Human Resource Services News

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1 Human Resource Services News Content Tax Reform 2015/2016 Topics relating to staff 1 Income tax / Wage tax tariff 2 Changes in the monthly car-related non-monetary 2 General valuation rule for non-monetary benefits 3 Employee discounts 3 Anniversary gifts 4 Food vouchers 4 Employee participations 4 Travel costs compensation for members of the Works Council 4 Allowance for funeral costs 4 Interest savings 5 Premiums for improvement suggestions and employee inventions 5 Special characteristic of the construction sector the ban on paying wages in cash Outlook for Amendment law with regard to reporting obligations 5 New monthly report on the contribution basis 5 Your contact 5 4 th edition, November Tax Reform 2015/2016 Topics relating to staff Over the last few months, PwC has reported on the tax reform in diverse newsletters. In the law-making process, there were, by nature, diverse amendments and supplements. We are summarising the latest status for you:

2 1. Income tax / Wage tax tariff The basic tax rate of 36.5% will be reduced to 25%. Instead of three progression levels, there will be six progression levels from 2016; this will result in a flatter progression. The 50% tax rate only applies from a calculation basis of 90,000 (60,000 up to now). Income up to 11,000 remain tax-free as it has been up to now. For income components over 1 million, the tax rate is 55%; this provision is initially for a limited period of time and applies for the calendar years 2016 until In the following, we provide a few examples of figures to make the effects tangible: Einkommen aktuell ab to 11,000 0% 0% 11,000 to 18,000 25% 36.5% 18,000 to 25,000 35% 25,000 to 31,000 35% 43.21% 31,000 to 60,000 42% 60,000 to 90,000 With a gross benefit of 1,500 per month, around 40 a month and thus around 485 a year is saved. With a gross benefit of 1,700 a month, the figure is 57 a month or 690 a year. With a benefit of 2,000 48% 90,000 to 1 million 50% 50% More than 1 million 55% monthly, this figure would be around 73 a month or 882 a year. In the following, we introduce the most important changes for the payroll accountant: 2. Changes to the monthly car-related non-monetary from The monthly non-monetary value will be increased from 1.5% to 2% of the acquisition costs. A preferential non-monetary value of 1.5% for ecological cars will be created. The cap of the acquisition costs at 48,000 remains unaffected; the maximum monthly car-related non-monetary is thus 960 (48,000 * 2%). The regulation regarding the half non-monetary for private use up to a maximum of 6,000 km per year remains unchanged. The regulation regarding the mini non-monetary remains in force and will be made more ecological. Definition of an ecological car: If the car was bought in 2016 or before, and if the CO 2 emissions are a maximum of 130 g/km, this car is deemed to be an ecological car. The maximum non-monetary value for an ecological car is thus 720 (48,000 * 1.5%). The exhaust gas criteria for an ecological car will be tightened in the period from 2016 until 2020, cf. table below. Once an ecological car, always an ecological car: If a car is classified as an ecological car in the year when it is bought, it also remains an ecological car even if it no longer corresponds to the exhaust gas criteria in the following years. For used cars, on the other hand, the non-monetary is not linked to the year of purchase, but Year of acquisition CO 2 limit value 2016 or earlier 130 gram/km gram/km gram/km gram/km 2020 or later 118 gram/km rather to the year of the vehicle s first registration. That way, used cars do not have a more disadvantageous position compared to newly purchased cars. An example: The employer buys a two year-old used car in The first registration was in The list price at that time was 30,000 and CO 2 emissions were 128 gram/km. Since the CO 2 emissions are below the limit of 130 gram/km that is relevant No exceeding in the year of acquisition 1.5% of the acquisition costs, max. 720 a month (also in the following years) full non-monetary or 0.75% of the acquisition costs max. 360 a month (also in the following years) half non-monetary Exceeding in the year of acquisition 2% of the acquisition costs, max. 960 a month (also in the following years) full non-monetary or 1% of the acquisition costs max. 480 a month (also in the following years) half non-monetary 2

