Fiscal Amendment Act 2024 – review draft

Tax Flash - 08 May 2024 | 13 minutes read

On 3 May 2024, the Federal Ministry of Finance (BMF) published the review draft of the Tax Amendment Act 2024 (AbgÄG 2024). The proposed legislation includes a large number of innovations as well as amendments to existing regulations.

The main contents of the draft Tax Amendment Act 2024 (AbgÄG 2024) are summarised below:

1. Income tax

Food donations

Accompanying the introduction of a VAT exemption for food donations to charitable organisations favoured by a tax assessment notice, the aim is to ensure that such donations are also neutral for the donating taxpayer in terms of income and corporation tax. The (one-off) deductibility of the residual book value (and therefore the total acquisition costs) means that the donation will have neither advantages nor disadvantages for taxpayers in future. The new regulation avoids the need to determine the fair market value of the donated food and take it into account for income tax purposes.

The regulations are due to come into force on 01.01.2024.

Donation cap

Sec 18 (1) no. 7 EStG provides for a donation cap of 10 % of the total amount of income. It is now to be clarified that the relevant donation cap is to be determined before taking into account donations in accordance with no. 8 and 9 (donations to charitable foundations or the Innovation Foundation for Education and its sub-foundations).

In no. 7 and 8, it is corrected that non-self-employed income treated as favoured for income tax purposes, which is not subject to the income tax rate in the context of the assessment pursuant to Sec 41 (4) first sentence EStG, is not included in the calculation of the donation cap. The same applies to income from capital and property that is subject to special tax rates. These are only to be taken into account if they are included in the total amount of income subject to income tax due to the exercise of a standard taxation option. However, the new clarifications do not result in any changes in practice, as the donation cap already had to be determined according to these criteria.

Mitigation of “accidental” real division

According to the current legal situation, all hidden reserves are realised in the case of real divisions that do not fall within the scope of the Reorganisation Tax Act (UmgrStG).

Mirroring the regulation already introduced with the AbgÄG 2023 regarding “unfortunate” mergers, in future there will only be a pro rata realisation of the hidden reserves contained in the “third-party quota” for “unfortunate” real divisions. To the extent of the “own quota”, i.e. to the extent that the favoured assets are still attributable to the transferee for tax purposes before and after the transfer, the previous book values are to be continued (addition in Sec 24 (7) last sentence EStG and analogous application of Sec 32 (3) EStG).

Withdrawals from partnerships

The AbgÄG 2023 already created an explicit legal basis for the tax treatment of the transfer of assets from private or special business assets to the company assets of a partnership (“contribution”). The mirror-image process (“withdrawal”) is now also to be expressly regulated by law. The legal consequences for the withdrawal of assets are to be based on those for the contribution of assets to partnerships, whereby the withdrawal process is also to be differentiated between third-party and own shares and split into a sale and a withdrawal process.

In future, the transfer of assets from the company assets of a partnership to private or special business assets will only constitute a disposal to the extent that the assets are no longer attributable to the other partners after the transfer (“third-party quota”). The capital gain arising on the transfer with regard to the minority interest is realised at the level of the partnership.
Insofar as the assets are attributable to the withdrawing taxpayer both before and after the transfer (“own quota”), a withdrawal pursuant to Sec 6 no. 4 EStG (transfer from a partnership to private assets) or a tax-neutral transaction (transfer from an asset-managing partnership or transfers to special business assets) should be deemed to have taken place.

The provisions are to be applied for the first time for transfers with a cut-off date after 30 June 2024.

Extension of application-free employee assessment

In future, an application-free assessment should also be possible if there is a mandatory assessment situation – provided that all requirements for an application-free assessment are met.

Exemption notices only on application

In view of the low practical relevance and therefore with the aim of simplifying administration, tax exemption notices should only be issued on application in future.

Conversion of “phantom shares” into start-up employee participation

The AbgÄG 2024 now makes it possible for virtual shares (“phantom shares”), which otherwise meet all the requirements of the new start-up employee participation per se, to be converted by 31 December 2025 without being subject to valuation and (wage) taxation.

However, the advantageousness of the changeover would have to be examined beforehand.

2. Corporation tax

Non-deductibility of losses in the event of a gradual expansion of the corporate group

Pursuant to Sec 9 (7) KStG, partial write-downs and capital losses within the corporate group are not deductible for tax purposes when determining profits in order to avoid double utilisation of one and the same loss.

