Tax on corporate transactions in Austria: overview

A Q&A guide to tax on corporate transactions in Austria.

The Q&A gives a high level overview of tax in Austria and looks at key practical issues including, for example: the main taxes, reliefs and structures used in share and asset sales, dividends, mergers, joint ventures, reorganisations, share buybacks, private equity deals and restructuring and insolvency.

To compare answers across multiple jurisdictions, visit the Tax on corporate transactions Country Q&A tool.

This Q&A is part of the PLC multi-jurisdictional guide to tax. For a full list of jurisdictional Q&As visit www.practicallaw.com/taxontransactions-mjg.

Herbert Buzanich, Schönherr Rechtsanwälte GmbH
Contents

Tax authorities

1. What are the main authorities responsible for enforcing taxes on corporate transactions in your jurisdiction?

Taxes are enforced by the Federal Ministry of Finance through its tax offices. Tax offices generally have regional competence. Certain tax offices are competent for specific taxes (for example, tax office for stamp duty, transfer taxes and gambling).

Pre-completion clearances and guidance

2. Is it possible to apply for tax clearances or obtain guidance from the tax authorities before completing a corporate transaction?

A formalised ruling process is available for certain areas of tax law, such as reorganisations, group taxation and transfer pricing. The ruling request must be filed before the underlying facts of the ruling request have materialised and the person filing the ruling request must have a special interest in obtaining the ruling.

The ruling has a binding effect for the applicant (and its legal successors) provided the materialised fact pattern does not deviate from the fact pattern described in the ruling request. The ruling is not binding:

  • If and to the extent statutory tax law provisions have changed or have been abolished (no grandfathering effect).

  • If the ruling turns out to be incorrect to the detriment of the applicant.

The applicant must pay a fee for processing the ruling request in an amount between EUR1,500 and EUR20,000, depending on the turnover of the applicant (as at 1 March 2012, US$1 was about EUR0.7).

For other areas of tax law, there is no formalised ruling process. In these cases, a ruling request may be filed with the tax office and a ruling may be obtained. These rulings are not generally binding, but are usually honoured by the tax authorities (on a bona fide basis).

Questions on international tax matters may be answered and published through the Express-Answering-Service (EAS) of the Federal Ministry of Finance which analyses a specific fact pattern on a no-name (and therefore not binding) basis.

 

Main taxes on corporate transactions

Transfer taxes and notaries' fees

3. What are the main transfer taxes and/or notaries' fees potentially payable on corporate transactions?

Capital tax (Gesellschaftsteuer)

Capital tax may be triggered on certain transfers of equity (cash or in-kind) by a shareholder to a corporation. Capital tax events include the following:

  • Acquisition of a participation in a corporation in the course of the foundation or an increase in capital.

  • Contributions to the corporation based on the articles of association, voluntary contributions (if the consideration for the contributions is an increase in the shareholder rights of the contributing shareholder) or specific other voluntary contributions (for example, the waiver of a claim against the corporation, the supply of goods to a corporation for a consideration that is less than the value of the goods, or the receipt of assets from a corporation with a value that exceeds the consideration given).

  • Issuance of bonds or participation rights granting a share in the assets or the profits of the issuer.

  • The transfer of the place of effective management or the seat of a foreign corporation to Austria and the transfer of equity by a foreign corporation to its Austrian permanent establishment (in both cases unless the foreign corporation has its place of effective management or seat in an EU member state).

Capital tax is charged at 1%. The assessment basis depends on the capital tax event. For example, on (initial) acquisition of shares, the assessment basis is the value of the consideration (or the value of the shares), or on equity contributions the value of the contribution made. Capital tax must be paid by the corporation issuing the shares, receiving an equity contribution, and so on. The person receiving the shareholder rights is secondarily liable for the tax.

Capital tax should not be triggered by appropriately structured contributions of indirect shareholders. Exemptions from capital tax are available, for example, if the consideration for the issuance of shares or the increase in shareholder rights consists in a business, a qualified part of a business or the entire assets and liabilities of the transferring corporation. Further exemptions may be available in the context of certain reorganisations (see Question 19, Capital tax).

