The Ministerial Draft bill regarding the Annual Tax Amendment Act 2018

Transcription

1 Tax News 04/2018 English Abstracts The Ministerial Draft bill regarding the Annual Tax Amendment Act 2018 On 9 April 2018, the Austrian Ministry of Finance has published the ministerial draft of an Annual Tax Amendment Act ( Jahressteuergesetz 2018 ). With this draft, not only the EU Anti-Tax Avoidance Directive (ATAD) will be implemented in Austrian domestic law. The draft rather also contains nu-merous other alterations. We will briefly outline the main points of the draft. 1. Changes in Direct and Reorganization Tax Law - In accordance with the ATAD, CFC taxation will be introduced in Austria for the first time. Thus, income of low-taxed subsidiaries (and permanent establishments) will (proportionally) be allocated to the Austrian parent and will be subject to Austrian taxation at a rate of 25%. Any foreign taxes paid will be credited against Austrian taxation. CFC taxation will apply to o Austrian corporations holding a controlling interest (more than 50% of voting rights, capital or dividend rights, alone or together with its associated enterprises) o Passive income of a foreign subsidiary (interest, royalties, dividends, financial leasing fees, capital gains from the sale of participations, income from insurance, banking or financial activities, income from invoicing companies) o if the passive income represents more than one third of the foreign subsidiary s overall income and o the effective tax rate is 12.5% or less CFC taxation will not apply where the controlled foreign company carries on a substantial economic activity supported by staff, equipment, assets and premises, as evidenced by relevant facts and circumstances. - In addition to the new CFC taxation, the former switch-over provision will continue to apply in a slightly modified way. Under the amended provisions, dividends and capital gains from low-taxed, passive participations of at least 5% will not be tax-exempt in Austria, but taxable with a tax credit granted for any foreign taxes paid, under the following conditions: o the purpose of the foreign company is predominantly to realize passive income (see above), tax exempt dividends are not considered in determining the predominant purpose. KPMG Tax News 03/2018 1

2 o being subject to low taxation at an effective tax rate of not more than 12.5% or less The switch-over provision will not apply, to the extent that profits of the foreign subsidiary have already been subject to CFC taxation. - Both, CFC taxation and switch-over provision will not be applicable to foreign credit institutions according to the EU ATAD, unless more of one third of their passive income results from transactions with the Austrian parent or its associated enterprises. The new provisions will apply for all fiscal years starting after September 30, Details of the new provisions will be regulated in an ordinance. - If Austria loses its taxing right in relation to an EU or EEA Member State, the exit tax for fixed assets can be paid in installments. The period for these payments will be reduced from seven to five years (for non-current assets). - A withholding tax obligation for operators of infrastructure paying compensations will be introduced. The tax rate for compensation payments to income taxpayers is 10% and 8,25% for corporate income tax payers. - The applicability of tax de-mergers will be extend for another five years. - Due to recent case law of the Austrian Supreme Administrative Court, an explicit rule for contributions of buildings without the land will be introduced (see the separate article in this tax news). 2. Changes in VAT Law - The VAT exemption for educational institutions will be applicable furtheron under the condition that the purpose of the institution is comparable with those of public schools. - In the area of travel services provided by travel agents, the regulation entering into force as of 1st May 2019 for services provided to taxable persons will be postponed until May Furthermore, for travel agents applying for the tour operator margin scheme, the possibility to calculate the VAT an a lump-sum-base is canceled. - Implementing Article 58 of the EU-VAT-Directive, the place of supply for telecommunications services, radio and television broadcasting services and electronically supplied services provided by small undertakings, will be where the supplier has established his business, if the services are rendered to non-taxable persons in other EU member states and a threshold of EUR 10,000 p.a. is not exceeded. 3. Changes in Administrative Tax Law - The General Anti-Avoidance Rule (GAAR) will be supplemented by a legal definition of abuse that is based on the ECJ s jurisprudence as well as on the corresponding rule of the ATAD. - Explicit provisions on the already running pilot project on Horizontal Monitoring will be implemented. KPMG Tax News 04/2018 2

3 - It has already been possible to obtain a binding information ("Advance Ruling") for specified taxes and concrete cases from the Tax Authorities. This possibility will now be extended to requests in the context of VAT, international tax law as well as misuse of form and structuring options (covered by 22 General Fiscal Code). The binding information has to be provided within two months after the request, although in complex cases this deadline can be prolonged. - Taxpayers will be enabled to pay their taxes via the SEPA Direct Debit Scheme. - The procedure to apply for a refund of Austrian withholding taxes will be modernized. 4. Other Changes - Real Estate Transfer Tax o Unification of shares: If at least 95% of the shares in a real estate owning entity are pooled in the hands of one shareholder or a tax group, real estate transfer tax may be triggered. The draft bill clarifies that the property is not allocated to the entity pooling the shares for real estate transfer tax purposes going forward; i.e. there is no indirect pooling of shares. o For multiple unifications of shares within a tax group, a mitigation provision applies. It is now proposed to include both forms of unifications of shares (i.e. normal pooling of shares and the special rule for partnerships). o Tax exemptions for real estate transfers between married couples are extended to gifts (agreed in case of death) if the effective space does not exceed 150 square meters and the acquirer used the property as his/her principal residence. - Stamp Duty Exemption for Guarantees Related to Rental Agreements o After the stamp duty for housing rental agreements has been abolished, an exemption for guarantees related to such housing rental agreements will be introduced (see the separate article in this tax news). - Insurance Tax o It will be clarified that retroactively agreed indemnities for premiums are subject to a 7% insurance tax only under certain circumstances. o The process for attaining the exemption of motor-related insurance tax for Disabled persons will be modernized. Esther Freitag, Christoph Plott, Barbara Polster, Kasper Dziurdź, Rainer Götz, Anna Jara, Christoph Marchgraber, Markus Vaishor, Christian Weber KPMG Tax News 04/2018 3