3 for the year 2016, the used car is classified as an ecological car. Hence, the the preferential non-monetary value of 1.5% is applied. Consequently, the non-monetary is 450 monthly. If the year of purchase were used in this case, then the used car would not qualify as an ecological car. The fundamental CO 2 emission value can be found in the type or individual permit or the EC type permit. With a CO 2 emission value of zero grams per kilometre, no non-monetary value is to be applied (vehicles with electric drive, electric cars). A deduction of input tax is possible for the acquisition, hire and operation of such cars. However, the luxury tangent under income tax law remains in force. The greening also has an impact on the so-called "mini non-monetary "; the rates were adjusted as follows: with a 1.5% non-monetary (ecological car) 0.50 per km (without driver), 0.72 per km (with driver) with a 2% non-monetary car 0.67 per km (without driver), 0.96 per km (with driver) PwC recommends: In particular with a large fleet, please ensure that the CO2 values of the company vehicles are collected in a timely manner and the payroll accounting department is provided with corresponding proof of ecological vehicles. We also recommend informing the employees whose nonmonetary values will be increased from in order to avoid a flood of enquiries after the January pay slip. Cost contributions of the employee: One-off and ongoing cost contributions of the employee continue to result in reductions in the non-monetary value. Currently: With one-off cost contributions, 2 different methods are currently accepted by the tax authority (immediately deduction or distribution over 8 years). From onwards, this right to choose will no longer apply. Cost contributions made by the employee directly reduce the acquisition value of the car; the cap of 48,000, however, does not apply. Acquisition costs: 51,000 Cost contribution: 4,000 Non-monetary : 1,5%/2% of 47, General valuation rule for non-monetary Currently: Non-monetary is to be valued with the "usual average price of the place of consumption". From , the "usual end price of the place of sale" applies for the valuation of non-monetary. The usual end price is the price reduced by usual price discounts at the company for external end consumers. 4. Employee discounts Currently: Higher discounts to own employees (these are discounts that are higher than those that end consumers usually receive) are subject to income tax and social insurance contributions. From : Higher discounts to own employees are tax-free up to 20%. If a higher discount is granted, an allowance of 1,000 every year is to be applied. This regulation is to be applied in an analogous manner for the calculation of the social insurance amounts. One example: An entrepreneur sells goods to third-party customers for 100. His employees receive these for 80. As the 20% threshold is not exceeded, there is no non-monetary subject to tax. If, however, the employees receive the goods for 70, there is fundamentally a cash-equivalent benefit of 30. A tax obligation, however, only occurs if the annual allowance of 1,000 is exceeded. If the employee discount does not exceed the 20% threshold, the total of the tax-free employee discounts per employee can also be more than 1,000. The new regulation applies for all professional groups. It must only be ensured that it involves goods and services that are offered by the employer in general business transactions; in addition, the employee discount must be accessible to all or certain groups of employees. 3

4 5. Anniversary benefits Currently: The regulations for the handling of anniversary bonuses and anniversary gifts under income tax and social insurance law are currently very heterogeneous. From : a) Anniversary bonuses that are paid to mark employer or employee anniversaries are subject to income tax and social insurance, irrespective of whether an entitlement exists under collective bargaining agreements or not. b) Non-monetary anniversary gifts receive an allowance of 186 a year. This allowance exists alongside the general allowance for non-monetary gifts of 186. One example: To mark the company's ten-year anniversary in May, all employees receive a watch worth 120. In the same year, the employees receive Christmas gifts worth 180. Both gifts are exempted from tax or levies. Please note: This amendment to the law also has an impact on the calculation of the provisions for anniversary bonuses. It should already be noted with the provisions as of that anniversary bonuses paid out in future will be subject to social insurance; a supplement for wage levies is therefore to be set. 6. Meal vouchers Until : Vouchers for meals up to a value of 4.40 are only taxfree if they are redeemed near to the place of work. From : The requirement of the restaurant to be nearby no longer applies. All other requirements regarding this tax exemption remain unchanged. This exemption is envisaged in an analogous manner in social insurance law. 7. Employee participations Currently: Allowance of 1,460 per calendar year. From : Increase of the allowance to 3,000. All other prerequisites regarding this tax exemption remain unchanged. This exemption is envisaged in an analogous manner in social insurance law. 8. Travel costs compensation for members of the Works Council Until : Initiated by a decision by the supreme court, travel expense compensation for work in the position as a member of the Works Council are subject to tax. Retrospectively from , travel cost compensation that is granted to members of the Works Council and staff representatives pursuant to the Federal Staff Representation Act ("Bundespersonalvertretungsgesetz") and similar regulations for their work are now exempt from tax. 1 This applies in an analogous manner in social insurance law. 9. Subsidy towards funeral costs From : Subsidies from the employer for the funeral of the employee, the latter's spouse/partner or his/her children can be granted free of tax and social insurance. There is no cap with regard to the amount. Corresponding records are to be placed in the wage account. 1 ) if they do not exceed the amounts pursuant to Section 26 Clause 4 of the Income Act (EStG) (e.g. within Austria: EUR 26.40). 4

