T H E A U S T R I A N T A X S Y S T E M

A U S T R I A N T A X N E W S February 2011 Please find beneath our updated version of: THE AUSTRIAN TAX SYSTEM 1. Introduction 2. Income Taxes ...
Author: Chester Nichols
16 downloads 10 Views 273KB Size
A U S T R I A N T A X

N E W S

February 2011

Please find beneath our updated version of:

THE AUSTRIAN TAX SYSTEM 1.

Introduction

2. Income Taxes on Corporations 3. Income Taxes on Individuals 4. Income Taxes on Non-Residents 5. Other Significant Taxes 6. Computation of Taxable Income

Casapicola & Gross · Wirtschaftsprüfungs- und Steuerberatungs GmbH · Handelsgericht Wien · FN 192763 a A-1010 Wien · Gluckgasse 3/15 · www.taxes.at · e-mail: [email protected] Tel.: +43 (1) 512 94 31 · Fax: +43 (1) 513 26 85

1

1. INTRODUCTION

We have created the following information on Austrian taxes for commercial and industrial investment in Austria. As the main portion of investment in Austria is concentrated on Austrian corporations, we start with the description on the taxation of corporations. Then we treat the taxation of individuals and other significant taxes and end with the computation of the taxable income. As a result of the major tax reform in 2005, the corporation tax rate has been set as a flat rate of 25 %. This 25 % are levied on the profit of a corporation. In order to calculate the profit business expenses are deductible. Business expenses include e.g. wages and salaries, depreciation, office expenses, maintenance and repairs, interest on business liabilities, different kinds of accruals. In Austria only the corporation tax and no other taxes on the profit exist (e.g. a trade tax). Furthermore Austria has a modern group taxation system which allows to clear profit and loss of the group members. Even foreign entities can be part of this system. Individuals who maintain their residence or habitual abode in Austria are subject to the Austrian income tax. They are liable to an unlimited tax liability and have to declare all domestic and foreign income (=worldwide income). Otherwise individuals are subject to limited tax liability for Austrian source income. Income tax concerns the yearly income of an individual. Yearly income is the income an individual earns within a calendar year from seven types of income stated in the income tax act. For employees the Austrian income tax act has a special tax relief. As the yearly income of an employee is divided in 14 portions and paid in 12 regular payments plus a vacation bonus (May) and a Christmas bonus (November), the vacation bonus and Christmas bonus are taxed with only 6 %. Starting with 2010 self employed persons get an automatic profit tax allowance of € 3,900 per year. Furthermore the highest tax rate comes into effect if the income exceeds € 60,000 instead of € 50,000 in former years. And if the individual uses the profit allowance of 13 %, the highest tax rate is normally no more than 43.50 %. Austria has no Property tax and has abolished Inheritance and Gift tax in 2008. Expatriates coming to Austria enjoy a special tax regime if they meet the conditions of the Austrian Expatriate regulations. These Expatriate regulations offer tax relief for housing, home leaves and children’s provisions.

Casapicola & Gross · Wirtschaftsprüfungs- und Steuerberatungs GmbH · Handelsgericht Wien · FN 192763 a A-1010 Wien · Gluckgasse 3/15 · www.taxes.at · e-mail: [email protected] Tel.: +43 (1) 512 94 31 · Fax: +43 (1) 513 26 85

2

2. INCOME TAXES ON CORPORATIONS

Rates The Austrian corporate tax rate is set uniformly at 25 % of the taxable income or, in the case of limited liability to tax at 25 % of the taxable income earned within Austria. Example: Profit before corporation tax: 25% corporation tax Net income (to be retained or distributed)

€ 1,000 € 250 € 750

Local income taxes Unlike in other EC countries, no Austrian trade tax exists.

Austrian group taxation The idea of the Austrian group taxation is the summing-up of profits and losses of associated corporations. The summing up of profits and losses of associated corporations will be done at the associated corporation at the top of the group. The investment in associated companies must be more than 50 % of the shares and voting rights. The Austrian group taxation applies also to foreign associated corporations. Therefore the Austrian associated corporation at the top of the group can use the losses of foreign associated corporations (not the profits). It is possible that more than one associated corporations will be on the top of the group. This is of special concern for joint ventures. The “good will” in the acquisition costs of a new associated corporation can be depreciated over 15 years under certain conditions.

Interests for the acquisition of an investment If a corporation acquires a new investment and this acquisition will be financed by loans, the interests can be considered as business expenses without limitation for 2010 and former years. Starting in 2011 the deduction of interest for acquisition related loans is restricted to acquisitions of non-group investments.