Real estate transfer tax (Grunderwerbsteuer)

Real estate transfer tax may be triggered on the transfer of title to real estate against consideration. Tax events triggering real estate transfer tax include:

  • Concluding a real estate purchase agreement or another legal transaction leading to the transfer of title to real estate, or acquiring real estate without preceding transfer of title.

  • Concentrating 100% of the shares in a corporation owning real estate in the hands of one person.

  • Transferring all shares in a corporation owning real estate.

Real estate transfer tax is generally charged at 3.5%. The assessment basis for real estate transfer tax is the purchase price, or in the absence of consideration, three times the tax value of the property (in a reorganisation, the tax base may be two times the tax value). The parties to the transaction are jointly liable for the real estate transfer tax triggered.

The registration of a transfer of ownership in real estate triggers a registration fee of 1.1% of the tax base for real estate transfer tax (such fee does not arise without a change in the ownership of the real estate, for example, on the transfer of shares in a real estate holding company).

Stamp duty (Rechtsgeschäftsgebühren)

Stamp duty may be triggered on the execution (that is, signing) of a document on certain dutiable transactions. Dutiable transactions include the following:

  • Leases (1% on the consideration paid for the lease subject to certain caps).

  • Sureties (1% of the secured amount).

  • Mortgages (1% of the secured amount).

  • Settlement agreements (1% or 2%).

  • Assignments (0.8% of the consideration).

Stamp duty on loan and credit agreements (0.8% or, in the case of revolving credit facilities with a term of more than five years, 1.5% of the loan) has been abolished with effect from 1 January 2011.

Stamp duty relevant documents are documents on the execution of which the dutiable transaction is concluded or documents that make reference to a dutiable transaction.

Stamp duty is generally triggered if a document in writing on a dutiable transaction is executed in Austria. Under certain circumstances, the execution of a document on a dutiable transaction outside Austria may trigger stamp duty (see Question 7, Stamp duty). If the execution of a document outside Austria does not trigger stamp duty, stamp duty may be triggered on the later import of the document (or a certified copy of it) into Austria.

The parties to the dutiable transaction are generally jointly and severally liable for stamp duty triggered. In any case, the other parties to the transaction are secondarily liable. On a discretionary basis, the tax authorities may honour agreements between the parties to the transaction as to which party must bear stamp duty if triggered.

Notary fees

Several transactions, such as the formation of or the transfer of shares in a company with limited liability (Gesellschaft mit beschränkter Haftung) (GmbH) must be executed in the form of a notarial deed. For the execution of a notarial deed, the notary charges a fee based on a tariff that depends on the value of the transaction (with certain caps). Notaries are free professionals. Notary fees are not taxes or public dues.

Corporate and capital gains taxes

4. What are the main corporate and/or capital gains taxes potentially payable on corporate transactions?

Corporate income tax (Körperschaftsteuer)

Corporate income tax is levied at a flat rate of 25% on the net profits of a corporation. The tax base is determined based on generally accepted accounting principles (GAAP) adjusted for tax purposes under tax accounting rules. The corporation must file a tax return for the financial year accompanied by payment of the tax due. The corporation must make quarterly prepayments on account of the corporate income tax liability for the financial year (fixed by the tax office based on the tax assessments for the previous financial year). The assessment period for corporate income tax is the financial year of the corporation (which may differ from the calendar year). Corporations are subject to (fairly low) minimum corporate income tax which is due even if a corporation is in a loss position (minimum corporate income tax is creditable against a future corporate income tax liability). The corporation is liable for corporate income tax due.

A corporation that is resident for tax purposes in Austria is subject to Austrian corporate income tax in relation to its worldwide income (subject to potential relief under applicable double taxation treaties). A corporation is resident for tax purposes in Austria, if it has its seat or place of effective management in Austria. The entire income of the corporation is generally considered as business income. A corporation that is not resident for tax purposes in Austria is subject to Austrian corporate income tax on certain items of Austrian source income (see Question 7, Corporate income tax).

Business expenses and losses are generally deductible. Losses may be carried forward and used against profits of future financial years. The use of loss carry forwards is capped at 75% of the profits (excess losses may be carried forward indefinitely). Exemptions from the loss carry forward limitation may apply (for example, in relation to profits from the sale of a business or profits from certain debt restructurings (see Question 28)).