5 10. Interest savings The regulation only contained up to now in the decree regulating nonmonetary s is included in the law with identical content. The allowance of 7,300 remains unaffected. The fundamental compa- rative interest rate is 1.5% for 2015 and will be announced for 2016 by means of a decree by 30 November 2015 at the latest. 11. Premiums for improvement suggestions and employee inventions Currently: Premiums for improvement suggestions and employee inventions can be taxed at 6% in the extent of an "additional sixth". There is no social insurance obligation. From : Both the preferential taxation and also the exemption in the social insurance will no longer apply in future. Such services are then fundamentally also to be treated as other benefits or special payments. 12. Special characteristic of the construction sector the ban on paying wages in cash From , monetary payments of wages to employees engaged in the provision of construction services may not be made in cash if the employee has a current account or a legal entitlement to such. A breach of this prohibition constitutes an offence against financial regulations pursuant to the Financial Penal Code and can be prosecuted with a fine of up to 5,000. Outlook for 2017 Amendment law with regard to reporting obligations From , the amendment law with regard to reporting obligations brings fundamental changes in the area of social insurance reporting. In the meantime some specialist media report that the commencement may be postponed to due to technical reasons. In the following, we offer you an initial brief overview of the most important provisions. New monthly contribution basis report The current reporting to the social insurance organisations is based on a monthly contribution record and an annual proof of the contribution basis. The monthly contribution record adds up the contributions per company and structures them according to contribution types (medical insurance, pension insurance, etc.). The annual contribution basis record is created per employee, is part of the annual wage slip and the basis for later pension claims. 5

6 The monthly contribution record and the current annual record of the contribution basis (as part of the wage slip) are eliminated and are replaced by a monthly reporting of the contribution basis per employee. Individual reporting obligations of the employee are reduced by the comprehensive reporting of employee-related data per month. The reports are to be submitted by the 15th of the following month; this regulation is unchanged. A recalculation of a monthly payslip thus causes a correction in the new system of the employee's monthly record of the contribution basis usually already reported. Such corrections can be carried out within a period of 6 months without incurring any penalties. If corrections are carried out after the 6-month period and if the correction results in a subsequent payment (the fee that was reported is too low), the stipulation of arrears interest is envisaged. The social insurance institutions can also waive the stipulation of arrears interest; it remains to be seen how this provision will be implemented in practice. From , the arrears interest is no longer 8 percentage points but rather 4 percentage points above the basic interest rate. PwC recommends: To avoid such financial penalties, we recommend that the current procedure is reviewed in order to avoid rolling of periods already billed as much as possible in the future. We will report on this topic further in the course of the 2016 calendar year. Upcoming event: HRS Network Breakfast 12 th November 2015 We invite you to our HRS Network Breakfast. All details and registration online: Editorial staff For any questions, hints or remarks concerning the newsletter please contact our editorial office at any time. We are looking forward to your feedback. Your Contact Claudia Grabner Human Resource Services claudia.grabner@at.pwc.com Claudia Grabner claudia.grabner@at.pwc.com PwC Vienna Department HRS/Payroll Guglgasse 7-9 / 6 th floor 1030 Vienna Copyright and Publisher: PwC Österreich GmbH Wirtschaftsprüfungsgesellschaft, Erdbergstraße 200, 1030 Vienna Editor: Claudia Grabner, claudia.grabner@at.pwc.com Distribution: Stefanie Friedl, stefanie.friedl@at.pwc.com, phone: , If you want to subscribe to Human Resource News, please send a blank with the subject: HR News subscribe to: stefanie.friedl@at.pwc.com If you want to unsubscribe from Human Resource News, please send a blank with the subject: HR News unsubscribe to: stefanie.friedl@at.pwc.com The above information is intended to provide general guidance to our clients 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. For specific issues please refer to the sources indicated or contact our office for further support. Parts of this published information can only be reprinted or manifold after prior written approval of the publisher. Contributions containing opinions refer to the personal opinion of the respective author. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.