4 ECJ: Subsequent issuance of in invoice showing value added tax related to the input tax refund procedure The ECJ dealt in the judgement of 21st March 2018 (C-533/16, Volkswagen AG) with a case, where a taxable person subsequently invoices VAT in invoices for supplies, which previously were treated as VAT exempt. For the recipient of the invoice the question arose, whether the VAT can be claimed in case of a VAT refund procedure. The court ruled, that any possible limitation periods are irrelevant in cases where the recipient was unable to claim the refund within time, due to the fact that he did not have an invoice and was unaware of the VAT liability. The ECJ enables in this case to overrule the procedural law by substantive law. Esther Freitag ECJ: Chain transactions and value added tax - Assessment of the moving supply and protection of legitimate expectations The ECJ dealt in the judgement of 21st February 2018 (C-628/16, Kreuzmayr) with the assignment of the moving supply in the context of a chain transaction, whereby the first party in the chain was not informed of the sale of the goods through his customer and the third party in the chain was in charge of the transport of the goods. As the second supply was invoiced as a local supply in Austria, the question arises, whether the third party in the chain is entitled to deduct the input VAT in regard to the invoiced VAT. As a result the ECJ has ruled that intentions that the intermediate purchaser had at the time of its acquisition must be taken into account. The prerequisite for this is that the intentions are recognizable by objective considerations. Moreover, the ECJ stated that the third party in the chain is not entitled to deduct the input VAT in regard to the incorrect invoice which stated the local Austrian VAT. Esther Freitag Real-time transfer obligation of invoices in Hungary from 1 July 2018 As already mentioned in our Tax News 11/2017, Hungary has introduced changes to the VAT Act, which enter into force as of 1st July The amendments concern data transmission regulations relating to domestic (Hungarian) invoices with a VAT amount of more than HUF 100, (around EUR 320,00). Due to the technical demands imposed on companies for the purpose of fulfilling the Hungarian data transmission regulations as well as possible fines up to HUF (around EUR 1.500) for non-filing, there is a need for immediate action. Esther Freitag, Norbert Ungar KPMG Tax News 04/2018 4

5 Further measures regarding the taxation of the digital economy The principles of current tax laws are unable to adequately capture the digital economy. Both the OECD and the EU have recently published substantial work or proposals for respective changes. In addition to long-term solutions, short-term transitional solutions are also considered. Florian Rosenberger, M. Schröger, F. Pischel New form (ZS-BB1) requesting an exemption notice for cross-border secondment For labor force who are transferred from abroad to Austria, the employer in Austria must in principle withhold a tax deduction in the amount of 20%. This withholding tax deduction can be avoided if the foreign transferor provides a valid exemption notice. To date, an informal application had to be submitted to the competent tax office Bruck Eisenstadt Oberwart. Now the Austrian Ministry of Finance has published a new standardized application form ZS-BB1 in order to simplify the direct relief (relief at the source) in the cross-border secondment. Florian Rosenberger, Nicolas Mitteregger No stamp duty for guarantees or cumulative debt assumptions in relation to rental contracts for residential purposes? According to the Austrian Stamp Duty Act, written contracts on the rental of real estate are subject to a 1 % duty whereby the tax base depends on the fees, the length and conditions of the contract. Recently, the stamp duty was abolished for the rental of properties for residential purposes. However, rental for other purposes (e.g. office, logistics etc) is still subject to stamp duty. Furthermore written contracts on guarantees or cumulative debt assumptions are subject to a 1% stamp duty. This also still applies for rentals for residential purposes even though stamp duty was abolished. On April 9, 2018 The Austrian Ministry of Finance published a draft bill on changes to the Austria Stamp Duty Act. It is intended to introduce an exemption for guarantees regarding rental contracts for residential purposes. As this new regulation will become effective (with retro-active effect) on November 11, 2017, there should not be any stamp duty on such transactions related to rental contracts for residential purposes since stamp duty on the rental contracts was abolished. Markus Vaishor, Katrin Postlmayr KPMG Tax News 04/2018 5

6 Update: Contribution in kind of a business if real property is retained Individuals may transfer a business to a company (in exchange for shares) by way of a taxneutral contribution in kind within the meaning of Art III Austrian Reorganization Tax Act ( RTA ). The RTA provides for the possibility that the contributor may retain individual assets. In practice, often real property is retained and in many cases the building is transferred to the absorbing company whereas the land is retained by the contributor. From a civil law perspective, the separation of land and building needs to be done, e.g. by way of registration of a development right incorporating the building ( Baurecht ). Previously according to the Austrian RTA Guidelines, it was sufficient to conclude such contract at the time of the contribution in kind agreement. However, since the development right becomes effective at the time of the registration in the cadaster, the Austrian Administrative Supreme Court recently decided that the development right already has to be registered before the contribution in kind agreement is signed. This decision contradicts the long lasting practice and is in particular problematic since a registration of a development right for the owner of a real property is legally impossible. Therefore, the working Group for Austrian Reorganizations of the Chamber of Public Accountants and Tax Advisors suggested in a letter addressing the Austrian Ministry of Finance a specific way of proceeding in relation to such contributions, which contains a combination of agreeing a dissolving condition in the contract of the development right and a dilatory condition in the contribution agreement. Recently the Austrian Ministry of Finance published a draft bill regarding amendments to the Austrian RTA including a clarification in relation to the described above issue. According to the proposed provision, the development right has to be registered during the period with retro-active effect (i.e. 9 months after the date of contribution). In addition the contribution agreement has to make reference to the contract of the development (and vice versa). Markus Vaishor, Katrin Postlmayr KPMG Tax News 04/2018 6