Austrian group taxation – an overview
Companies are, by law, separate and independent entities. Any profit derived by a corporation is subject to Austrian corporate income tax at a flat rate of 25% regardless of whether the profit is distributed to shareholders or retained.
However, if an Austrian corporation holds a (direct or indirect through another group member or a partnership) participation of more than 50% of the capital and the majority of the voting rights in a domestic or foreign corporation, a tax group may be established.
A non-resident company can also form a tax group, provided that it is either listed in the annex of the EU Parent-Subsidiary Directive or is comparable to a resident company and has its place of management in the European Economic Area. In addition, the non-resident company needs to be registered in the commercial register with an Austrian branch and the shares in the group members have to be attributable to that Austrian branch.
All Austrian corporations as well as comparable foreign corporations which are resident in the EU or in a state which has concluded an agreement for Exchange of Information and Mutual Assistance in the Collection of Taxes with Austria, theoretically qualify as a group member. However, only “first-tier” foreign subsidiaries may be included into the group, meaning that the required share exceeding 50% in a foreign group member needs to be held by one or more Austrian group members.
As a consequence of group taxation, the group members’ total profits and losses are attributed to the group parent. The degree of participation of the latter is irrelevant. The total attribution of profits and losses also takes place when the percentage of participation does not amount to 100%. An exception exists for foreign group members: only losses of foreign group members may be deducted from the taxable income of the group in portion of the amount of the direct shareholding of the group in the foreign entity. However, such losses are recaptured and taxed in Austria in subsequent years if and to the extent they can be offset against profits of the foreign entity under its domestic tax regime or if the foreign entity drops out of the group. Forming a tax group is particularly useful when at least one of the group companies incurs a loss in the relevant year.
The group needs to be existent for a period of at least three years. If the tax group is terminated earlier, all benefits from the group taxation will be lost and each member of the group will be taxed as a separate entity with retroactive effect. Providing that all requirements are fulfilled, the group leader may opt for group taxation simply by filing an application form with the tax authorities. Furthermore it has to be mentioned that binding rulings are available in group taxation issues (costs differ between €1,500 and €20.000 ($5,500 and $22,000) depending on the turnover of the requesting taxpayer).
This article was prepared by WTS Austria, member of WTS Global.
Kerstin Weber, certified tax advisor
00431 24 266 17
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