The planned new regulation (in Sec 9 (7) no. 4a KStG) is intended to ensure that this cannot be circumvented by a gradual upward expansion of the corporate group. Accordingly, losses carried forward by the (now) group parent from periods before the corporate group came into effect (pre-group losses) cannot be offset if they include – previously deductible – write-downs to the lower going-concern value and losses on the disposal of investments in corporations that were already members of another corporate group at the time of the write-down or disposal. The regulation should also apply to sevenths not yet recognised, i.e. not yet deducted, in accordance with Sec 12 (3) no. 2 KStG; these should therefore also not be available for offsetting in the new corporate group in order to prevent the otherwise possible double utilisation of these losses.

The regulation is to enter into force on the day after publication in the Federal Law Gazette.

Option to waive the offsetting of losses of foreign group members

The offsetting of foreign losses in the tax group regime is to be organised as an option through the possibility of waiving the attribution of losses of a foreign group member (Sec 9 (6) no. 6 KStG). The waiver can be exercised anew for each financial year and relates to the entire loss of the foreign group member in the respective financial year.

A waiver of the attribution of the foreign loss may be particularly relevant for groups of companies that also fall within the scope of the Minimum Taxation Act (MinBestG). The regulation therefore also serves to simplify administration. The waiver of the attribution of the losses of a foreign group member is to be made possible for the first time in the assessment for the 2024 calendar year.

Submission of group application

The possibility of applying for group taxation, which is to be understood narrowly due to the most recent BFG ruling (3 February 2023, RV/7102169/2022; see also WZP Tax News from 17 March 2023), is now to be extended by law.

In future, it should also be possible to submit a group application if the official forms are signed by the legal representatives of the group parent and all domestic entities to be included by means of a qualified electronic signature and uploaded by the group parent using the function provided for this purpose in FinanzOnline.

Supplementary tax

Sec 10a (3) KStG is to be amended to stipulate that the calculation of the effective tax burden of a foreign corporation should also take into account a recognised national supplementary tax that is demonstrably attributable to this corporation.

This provision is to apply regardless of whether the foreign company is itself liable for the supplementary tax under foreign law or whether the tax liability for the entire group of companies lies with a single business unit (as is the case in Austria under Sec 6 in conjunction with Sec 76 MinBestG).

In addition, it should also be clarified in the case of add-back taxation or a change of method that the national supplementary tax can be credited to avoid double taxation (through references in Sec 10a (9) no. 3 and no. 4 KStG to para. 3). The consideration of the national supplementary tax should also be taken into account in the prohibition of deduction for interest and licence fees (in accordance with an amendment to Sec 12 (1) no. 10 KStG).

3. Value added tax

Place of performance regulation for streaming services

In the past, difficulties arose with regard to determining the place of supply when services were made available virtually. The place of supply regulation of Sec 3a (13) UStG is therefore to be extended in implementation of Directive (EU) 2022/542 and in future also include streaming services that do not fall under Sec 3a (11) lit a UStG (e.g. interactive online language courses). For these services, the place of supply will be the place where the recipient has their domicile or habitual residence, based on the place of supply rule for electronically supplied services.

The changes are to come into force on 1 January 2025.

Tax exemption for food donations

Up to now, entrepreneurs may have to pay tax on food withdrawals as own use. In future, a genuine tax exemption for food donations to certain favoured institutions (based on the Income Tax Act) is to be applied. A (pro rata) right to deduct input tax is therefore not excluded.

The amendment is to enter into force on 1 January 2025.

Small business regulation

As part of the implementation of the EU requirements, an “EU small business” will be created so that Austrian companies can also make use of the small business exemption in other member states and, vice versa, foreign companies can make use of the small business regulation in Austria.

Application in future also for entrepreneurs based in other member states:

In future, it should also be possible for entrepreneurs who do not operate their business in Austria, but in another Member State, to apply the tax exemption pursuant to Sec 6 (1) no. 27 UStG.

The prerequisite for this is that, in addition to the national turnover threshold of EUR 42,000 (gross threshold), the entrepreneur in question does not exceed the EU-wide turnover threshold of EUR 100,000 in the current and previous calendar year. The turnover to be included here is determined by Sec 6 (1) no. 27 UStG. If these thresholds are exceeded, the exemption is generally no longer applicable from the time the threshold is exceeded (see below for the tolerance rule regarding the national threshold).

A further prerequisite is the application for utilisation of the small business exemption for the purposes of the transactions carried out in Austria in the Member State in which the entrepreneur operates the business.