Related corporations may create a tax group for tax purposes if certain prerequisites are met. Under the group taxation regime, profits and losses of group members are attributed for tax purposes to the group parent. The profit or loss of the tax group is determined at the level of the group parent which is assessed to corporate income tax. First-tier non-Austrian subsidiaries may be included in the tax group and foreign losses of non-Austrian group members may be attributed to the group parent (subject to recapture).

Value added and sales taxes

5. What are the main value added and/or sales taxes potentially payable on corporate transactions?

Value added tax (Umsatzsteuer)

VAT may be due on:

  • Taxable supplies of goods.

  • Taxable supplies of services.

  • Importation of goods from outside the EU.

The standard VAT rate is 20% (reduced rates of 10% or 12% apply to certain supplies).

An entrepreneur is usually entitled to a deduction of VAT incurred in relation to supplies of goods or services received in connection with the entrepreneurial activity (input VAT). To be entitled to input VAT deduction, the entrepreneur must receive the supply for its business and the supplier must issue a proper invoice. Input VAT deduction is not available for VAT incurred in connection with exempt supplies. To the extent input VAT exceeds the amount of VAT due on the supplies rendered by the entrepreneur, the entrepreneur may be entitled to a refund.

Other taxes on corporate transactions

6. Are any other taxes potentially payable on corporate transactions?

Certain other taxes may be payable depending on the transaction structure. For example, if a private foundation is involved in a transaction, private foundation entry tax at 2.5% may apply to the transfer of assets to an Austrian private foundation (in certain cases foundation entry tax may be due at an increased rate of 25%). Other taxes may arise depending on the type of business carried on by the relevant parties to the transaction, for example a specific tax on banks based on the adjusted balance sheet total and on the volume of derivative transactions according to the trading books of the bank (Stabilitätsabgabe), energy taxes, and so on.

Taxes applicable to foreign companies

7. In what circumstances will the taxes identified in Questions 3 to 6 be applicable to foreign companies (in other words, what "presence" is required to give rise to tax liability)?

Corporate income tax

Corporations that are not resident for tax purposes in Austria (that is, corporations that have neither their seat nor their place of effective management in Austria) are subject to Austrian corporate income tax in relation to certain Austrian source income (see Question 4, Corporate income tax), such as the following:

  • Business profits that are attributable to an Austrian permanent establishment or generated through a permanent representative appointed in Austria.

  • Capital gains from the sale of shares in an Austrian corporation if the seller has held at least 1% at any time during the last five years preceding the sale.

  • Dividends paid by an Austrian corporation.

  • Interest on debt secured by Austrian real estate (or rights governed by the provisions applicable to real estate or ships registered with an Austrian ship registry), unless the interest is paid on a bond.

  • Rental income from the leasing of Austrian real estate or a compound of assets.

  • Capital gains from the sale of Austrian real estate.

Treaty relief under an applicable double taxation treaty may be available for the non-Austrian resident corporation in relation to Austrian source income.

VAT

Whether a supply is subject to VAT depends on where the supply occurs rather than the residence for tax purposes of the supplier. However, to determine the place of supply, it may be relevant where the supplier has established its business or has a permanent establishment.

Capital tax, real estate transfer tax

The equity contribution of a non-Austrian corporation to an Austrian corporation may trigger capital tax (see Question 3, Capital tax).

When a non-Austrian resident corporation transfers Austrian real estate (or shares in a corporation owning Austrian real estate), real estate transfer tax may be triggered (see Question 3, Real estate transfer tax).

Stamp duty

Stamp duty is triggered if a document on a dutiable transaction is created in Austria. In this case it is irrelevant whether the parties to the transaction are resident for tax purposes in Austria (see Question 3, Stamp duty). However, residence of the parties may be relevant if the document on a dutiable transaction is created outside Austria. In this case, stamp duty is only triggered if the parties to the transaction are resident for stamp duty purposes in Austria (that is, Austrian seat, place of effective management or permanent establishment) and either the transaction concerns Austrian situated assets or a party is entitled or obliged to performance under the transaction in Austria.

 

Dividends

8. Is there a requirement to withhold tax on dividends or other distributions?

Dividends paid by a corporation are generally subject to 25% dividend withholding tax.

