Human Resource Services News

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1 Human Resource Services News Content Wage tax 1 Austrian Tax Reorganisation Act 2014: personnel implications 1 Commuter Ordinance: Commute calculator 3 Remuneration in kind amounts for company cars to be raised 3 International tax law Recapture taxation of foreign losses recorded in Austria to be tightened as from Extension of limited tax liability on interest 5 Your Contact 5 Wage tax Austrian Tax Reorganisation Act 2014: personnel implications Cap to be introduced on golden handshakes Since 1 March 2014 new rules have been in force for severance payments such as voluntary termination benefits or termination compensation. Generally speaking, the rearrangement of the tax exempt element of these payments in effect ushers in the end of golden handshakes. Details on the changes are shown in the table on page 2. Accordingly, voluntary termination benefits are only to be taxed up to the cap of three times or nine times the maximum social security assessment base at the privileged tax rate of 6%. Likewise in the case of termina-tion compensation and settlement payments, a cap is to be drawn in at the level of nine times the maximum social security assessment base. In the case of employment severance remuneration and renouncing of work, this partially favourable tax treatment has been cancelled altogether.

2 Changes for severance payments Severance payments (Voluntary) termination benefits Employment severance remuneration/renouncing of work Termination compensation/ settlement amounts Previous legal situation 1/4 rule 6% x/12 rule 6% New legal situation 1/4 rule 6% Cap at 9 times HBG* (2014: EUR 40,770) x/12 rule 6% Cap at 3 times HBG* (2014: EUR 13,590 per 12 th ) Taxation pursuant to payroll tax rate in accordance with 67(10) Income Tax Act Cap at 9 times HBG* (2014: EUR 40,770 of which 1/5 = EUR 8,154) *HBG = Maximum social security assessment base Solidarity tax prolonged As had been expected, the unlimited extension of the solidarity tax is to provide a further source of tax revenue for the Ministry of Finance coffers. The limitation as originally foreseen in the Stability Act 2012 is now to be extended beyond Just to recap, here are the income tax rates for other remuneration once again: For the first EUR 620 0% And for the next EUR 24,380 6% EUR 25,000 27% EUR 33,333 35,75% Exceeding EUR 83,333 standard tax rate Deductibility limit for top earners Please note: When it comes to payments effected as from 1 March 2014, salaries may only be deductible as operational expenses up to a limit of EUR 500,000 per person and per business year. This provision is valid for all active or previous employees and persons who for organisational purposes can be categorised in a comparable manner (e.g. company directors, managing directors of a stock corporation (AG) or a limited liability company (GmbH) who are active within the framework of an employment relationship). Outlined below are some of the main points of the new rules: 1. Remuneration: Which forms of remuneration are now affected? In general, the deductibility limit covers the total of all monetary payments and benefits in kind including pension payments (pension settlements and pension provisions). 2. Exceptions: The following expenditure deductions do not apply to the assessment base: Severances within the meaning of 67(3) Income Tax Act Other remuneration as defined in 67(6) Income Tax Act (especially voluntary termination benefits) Expenditure allowance Ancillary labour costs 3. Factoring: Monthly factoring is used in the following cases: Services performed under an employment contract or contract for work do not cover a full calendar year Services performed under an employment contract or contract for work are carried out for several establishments of the same taxpayer Services performed under an employment contract or contract for work are performed for several business partnerships in which the very same taxpayer is a shareholder Deductibility limit for voluntary termination benefits Other remuneration pursuant to 67(6) Income Tax Act (including voluntary termination benefits), provided it is not subject to the 6% tax rate, is now no longer deductible as operational expenditure. Intensification of information exchange arrangements between financial authority and social security providers At this point, we feel it would be worth giving you an early insight into the planned intensification of information exchange arrangements between the financial authority and social security providers. As from 1 January 2015, statutory social security providers are to submit the name, address and social security number of all registered and deregistered employees together with the monthly basis for contributions of all employees to the Austrian financial authority. This is to help combat fraud. 2