If the requirements for the application of the small business exemption are met, the entrepreneur receives a “small business identification number” with the suffix “-EX” from the tax authority of the country of residence. The small business owner must record the turnover generated in Austria in a declaration and submit it to the competent tax authority in the country of residence, which forwards the information to the Austrian authorities.

Adjustment of the turnover limit, tolerance regulation, waiver of the small business exemption:

According to the previous case law of the VwGH (28 October 1998, 98/14/0057), the calculation of the turnover limit of Sec 6 (1) no. 27 UStG 1994 was based on the assessment basis with assumed tax liability. As a result, the small business threshold – assuming the application of the standard tax rate – actually amounted to EUR 42,000 to date. Due to the legal situation now required under EU law, among other things, the calculation of the turnover threshold and the EU-wide annual turnover should no longer be based on the taxable amount assuming tax liability within the meaning of the aforementioned VwGH ruling. The amount of EUR 35,000 is to be replaced by EUR 42,000 so that the small business threshold remains unchanged.

Another change concerns the tolerance rule. In its current form, a one-off exceeding of the turnover limit by no more than 15 % within a period of five calendar years is irrelevant. In future, a 10 % tolerance rule is to be introduced. Unlike in the past, exceeding the tolerance rule will no longer have an effect back to the beginning of the year, but the exemption will cease with the turnover with which the 10 % tolerance rule was exceeded. The exemption will no longer apply to this and all subsequent sales. If the small business threshold is exceeded by no more than 10%, the small business exemption may be utilised until the end of the respective calendar year.

The application of the small business exemption can be waived. Entrepreneurs who operate the business in another Member State must declare the waiver via the Member State of residence. The waiver should only be possible with effect from the beginning of a calendar year and, for entrepreneurs who operate their business in Germany, only by 31 January of the relevant calendar year at the latest and can be revoked unchanged after five years at the earliest.

Extension of the option to issue simplified invoices:

In future, small businesses will be able to issue simplified invoices in accordance with Sec 11 (6) UStG, regardless of the invoice amount. If the small business exemption no longer applies (e.g. due to the small business threshold being exceeded), simplified invoicing is only permitted for invoices whose total amount – in accordance with the general regulation – does not exceed EUR 400.

Input tax deduction:

From 1 January 2025, entrepreneurs who are entitled to deduct input VAT in Austria may also claim the small business exemption in other Member States. Therefore, Art. 12 (5) UStG is to be amended to the effect that input VAT deduction is excluded for input transactions that are related to transactions covered by the small business exemption in the target Member State. As before, input VAT deduction should generally be excluded for transactions covered by Sec 6 (1) no. 28 UStG.

Utilisation of the small business exemption by entrepreneurs based in Austria in other Member States:

Businesses based in Austria should also be able to claim the small business exemption in other Member States in a mirror image (if the EU-wide threshold and the relevant national threshold are not exceeded in the current and previous calendar year). For this purpose, a pre-notification must be submitted via a portal set up for this purpose, whereupon the “small business identification number” should generally be issued within 35 working days of receipt of the pre-notification.

From the time of registration, there will be an obligation to submit quarterly reports on turnover, which must be submitted by the end of the month following the calendar quarter.

It should be possible to terminate the procedure voluntarily at any time, whereby exclusion from the procedure is also possible.

The changes in relation to the small business regulation are to come into force on 1 January 2025.

Differential taxation for works of art

The margin scheme is not to apply to the supply of works of art if the supply to a reseller or the import by the reseller is subject to a reduced tax rate.

The amendment is to enter into force on 01.01.2025.

4. Federal Fiscal Code (BAO)

Applications for the extension of tax return deadlines can currently be submitted within open (extension) deadlines without limitation because the extension is an extendable official deadline. In future, applications for extensions of deadlines for the submission of tax returns are to be limited to a single extension period.
The VAT credit interest is to be restricted.

5. Miscellaneous

The subsequent transmission of a corrected payslip as well as the correction for the Family Bonus Plus should be considered a retroactive event in accordance with Section 295a BAO (administrative simplification through the legal establishment of an explicit procedural title).
The prohibition of deduction under Section 12 (2) KStG is to be extended to include income from cryptocurrencies.
There will no longer be a fee pursuant to Section 14 TP 5 GebG for those enclosures that are submitted to the authority electronically if they have already been submitted in paper form in the same procedure.
The responsibilities for groups that maintain CbCR and Pillar II-relevant companies in Austria are to be reorganised and the tax office is to be given general responsibility for large companies.

The review period ends on 17 May 2024. The legislative process remains to be seen.