Exemptions from this dividend withholding tax apply to dividends paid to:

  • Austrian resident corporate shareholders holding at least 25% (but as from 1 April 2012, 10%) in the dividend paying corporation.

  • Certain EU corporate shareholders holding at least 10% in the dividend paying corporation for a minimum period of one year.

The exemption from Austrian dividend withholding tax on outbound dividends paid to certain EU corporations is subject to an anti-abuse provision. Accordingly, the Austrian dividend paying corporation must not abstain from its withholding obligation if:

  • The facts and circumstances indicate misuse (and the Austrian dividend paying corporation may be held responsible for such misuse).

  • An obvious hidden contribution is constituted.

  • The Austrian dividend paying corporation cannot prove that all requirements for abstaining from its withholding obligation are met.

Dividend withholding tax may be due at a reduced treaty rate under an applicable double taxation treaty. Treaty relief may be available at source if certain prerequisites described in a decree of the Federal Ministry of Finance are met.

If the exemption from dividend withholding tax on dividends paid to an EU corporation is not available, the EU corporation may reclaim the Austrian tax withheld to the extent such tax cannot be credited under an applicable double tax treaty in the residence state.

Other than the distribution of profits, the repayment of previous contributions (for example, in the case of a capital decrease or a dividend paid from capital reserves) does not attract Austrian withholding tax. However, to the extent the repayment of previous contributions exceeds the book value of the shares, a sale would be assumed and capital gains taxation may apply.

 

Share acquisitions and disposals

Taxes potentially payable

9. What taxes are potentially payable on a share acquisition/share disposal?

Corporate income tax

Capital gains from the disposal of shares in a corporation are subject to corporate income tax.

Equally, capital gains from the disposal of shares in a corporation that is not resident for tax purposes in Austria are subject to Austrian corporate income tax, unless the shareholding qualifies for the Austrian international participation exemption and the shareholder has not opted out of tax neutral treatment of capital gains (see Question 10, Corporate income tax).

VAT

The sale of shares is an exempt supply for VAT purposes.

Capital tax

The contribution of shares to a corporation may be subject to capital tax (see Question 3, Capital tax).

Real estate transfer tax

The transfer of shares in a corporation that owns real estate may trigger real estate transfer tax (see Question 3, Real estate transfer tax).

Stamp duty

The transfer of stock in a stock corporation is usually not a dutiable transaction. Stamp duty on assignments may be due if stockholder rights have not been securitised in the form of stock (or interim certificates) and the stockholder rights must be transferred by way of assignment. Assignments are dutiable transactions (see Question 3, Stamp duty).

Shares in a company with limited liability are generally transferred through assignment. However, a specific exemption from stamp duty on assignments applies to these transfers.

Exemptions and reliefs

10. Are any exemptions or reliefs available to the liable party?

Corporate income tax

Capital gains from the disposal of shares in a corporation that is not resident for tax purposes in Austria are exempt from Austrian corporate income tax if the shareholding qualifies for the Austrian international participation exemption (and the shareholder has not opted out of tax neutral treatment of capital gains and capital losses). Requirements of the Austrian international participation exemption are:

  • Shareholding of at least 10% in the dividend paying corporation.

  • Dividend paying corporation is an EU corporation or is comparable to an Austrian corporation.

  • Shareholding in the dividend paying corporation has been held for an uninterrupted period of at least one year.

The international participation exemption is subject to an anti-abuse provision. Accordingly, the exemption from Austrian corporate income tax is denied if a structure is considered generally abusive, or a certain criteria under statutory tests indicating abusive use of the international participation exemption are met. For example, abusive use is assumed if the predominant business object of the non-Austrian corporation is the generation of passive income (for example interest, royalties) and the income of the non-Austrian corporation is subject to taxation that is not comparable to Austrian corporate income tax (generally, if 15% or less).

If there is assumed abusive use of the international participation exemption, there is a switch-over from the exemption method to the credit method.

Other than the Austrian international participation exemption, the Austrian general participation (covering shares in an Austrian corporation and certain non-Austrian portfolio shareholdings non-Austrian shares) does not cover capital gains.

Hidden reserves built into the shares that are disposed of would not be triggered if the disposal of the shares qualifies as a tax neutral reorganisation under the Austrian tax law (for example, contribution or demerger) (see Question 25).