3 Commuter Ordinance: Commute calculator The Austrian Ministry of Finance s commute calculator has finally been online since 12 February 2014 This new official commute calculator will ensure that the determination of the commuter allowance and the commuter euro received is standardised while at the same time creating greater legal certainty. Objectively speaking, the outcome of the calculation serves as an official form, thus serving as confirmation for the employer that the criteria for entitlement to the commuter allowance are met. The employer is to use the commute calculation in the payroll account. What to take into account with the commute calculator: In theory, the new Commuter Ordinance came into effect on 1 January However, due to the delayed launch of the commute calculator, which was finally made available on 12 February 2014, the following key dates are to be considered: a) 1 January 2014/12 February 2014: The Ordinance basically works on a retroactive basis going back to 1 January 2014, with an exception applying in case the taxpayer is put at a disadvantage due to the Ordinance. In such instances it is only to be applicable as from the launch, i.e. 12 February b) 30 June 2014: If the employee has already submitted a declaration for the commuter allowance to be taken into account ( L34 ) before the commute calculator was launched, then he or she must ensure that a printout of the determined result of the commute calculator ( L34 EDV ) is submitted to his or her employer by no later than 30 June c)30 September 2014: Using the outcome of the commute calculation on the basis of this new portal, a recalculation of the commuter allowance must be carried out by 30 September 2014 at the latest. Remuneration in kind amounts for company cars to be raised On 1 March 2014 there will be a major overhaul of company car taxation. The maximum extent of remuneration in kind pursuant to 4(1) Ordinance on Remuneration in Kind is to change as follows: So what does this mean for you? As from 1 March 2014 the old rates will have to be replaced by the new ones. When checking through payroll entries in future (GPLA; joint audit of wage-dependent levies), the auditor will make sure that the payroll accounting entries have been adjusted accordingly. Just as in the past, the travel log will be an integral part for any audit it is especially necessary in cases in which half the amount of remuneration in kind applies. Full remuneration in kind: 1.5% of tax assessment base Half the remuneration in kind: 1.5% of tax assessment base Old New max. 600 max. 720 max. 300 max

4 International tax law Recapture taxation of foreign losses recorded in Austria to be tightened as from 2015 What this means for expatriates This amendment may have an effect on your expatriates if they are Austrian residents pursuant to the DTA in question and incur losses in their country of origin (or another country), for instance from leasing and letting or negative commercial income from shareholdings. As previously, the law stipulates that a taxpayer paying taxes on his or her global income in Austria is to deduct any negative foreign losses from positive domestic income if it is impossible to offset such losses against positive foreign income. Loss utilisation in the country of origin is for instance impossible when the taxpayer has no positive taxable income in the country of origin. The set-off of losses is mandatory. The foreign losses are to be determined on the basis of Austrian legal provisions. Since 2012 there has been a cap on the losses to be deducted in Austria which equals the losses determined in accordance with foreign tax law. As soon as the losses recorded in Austria are or may be utilised abroad, recapture taxation will apply in Austria. One of the new provisions starting with sets out that with respect to losses from countries with which no comprehensive administrative assistance arrangements exist, recapture taxation is mandatory at the latest in the third year after the foreign losses have been recorded. In this context, comprehensive administrative assistance means that all information may be exchanged which is required for the enforcement of the provision in question. To this end, the so called major administrative assistance clause will be sufficient, as opposed to the minor administrative assistance clause. At present, a large administrative assistance clause applies with respect to the following countries: EU Member States Countries in which the major administrative assistance clause is part of the DTA (e.g. Turkey) Countries with which an information exchange agreement has been concluded (e.g. Andorra) If minor administrative assistance has been agreed upon (such as with China or India), comprehensive administrative assistance arrangements will not be deemed to exist. Transitional provisions: For losses recorded until 2014, one third of recapture taxation is to apply in each of the assessment years if losses were not considered in the foreign country until For example: 1. An expatriate from India is to pay one third of recapture taxation in 2016, 2017 and 2018 each for all foreign losses recorded until 2012, if losses were not considered in the foreign country. Recapture taxation payments are to be made in full in 2018 at the latest for any losses recorded in 2015, since no comprehensive administrative assistance arrangements are in place with India. 2. An expatriate from Germany will only have to make recapture taxation payments for recorded losses when he or she has actually utilised or may utilise them in Germany, since in the case of Germany comprehensive administrative assistance arrangements are in place. We at PwC will be happy to support you with respect to any specific cases in relation to this matter. 4

5 Extension of limited tax liability on interest Another issue that might be of interest for expatriates is that of the extension of the limited tax liability and thus the obligation to pay capital gains tax on interest income accrued after 31 December The new provision is applicable with respect to the following: Austrian bank interest and Austrian interest from securities Natural persons from non-eu Member States Entities from EU and non-eu Member States If the custodian centre or payment centre is located in Austria This new limitation is not, however, applicable to group and private loans. The existing deduction obligation pursuant to the Austrian Withholding Tax Act for interest income paid out to natural persons in EU Member States (35%) remains unaffected. In order to be able to provide DTAcompliant relief at source, the DTA Relief Regulation will be amended accordingly. This means that the limited tax liability regarding Austrian interest income should only apply to residents of non-eu Member States or non-dta contracting states. Your Contact Aline Kapp Partner Human Resource Services aline.kapp@at.pwc.com 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. 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: Aline Kapp, aline.kapp@at.pwc.com Distribution: Christiane Fuchs, christiane.fuchs@at.pwc.com, phone: , fax: If you want to subscribe to Human Resource News, please send a blank with the subject: HR News subscribe to: christiane.fuchs@ at.pwc.com If you want to unsubscribe from Human Resource News, please send a blank with the subject: HR News unsubscribe to: christiane. fuchs@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.

Human Resource Services News

www.pwc.at/newsletter 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