Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Nexia – tax meeting Vienna 2008 Hot Topics – Austria

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Hot Topics – Austria Gift tax + inheritance tax Austrian Holding

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Gift tax + inheritance tax 2007: Higher administrative court decided that inheritance tax and the gift tax is unconstitutional Current law is valid until 31st of July There will be no replacement These transactions will be tax free from 1st of August  Only the transfer of goods into „Austrian private foundations“ will be taxed

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Gift tax + inheritance tax To avoid abuse  Report gifts € ,- / 5 years with 3rd parties  Report gifts € ,- / one year within family Sense: get notice of eye catching transactions  detect tax fraud Report within 3 months otherwise up to 10% penalty  Up to 7 years of jail for classifiying income as gift

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Gift tax + inheritance tax How long will the inheritance tax and the gift tax be charged? Gifts  Tax: carried out until the end oft july.  No tax: contract signed before but carried out after the 31 of july  tax free. inheritance tax  Tax: death before 31 of july  No Tax: death before 31 of july but if someone receives only a legal minimum portion as heritage.  claim the minimum portion of heritage after 31 of july

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Gift tax + inheritance tax Cross boarder inheritance tax Unlimited tax liability in Austria, if testator or inheritor got a residence in Austria Double taxation agreements  None: until August 1st full tax charge in Austria  Yes: double taxation treaty must be taken in mind 9 Existing double taxation agreements with other countries

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Gift tax + inheritance tax Germany (Cancelled) France Liechtenstein Netherlands Sweden Swiss Czech Republic Hungary United States of America

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Gift tax + inheritance tax Germany cancelled double tax agreement concerning inheritance tax because  treaty gave primarily the state the right of taxation, where the testators main domicile was  Only stationary goods and permanent business establishments located in Germany would have been taxed in Germany Now  Full tax liability in Germany, if testator or inheritor have a residence in Germany  Especially capital assets located in Austria will be taxed in Germany if one person is a german residency.  Real estates located in Austria will be subject to German inheritance tax.  All german shares (10+ %) will be taxed in Germany

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Gift tax + inheritance tax Conclusion Germany  donate real estates located in Austria before the 1st of August ?  calculation is needed Other countries with double taxation agreements  agreement remains: could be profitable to move the centre of one´s life to Austria  Agreement cancelled: a quick donation may be attractive Countries with no double taxation agreements  Delay of donations may avoid double taxation/ official channels

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Austrian Holding Benefits Austrian corporation tax rate of 25% Dividends received from foreign subsidiary are tax free in Austria Tax free sale of foreign subsidiary Group taxation Research aid

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Austrian Holding No corporation tax on dividends of subsidiaries if  the foreign subsidiary is a corporation  the subsidiary is owned at least one year  own at least 10 % of subsidiary Tax free sale of foreign subsidiary if  If the points above apply

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Austrian Holding Group taxation How to qualify as a tax group:  two or more companies  decide to form a tax group (free decision)  qualifying participation of more than 50%  Participation exist whole year  a written application to form a tax group  an agreement on the allocation of tax costs  No need for any economic and organizational integration

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Austrian Holding Advantage of group taxation  results of Austrian “group members” will be attributed to their parent company and will be taxed on parent level  Tax losses of all group companies can be consolidated with taxable profits of other group companies.  No requirement for a profit/loss takeover agreement

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Austrian Holding Austrian Groups  Income and loss is effected at 100%  Even if participation is not 100%  appropriate system of tax allocations needed  Even if partnership is in between. Parent Aut NO Partnership 60% GM Aut 100% GM Aut 80% GM Aut 80% = 64%

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Austrian Holding Foreign Groups members  Income is not effected  Loss is attributed proportional against austrian profits  Foreign losses can only be used if they are not used in the foreign country.  tax benefit has to be refunded  If the foreign losses get used at a later point in time in the foreign country or  if a foreign subsidiary leaves the group Parent Aut GM1Aut NO GM2 foreihn profit GM3 foreign loss 60% NO GM4 foreign in 2 line

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Austrian Holding Research aid Frascati tax free amount / Frascati bonus Free choice between tax free amount or bonus Requirement  research generating new knowledge. (includes: software, marketing and experimental research)  no external confirmation necessary Calculation basis: loan costs, energy costs, interests, overhead costs and investments Rates  tax free amount: 25% of the expenses  tax free bonus: 8% of the expenses  Since Austrian corporate tax = 25%, the 8% Bonus is always the better choice!

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Austrian Holding Research aid „Old“ tax free amount Requirement  certificate of the Austrian chamber of commerce needed Or  need existing patent protection Calculation basis: only direct costs, no investments (smaller basis) Rates  tax free amount: 25% of the expenses  tax free amount: 35% of the expenses that excel average expenses last 3 years  Possible to mix the old and the Frascati tax free amount. It is only forbidden to use expenses twice!

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Austrian Holding Research aid Contract research aid Requirement  Austrian company is ordering research work from another company  Other company must be a EU company that emphases on research  Other company must be independent from purchaser  Other company must be informed, that you make use of that research aid. Rates  tax free Bonus: 8% of the expenses  tax free amount: 25% of the expenses  maximum base of € ,- € expenses  Since Austrian corporate tax = 25%, the 8% Bonus is always the better choice

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka Austrian Holding Negative If an Austrian Holding does not carry out any business, there is no VAT refund possible for their expenses Depreciations of tax free foreign subsidiaries are tax neutral Depreciation of group members are tax neutral

Treuhand - Union Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Mag. Harald Czajka