Capital tax

The contribution of shares to a corporation by way of a reorganisation may be exempt from capital tax under certain prerequisites (among others, the contributor must have held the contributed shares for at least two years).

Tax advantages/disadvantages for the buyer

11. Please set out the tax advantages and disadvantages of a share acquisition for the buyer.

Advantages

The advantages of a share acquisition for a corporate buyer include:

  • Tax attributes of the target (for example loss carry forwards) may survive the transaction.

  • Debt financing interest is deductible (even if the shareholding qualifies for the Austrian general participation exemption or the international participation exemption) unless the target is a related or controlled corporation.

  • Goodwill depreciation on the shares may be available if the target is included in the buyer's tax group. The target must be an Austrian tax resident operating corporation that is not related to or controlled by the purchaser. Goodwill for these purposes is defined as the difference amount between the purchase price and the commercial law equity plus hidden reserves in non-depreciable fixed assets of the target, capped at 50% of the purchase price. This goodwill is to be depreciated over 15 years.

Disadvantages

The disadvantages of a share acquisition for a corporate buyer include:

  • No step-up in basis in relation to the acquired assets (a step-up may allow for a higher depreciation amount).

  • Loss carry forwards may be lost if the share transfer results in a change in, cumulatively, the organisational structure, the economic structure and the shareholder structure. Further restrictions may apply if the shares are transferred in the course of a reorganisation.

Tax advantages/disadvantages for the seller

12. Please set out the tax advantages and disadvantages of a share disposal for the seller.

Advantages

A corporate seller of shares in a corporation that is not resident for tax purposes in Austria may benefit from the exemption from Austrian corporate income tax for shareholdings that qualify for the Austrian international participation exemption (see Question 10).

Disadvantages

The corporate seller of a shareholding that qualifies for the international participation exemption cannot make use of the capital losses from the sale of such shareholding, unless the seller has opted out of tax neutral treatment of capital gains and capital losses (see Question 10).

If the disposal of shares in a corporation that is a member of an Austrian tax group results in the corporation leaving the tax group before the corporation has been a member of the tax group for at least three years, the entire tax consequences of the tax group in relation to this group member must be reversed. The sale of a non-Austrian group member may result in a final recapture of foreign losses that have been used in Austria.

Transaction structures to minimise the tax burden

13. What transaction structures (if any) are commonly used to minimise the tax burden?

Corporate income tax

The acquired shareholding may be included in the tax group of the buyer. This may allow for a depreciation of goodwill on the acquired shareholding. Further, acquisition debt financing costs incurred by the acquiring corporation may be netted against profits generated by the target corporation, which results in a debt push down (effectively, not on a cash basis) that may usually not be achieved in such a scenario through a downstream merger due to capital maintenance rules. These structures will generally require an acquisition company.

Capital tax

Equity contributions to a corporation may be structured as indirect shareholder contributions to avoid triggering capital tax (see Question 3, Capital tax).

Real estate transfer tax

Triggering real estate transfer tax on acquiring shares in a corporation owning real estate may be avoided by introducing a minority shareholder to the structure to avoid a concentration of all shares in the corporation owning real estate with a single person. There is no statutory minimum amount of the minority shareholding; however, restrictions may have to be considered due to recent case law.

 

Asset acquisitions and disposals

Taxes potentially payable

14. What taxes are potentially payable on an asset acquisition/asset disposal?

Corporate income tax

Capital gains from the sale of assets by a corporation are business income and are subject to corporate income tax.

VAT

The sale of assets may be subject to VAT. VAT may also be due if an entire business or a qualified part of a business is sold as a going concern to a buyer that intends to use the assets to carry on the same kind of business (except in certain reorganisations).

Capital tax

Equity contributions, including contributions in kind to a corporation, may trigger capital tax (see Question 3, Capital tax).

Real estate transfer tax

If the asset disposed of is real estate, real estate transfer tax is triggered (see Question 3, Real estate transfer tax).

Stamp duty

Stamp duty may be payable in the context of an asset deal, for example, if rights and claims are transferred by way of assignment, or an entire contractual position under a dutiable transaction is transferred resulting in the conclusion of a new agreement for stamp duty purposes (see Question 3, Stamp duty). There are various ways to mitigate the risk of triggering stamp duty.