Casapicola & Gross · Wirtschaftsprüfungs- und Steuerberatungs GmbH · Handelsgericht Wien · FN 192763 a A-1010 Wien · Gluckgasse 3/15 · www.taxes.at · e-mail: [email protected] Tel.: +43 (1) 512 94 31 · Fax: +43 (1) 513 26 85

3

Capital gains taxes Capital gains are fully included in the taxable income and are taxed at the corporation income tax rate. Capital gains on sales of shares in foreign companies are exempt from Austrian income taxes under certain circumstances. Branch profit taxes Branches of a foreign corporation are subject to corporation tax in Austria on their income earned in Austria. Losses may be carried forward without a time limit.

Foreign tax relief In general, taxation of foreign income is based on the regulations for avoiding double taxation. A special tax relief is called “Schachtelbegünstigung” (international affiliation privilege = IAP). The Austrian IAP determines that no Austrian corporate income tax will be imposed on dividends and capital gains paid to an Austrian holding company, if certain requirements are fulfilled. Losses caused by the liquidation or by bankruptcy of the foreign corporation may be considered under certain conditions.

These requirements are:  Direct investment of an Austrian corporation in a foreign corporation amounting to at least 10 %  The foreign corporation must be comparable to an Austrian corporation  Minimum holding period of one year  Abuse clause must not be met

Loss carried forward Losses may be carried forward without a time limit. In each following profit year only 75 % of the profit can be compensated.

Casapicola & Gross · Wirtschaftsprüfungs- und Steuerberatungs GmbH · Handelsgericht Wien · FN 192763 a A-1010 Wien · Gluckgasse 3/15 · www.taxes.at · e-mail: [email protected] Tel.: +43 (1) 512 94 31 · Fax: +43 (1) 513 26 85

4

3. INCOME TAX ON INDIVIDUALS

Rates The income tax rates for an individual (married or unmarried with or without children) are: Taxable income (TI): Income over € 11,000 to € 25,000 over € 25,000 to € 60,000 over € 60,000

Income tax in € (TI – 11,000) / 14,000 x 5,110 (TI – 25,000) / 35,000 x 15,125 + 5,110 (TI – 60,000) x 0.50 + 20,235

Social security contributions are tax deductible items in Austria. Several tax allowances exist, for example the tax allowance for employees (€ 54) and transport allowance for employees (€ 291). The new Income tax legislation determines that self employed persons will profit automatically of a profit tax allowance of € 3,900 per year, starting with 2010. Besides they can use the profit allowance of 13 % if they make investments in certain movable assets or certain shares or bonds. Therefore the highest tax range is normally no more than 43.50 % for self employed persons. The income tax payable by individuals on dividend distributions by Austrian companies is reduced to 25 % of the dividend gross amount. A payroll withholding tax is imposed on an individual’s employment income. If the individual has other types of income, he or she is therefore required to file an income tax return. The employee’s annual salary is divided into fourteen parts from which the tax is withheld at source. Christmas and vacation salaries are taxed at the favourable rate of 6 %. All individuals having their place of abode or their normal residence in Austria, or who stay in the Austrian territory for more than six months, are fully tax liable. All others are only partly liable.

Capital gains taxes Capital gains of the sale of non-business property are tax free if the property has been held for at least one year (10 years for real estate). Gains from the sale of a house or a flat are tax free if the house or the flat has been used as the main domicile for at least two years. Capital gains regulations for shares (valid for 2011):  If an individual owns more than 1 % of a company’s shares, any capital gain on the sale of those shares is taxable.

Casapicola & Gross · Wirtschaftsprüfungs- und Steuerberatungs GmbH · Handelsgericht Wien · FN 192763 a A-1010 Wien · Gluckgasse 3/15 · www.taxes.at · e-mail: [email protected] Tel.: +43 (1) 512 94 31 · Fax: +43 (1) 513 26 85

5

 The capital gain, which results from the selling of shares bought before Dec. 31st 2010 is tax free, if the holding period of the shares was more than one year.  For shares bought after Jan 1st 2011 the capital gain is taxed with 25 % .

Foreign tax relief Taxation of foreign income is in most cases specified in double taxation agreements.

Casapicola & Gross · Wirtschaftsprüfungs- und Steuerberatungs GmbH · Handelsgericht Wien · FN 192763 a A-1010 Wien · Gluckgasse 3/15 · www.taxes.at · e-mail: [email protected] Tel.: +43 (1) 512 94 31 · Fax: +43 (1) 513 26 85

6

4. INCOME TAXES ON NON-RESIDENTS

Tax liability Individuals having neither their place of abode nor their normal residence in Austria are taxable only on the Austrian source income. Corporations having neither their site nor management in Austria are also taxable only on Austrian source income. “Other operating business expenses” and “allowable expenses” that are economically related to Austrian source income may be deducted.

