the object or purpose of the applicable tax law.

Individuals are also covered by the general anti-avoidance rule (Section 22 of the Austrian Federal Fiscal Code). The provision was introduced in new version in 2018 and clearly follows the ATAD in the decisive passages. The legislative materials for Section 22 also reveal the implementation of the ATAD as the legislator’s clear main objective.

Austria has no periodic routine audit cycle. Tax audits are typically carried out at the discretion of the tax authorities.

The status of implementation in Austria regarding the BEPS recommended changes can be summarised as follows:

• Action 1 (address the challenges of the digital economy) – not yet implemented, although ongoing discussions;
• Action 2 (neutralise the effect of hybrid mismatch arrangements) – implemented through the OECD Multilateral Instrument (MLI);
• Action 3 (strengthen CFC rules) – implemented through adoptions of the EU Anti-Tax Avoidance Directive (ATAD);
• Action 4 (Limit base erosion via interest deductions and other financial payments) implemented through adoptions of the EU Anti-Tax Avoidance Directive (ATAD);
• Action 5 (counter harmful tax practices more effectively and strengthen transparency) – implementations through EU Directive as regards mandatory automatic exchange of information and adoptions of several provisions of the Austrian Fiscal Code (BAO);
• Action 6 (prevent treaty abuse) – implemented through the OECD Multilateral Instrument (MLI);
• Action 7 (prevent the artificial avoidance of permanent establishment status) – implemented through the OECD Multilateral Instrument (MLI);
• Action 8 (assuring that transfer pricing outcomes are in line with value creation: intangibles) – new OECD standards implemented through the transfer pricing guidelines (VPR 2021);
• Action 9 (assuring that transfer pricing outcomes are in line with value creation: risks and capital) – new OECD standards implemented through the transfer pricing guidelines (VPR 2021);
• Action 10 (assuring that transfer pricing outcomes are in line with value creation: other high-risk transactions) – new OECD standards implemented through the transfer pricing guidelines (VPR 2021);
• Action 11 (establish methodologies to collect and analyse data on BEPS and the actions to address it);
• Action 12 (require taxpayers to report aggressive tax planning arrangements) – implemented through the adoption of DAC6 via the Austrian EU Reporting Requirement Act (EU-MPfG);
• Action 13 (re-examine transfer pricing documentation) – new OECD standards implemented through the Austrian Transfer Pricing Documentation Act (VPDG);
• Action 14 (make dispute resolution mechanisms more effective) – implemented through the OECD Multilateral Instrument (MLI); and
• Action 15 (develop a multilateral instrument) – implemented through the multilateral instrument (MLI).

The Austrian government has fully supported the BEPS project at all times.

On 3 October 2023, the Austrian Ministry of Finance has published its draft for a Pillar II implementation law (Mindestbesteuerungsgesetz – MinBestG).

Austria intends to implement Pillar II by means of a separate law rather than amending the Austrian Corporate Income Tax Act. It will include an Income Inclusion Rule (IIR, applicable for fiscal years starting on or after 31 December 2023), an Undertaxed Profits Rule (UTPR, applicable for fiscal years staring on or after 31 December 2024) as well as a Qualified Domestic Minimum Top-Up Tax (QDMTT). Moreover, all Safe Harbours as suggested by the OECD in its various Pillar II publications (eg, temporary safe harbours, permanent safe habour for Non-Material Constituent Entities, QDMTT safe harbour, temporary UTPR safe harbour) will be implemented.

Austrian Entities are, in general, required to file a GloBE Information Return (GIR) within 15 months after the end of the Reporting Fiscal Year (18 months for the transitional year). However, the draft also provides the option to transfer the obligation to file the GIR to another Austrian Entity.

Failures to comply with the administration of the new rules can be sanctioned with a fine of up to EUR100,000 (EUR50,000 in case of gross negligence).

Since the publication of LuxLeaks, the Panama Papers and similar reports, public interest in international taxation has grown substantially. As a result, the Austrian business and political press frequently reported on such developments and scientific contributions on how to make taxation more efficient. However, neither the BEPS project nor the implementation of its recommendations receives significant media attention.

The Austrian economy relies for a large part on foreign markets. Consequently, the Austrian Government does pursue a competitive tax policy objective. In recent years, the corporate income tax rates have been reduced from 25% down to 24% (2023) and 23% (2024 and subsequent years). However, Austria has also introduced several anti-abuse and CFC rules to limit base erosion and profit shifting as well es statutory provisions to strengthen tax transparency. Austria seeks to achieve international standards for fair and realistic tax competition.

Austria does not have a competitive tax system, state aid or other similar constraints that might be particularly affected by anti-BEPS measures.

The BEPS and ATAD proposals addressing hybrid instruments have been implemented in Austria and as such are included in Austrian tax law and/or Austrian double taxation treaties.

Austria has no territorial tax regime. An Austrian resident corporation is liable to corporate income tax on its worldwide profits (unlimited tax liability), while a non-resident corporation is only taxed on its Austrian-source income (limited tax liability).

As part of the implementation of the EU Anti-Tax Avoidance Directive, Austria introduced a controlled foreign companies (CFC) regime on 1 January 2019, which leads to the attribution (taxation in Austria) of low-taxed passive income from foreign subsidiaries under the conditions described in 6.5 Taxation of Income of Non-local Subsidiaries Under Controlled Foreign Corporation-Type Rules.

Further to recently adopted anti-avoidance rules (eg, CFC rules, Switch-over rule) driven by BEPS and EU legislation, Section 22 of the Austrian Federal Fiscal Code further provides for a relatively new general anti-avoidance rule that applies in the case of abusive tax structures.

Thus, Austrian tax law already provides adequate regulations to address the abuse of benefits and tax avoidance in general.

As a result of new amended transfer pricing documentation rules with the implemented country-by-country reporting, as well as the master file and the local file, intellectual property must be documented more extensively.

Transfer pricing reporting standards (including country-by-country reporting) have been updated and amended recently by the Austrian Transfer Pricing Documentation Act (VPDG) and published guidelines from the Austrian tax administration.

No national statutory changes have yet been made in Austria, but the government supports the OECD’s initiatives in this regard.

The EU Directive on Administrative Cooperation (DAC7) has already been implemented into Austrian law. DAC7 contains rules on the information exchange of digital platforms. The European Council further adopted a directive amending EU rules on Administrative Cooperation (DAC8) in 2023. DAC8 introduces rules on the information exchange of crypto-assets and advance tax rulings for the wealthiest individuals. The new rules should be implemented into Austrian law within the next two years. 

Austria has not yet introduced any provisions dealing with the taxation of offshore intellectual property.