Exemptions and reliefs

15. Are any exemptions or reliefs available to the liable party?

The seller may use loss carry forwards against capital gains from the sale of assets that qualify as a business or a qualified part of a business without the general 75% loss carry forward limitation (see Question 4, Corporate income tax). There may be a depreciation allowance for the buyer in relation to the acquired assets. Fixed, tangible or intangible assets may be depreciable by the beneficial owner if the useful life of the asset exceeds one year but is limited in time. Land may not be depreciated. The depreciation basis is the cost of acquiring or producing the asset. The straight-line method of depreciation is generally used.

Corporate income tax may be avoided by structuring the transfer as a tax neutral reorganisation (see Question 25).

An exemption from capital tax may apply if the contributed assets amount to a business (or a qualified part of a business). Further, triggering capital tax may be avoided if the contribution is made by an indirect shareholder (see Question 3, Capital tax).

Exemptions from stamp duty on assignments apply, for example, to the assignment of receivables to a securitisation special purpose vehicle or assignments between banks. Exemptions from stamp duty may also be available in connection with the transfer of a business or a qualified part of a business by way of certain reorganisations.

Tax advantages/disadvantages for the buyer

16. Please set out the tax advantages and disadvantages of an asset acquisition for the buyer.

Advantages

There may be a depreciation allowance for the buyer in an asset acquisition (see Question 15).

Disadvantages

The disadvantages of an asset acquisition for a corporate buyer include:

  • Loss carry forwards generally remain with the seller and cannot be transferred to the buyer (except for certain reorganisations).

  • Real estate transfer tax may be payable if real estate is transferred.

Tax advantages/disadvantages for the seller

17. Please set out the tax advantages and disadvantages of an asset disposal for the seller.

Advantages

The advantages of an asset disposal for a corporate seller include:

  • Losses and loss carry forwards (in certain cases without the 75% loss carry forward limitation) may be netted against the capital gains from the sale of the assets (see Question 15).

  • In the context of the group taxation regime (see Question 4, Corporate income tax), the sale of assets of a group member (rather than the sale of the shares in such a group member) may avoid negative tax consequences if the group member would leave the tax group in the case of a share sale. (However, non-Austrian group members may also be deemed to leave the tax group as a consequence of certain asset transactions.)

Disadvantages

The disadvantages of an asset disposal for a corporate seller include:

  • Capital gains from the sale of the assets are subject to corporate income tax.

  • The transfer of assets may be subject to Austrian VAT (as an entrepreneur, the buyer should be entitled to input VAT deduction under the general rules.)

  • The transfer of certain assets may attract real estate transfer tax or stamp duty.

Transaction structures to minimise the tax burden

18. What transaction structures (if any) are commonly used to minimise the tax burden?

Transfers may be structured as tax neutral reorganisations or as indirect contributions to reduce the tax burden by making use of generally available exemptions or reliefs (see Question 15).

 

Legal mergers

Taxes potentially payable

19. What taxes are potentially payable on a legal merger?

Tax law provides for provisions on domestic and cross-border mergers of corporations. A legal merger is defined as a reorganisation by which all assets and liabilities of one corporation are transferred to another corporation without liquidation in exchange for shares in the receiving corporation.

Corporate income tax

A legal merger may be a tax neutral transaction for corporate income tax purposes, that is, there is no realisation of hidden reserves built into the assets transferred (the receiving corporation accounts for the assets received at continued book values).

Cross-border mergers are generally tax neutral provided Austria does not lose a taxing right in relation to the assets transferred as a consequence of the merger (specific provisions providing for deferred exit taxation may apply if Austria loses a tax right to an EU member state (or Norway)).

If a merger does not meet the requirements of a legal merger, the general rules of liquidation taxation apply in relation to the transferring corporation and its shareholders (see Question 28).

VAT

Legal mergers are exempt from VAT.

Capital tax

Transfers through a legal merger are exempt from capital tax if the transferring corporation has existed for at least two years. Equally, the exemption from capital tax for a transfer of the entire profits and losses of a corporation as consideration for the issuance of shares may apply in the case of a merger (see Question 3, Capital tax).