Rates The same tax rates apply to non-residents as to residents, although € 9,000 have to be added when the Income Tax is computed.

Withholding tax rates Tax is withheld at a special rate of 20 % on the following categories of income:  Income from employment and directors’ fees  Income derived from the practice of an art or sport, from commercial or technical advice, or from personnel leasing  Income received for the right to use copyrights, patents, plans, designs, know-how, licensing fees

Tax treaties More than 40 taxation treaties with European and overseas countries are in force to avoid double taxation. Please contact us for further information and in the case of special questions.

Casapicola & Gross · Wirtschaftsprüfungs- und Steuerberatungs GmbH · Handelsgericht Wien · FN 192763 a A-1010 Wien · Gluckgasse 3/15 · www.taxes.at · e-mail: [email protected] Tel.: +43 (1) 512 94 31 · Fax: +43 (1) 513 26 85

7

5. OTHER SIGNIFICANT TAXES

Sales (Value added) tax An Austrian customer must pay the net sales plus 20 % value added tax, which is listed separately on the supplier’s invoice. The customer, in effect, pays the supplier’s tax burden. The amount is thereafter deductible from the customer’s own value added tax burden. Upon transferring these purchased goods to the next customer, the customer (now seller) lists 20 % value added tax for that transaction on the invoice presented to the customer, and the process is repeated. The ultimate retail consumer absorbs the final burden. Among others, exports and certain services for foreign customers are exempt from value added tax. Import transactions from non-EC countries are subject to an import turnover tax at the same rates as turnover tax. Value added tax is reduced to 10 % on certain products. This applies to basic foods and printed material, for example.

Inheritance and gift taxes The inheritance and gift tax was completely abolished in 2008.

Related payroll taxes (social security) In Austria, social security contributions include three types of insurance together with some other contributions to funds. All employees are compulsorily members of these insurances. The basis of assessment for the insurance contributions is the employee’s monthly gross salary (or gross wage) up to € 4,200. Any income in excess of these limits is irrelevant for the purpose of the assessment for contributions. The employer is required to withhold the employee’s part (18.07 %) and to pay this amount together with his own share (21.83 %) Property tax Property tax was abolished in 1989.

Land transfer tax Real estate transactions are exempt from value added tax. On most transfers of land and buildings within Austria, the buyer is liable to pay a tax amounting to 3.50 % of the sales price. Capital transfer tax The most significant part of the capital transfer tax is the tax imposed on the increase of capital. Tax of 1 % is levied on the issue of share capital, on any increase of share capital and on capital contributions to a corporation. Casapicola & Gross · Wirtschaftsprüfungs- und Steuerberatungs GmbH · Handelsgericht Wien · FN 192763 a A-1010 Wien · Gluckgasse 3/15 · www.taxes.at · e-mail: [email protected] Tel.: +43 (1) 512 94 31 · Fax: +43 (1) 513 26 85

8

6. COMPUTATION OF TAXABLE INCOME (MAIN ASPECTS)

Depreciation Depreciation on buildings and other fixed assets is usually based on cost. The cost of production or acquisition of fixed assets must be spread over their useful lives. In general, depreciation is calculated on the straight line method. Extraordinary depreciation is allowed in case of abnormal use and for impending obsolescence.

Loss carried forward Losses resulting from running a business which are determined in conformity with generally accepted accounting principles may be carried forward to an unlimited degree. This applies to local registered companies. For branches of foreign companies, losses may be carried forward in the same way if they have not been used in the foreign country. In each following profit year only 75 % of the profit can be compensated. That means that 25 % of the profit is subject to tax even in case of existing loss carried forward.

Transactions between related parties Royalties, interest, management fees and similar charges paid to foreign related companies are generally deductible if considered reasonable. Any excessive payment or other monetary advantage given to an affiliated or parent company, whether in respect of sales or technical and management fees, may be considered to be a hidden contribution by the tax authorities.

Tax periods The calendar year is the tax year. To file on a fiscal-year basis other than the calendar year, the permission of the tax authorities must be obtained.

Vienna, February 2011 Casapicola & Gross WP & Stb GmbH

The above information is intended to provide general guidance only. It should not be used as a substitute for professional advice or as the basis for decisions or actions without prior consultation with your advisors. While every care has been taken in the preparation of the publication, no liability is accepted for any statement, option, error or omission. Casapicola & Gross · Wirtschaftsprüfungs- und Steuerberatungs GmbH · Handelsgericht Wien · FN 192763 a A-1010 Wien · Gluckgasse 3/15 · www.taxes.at · e-mail: [email protected] Tel.: +43 (1) 512 94 31 · Fax: +43 (1) 513 26 85

9