Real estate transfer tax

If the merger results in the transfer of real estate, real estate transfer tax may be due on two times the tax value of the real estate. Where the consequence of a legal merger is the concentration of all shares in a corporation owning real estate, real estate transfer tax may be due on three times the tax value.

Exemptions and reliefs

20. Are any exemptions or reliefs available to the liable party?

In a legal merger, exemptions and reliefs may be available in relation to corporate income tax, VAT and capital tax (see Question 19). Stamp duty should generally not be triggered in a merger because assets are transferred through universal succession.

Transaction structures to minimise the tax burden

21. What transaction structures (if any) are commonly used to minimise the tax burden?

Certain features of legal mergers may be used for tax planning purposes, for example the possibility to implement the merger with retroactive effect on the level of the corporation and the shareholders.

If one of the corporations to be merged owns real estate, it may be considered using the real estate owning corporation as the receiving corporation to avoid triggering real estate transfer tax.

 

Joint ventures

Taxes potentially payable

22. What taxes are potentially payable on establishing a joint venture company (JVC)?

Corporate income tax

The transfer of shares or assets to the JVC may trigger capital gains taxation for the transferor (see Questions 9 and 14, Corporate income tax).

VAT

The transfer of assets (but not shares) may be subject to VAT (see Questions 9 and 14, VAT).

Capital tax, real estate transfer tax

Capital tax may be triggered on establishing the JVC in the form of a corporation or on equity contributions (whether cash or in kind) to a corporation (see Questions 9 and 14, VAT).

The transfer of real estate (or shares in a corporation owning real estate) to the joint venture company may trigger real estate transfer tax (see Questions 9 and14, Real estate transfer tax).

Stamp duty

The assignment of rights (for example intellectual property rights) or the transfer of contractual positions to the joint venture company may trigger stamp duty. Other dutiable transactions (for example sureties provided in relation to obligations of a joint venture party) may be considered (see Question 3, Stamp duty).

Exemptions and reliefs

23. Are any exemptions or reliefs available to the liable party?

The general reliefs and exemptions may apply (see Questions 10 and 15).

Transaction structures to minimise the tax burden

24. What transaction structures (if any) are commonly used to minimise the tax burden?

The JVC may be established, for example, by transfers structured as tax neutral reorganisations or as indirect contributions to reduce the tax burden on creating the JVC by using generally available exemptions and reliefs (see Question 15).

 

Company reorganisations

Taxes potentially payable

25. What taxes are potentially payable on a company reorganisation?

Tax law provides for certain forms of domestic and cross-border reorganisations that are tax neutral for corporate income tax purposes and may be exempt from certain other taxes (see Question 19).

Tax law provides for the following types of tax neutral reorganisations:

  • Merger (Verschmelzung). See Question 19.

  • Transformation (Umwandlung). The conversion of a corporation into a partnership (or the merger of a corporation into its main shareholder in certain cases).

  • Contribution (Einbringung). The (in kind) contribution to a corporation of a business, a qualified part of a business, a partnership interest or certain shareholdings in exchange for shares issued by the receiving corporation.

  • Concentration (Zusammenschluss). The transfer of a business, a qualified part of a business or a partnership interest to a newly established partnership.

  • Division (Realteilung). The division of a partnership into sole businesses of the (former) partners in the partnership.

  • De-merger (Spaltung). The transfers of a business, a qualified part of a business, a partnership interest or certain shareholdings through a spin-off or a split-up from one corporation to one or more other corporations in exchange for shares in the receiving corporation.

Cross-border reorganisations are generally tax neutral provided that Austria does not lose a taxing right as a consequence of the reorganisation. If Austria loses a taxing right to another EU member state (or Norway), exit taxation may be deferred on request (the tax would be triggered in case of an on-transfer to a non-EU member state (or Norway) or on actual sale; however, the tax may not be levied anymore after a period of 10 years).

Exemptions and reliefs

26. Are any exemptions or reliefs available to the liable party?

Various exemptions may be available if the reorganisation qualifies as a tax neutral reorganisation (see Question 20).

Transaction structures to minimise the tax burden

27. What transaction structures (if any) are commonly used to minimise the tax burden?

Transaction structures that qualify as tax neutral reorganisations from an Austrian tax perspective may be used to reduce the tax burden (see Question 25).

 

Restructuring and insolvency

28. What are the key tax implications of the business insolvency and restructuring procedures in your jurisdiction?

If a corporation is liquidated, capital gains may be taxable at the level of the corporation and the shareholders. The liquidation profit at the level of the corporation is calculated as the difference between the net assets accounted for in the financial statements at the beginning of the financial year of the liquidation and in the financial statements at the end of the liquidation period. Equally, a liquidation profit may be taxable at the level of the shareholder. For the shareholder, a liquidation profit may be taxable to the extent it exceeds the book value of the shareholding.

The waiver by a shareholder of a receivable against the corporation that is, partially or entirely, not recoverable, results in a taxable profit at the corporation to the extent the receivable was not recoverable. Special rules apply to waivers of debt in insolvency proceedings. The waiver of a claim against the corporation may also trigger capital tax.

The 75% loss carry forward limitation does not apply in relation to certain debt restructuring profits.

 

Share buybacks

Taxes potentially payable

29. What taxes are potentially payable on a share buyback? (List them and cross-refer to Questions 3 to 6 as appropriate.)

Corporate income tax

From the perspective of the shareholder (seller), the buyback of own shares by a corporation (buyer) may be treated as a share sale transaction (or as a repayment of previous contributions which should, however, not lead to a different result). The general rules for share sales apply (see Question 9, Corporate income tax).

Exemptions and reliefs

30. Are any exemptions or reliefs available to the liable party?

There are no specific exemptions or reliefs.

Transaction structures to minimise the tax burden

31. What transaction structures (if any) are commonly used to minimise the tax burden?

There are no specific commonly used structures.

 

Private equity financed transactions: MBOs

Taxes potentially payable

32. What taxes are potentially payable on a management buyout (MBO)?

Corporate income tax

A management buyout is commonly effected through a corporate acquisition vehicle (NewCo) set up by the management. NewCo may be funded with equity or, to leverage the buyout, debt. To the extent NewCo is funded with shareholder debt, thin cap rules (arm's-length documentation and appropriate debt/equity ratio) must be observed to ensure (full) deductibility of the interest paid under the shareholder debt.

Since NewCo does not usually generate own profits against which the debt financing cost for the acquisition may be netted, a tax group may be established between NewCo and the target, effectively allowing for a debt push down (see Question 13, Corporate income tax).

To the sale of shares in the target or certain assets of the target, the general rules on share sale and asset sale transactions apply (see Questions 9 to 18).

Income tax

Disproportionate profit distributions under an agreement providing for a carried interest for the managers as shareholders in NewCo may be recognised for tax purposes provided the disproportionate distribution is agreed in the articles of the corporation and economically justified. Provided all relevant requirements are met and subject to relevant facts and circumstances, the carry may be treated as a dividend for tax purposes which is taxed at a flat rate of 25% (rather than income from employment which is taxed at the regular rates of up to 50%).

If the acquisition vehicle is set up as a partnership (which is transparent for tax purposes), the managers receive business income if the partnership amounts to a co-entrepreneurship, or dividends or capital gains from the shares held by the partnership if the function of the partnership is restricted to asset management.

Exemptions and reliefs

33. Are any exemptions or reliefs available to the liable party?

There are no specific exemptions or reliefs.

Transaction structures to minimise the tax burden

34. What transaction structures (if any) are commonly used to minimise the tax burden?
 

Reform

35. Please summarise any proposals for reform that will impact on the taxation of corporate transactions.

Utilisation of foreign losses

Under the Austrian group taxation regime, first-tier foreign corporations may be included in the tax group and the foreign losses of such group members may be utilised in Austria immediately in proportion to the shareholding in the non-Austrian group member (subject to recapture). Currently, the foreign losses are to be computed applying Austrian tax law which may lead to situations where the losses computed under Austrian tax law are higher than the actual foreign losses (as computed under the applicable local tax law). As a consequence, the recapture of foreign losses would not reach the excess amount of foreign losses computed under Austrian tax law in this case. To prevent this, recently adopted legislation provides that the amount of foreign losses that may be utilised in Austria must be capped at the amount of foreign losses computed under the applicable foreign law.

 
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