|Corporate Income Tax Rate (%)||25 (a)|
|Capital Gains Tax Rate (%)||25|
|Withholding Tax (%)|
|Dividends||25 / 27.5 (b)|
|Interest (from Bank Deposits and Securities only)||0 / 25 (c)|
|Royalties from Patents, Know-how, etc.||20 (d)|
|Net Operating Losses (years)|
a) This rate applies to distributed and undistributed profits.
b) In general, this withholding tax applies to dividends paid to residents and nonresidents. An Austrian corporation is generally required to withhold tax at a rate of 27.5%. However, if the distributing company has evidence of the corporate status of the investor, it may withhold tax at a rate of 25% (see Section B). Certain dividends paid to Austrian and European Union (EU) companies are exempt from tax (see Section B). In addition, a reduction in or relief from dividend withholding tax may be possible under double tax treaties.
c) For details, see Section B.
d) This withholding tax applies to nonresidents.
e) The offset of loss carryforwards against taxable income is limited to 75% of taxable income in most cases (see Section C).
Taxes on corporate income and gains
Corporate income tax. In general, all companies resident in Austria and foreign companies with Austria-source income are subject to corporate income tax. (For the scope of income subject to tax, see Foreign tax relief.) A company is resident in Austria if it has its legal seat or its effective place of management in Austria.
Rates of corporate income tax. The corporate tax rate is gener ally 25%.
All companies, including those incurring tax losses, are subject to the minimum tax. In general, the minimum tax is EUR1,750 for an Austrian private limited company (Gesellschaft mit besch-raenkter Haftung, or GmbH), EUR3,500 for a stock corporation (Aktiengesellschaft, or AG) and EUR6,000 for a European stock corporation (Societas Europea, or SE). For banks and insurance companies, the minimum tax is EUR5,452. Minimum tax may be credited against corporate tax payable in future years.
A reduced minimum tax applies to newly formed Austrian private limited companies incorporated after 30 June 2013. For such companies, the minimum tax is EUR500 per year for the first five years and EUR1,000 for the following five years. This is known as the “foundation privilege.”
Participation exemptions. The Austrian tax law provides for national and international participation exemptions.
National. Dividends (including hidden profit distributions) received by an Austrian company from another Austrian company are ex empt from corporate income tax (no minimum holding is required). Capital gains derived from the sale of shares in Austrian companies are treated as ordinary income and are subject to tax at the regular corporate tax rate. In general, capital losses on and depreciation of the participation may be deducted from taxable income, spread over a period of seven years.
International participation. An Austrian company is entitled to the international participation exemption if it holds at least 10% of the share capital of a foreign corporation that is comparable to an Austrian corporation for more than one year. The one-year hold ing period begins with the acquisition of the participation. The international participation exemption applies to dividends and capital gains.
A decrease in the value of an international participation is generally not tax deductible, but an Austrian company can irrevocably opt for such tax deductibility in the annual tax return for the year of acquisition. If this irrevocable option is exercised, capital gains are subject to tax, and decreases in value and capital losses are tax deductible. In general, capital losses and depreciation of the participation may then be deducted from the taxable income, spread over a period of seven years. In the event of insolvency or liquidation, final losses may be deducted even if the option for tax effectiveness was not exercised. The option does not affect the tax treatment of dividends.
According to an anti-abuse rule, the in ternational participation exemption does not apply if both of the following conditions are met:
- The subsidiary earns primarily specified types of passive income, which are interest, income from leasing property other than land and buildings and capital gains (active business test).
- The subsidiary is not subject to income tax at an effective rate of more than 15% in its home country (low taxation test).
To determine whether a company is a passive company, the Austrian corporate income tax guidelines refer to the company’s focus. The focus is determined from an economic perspective, based on the use of capital, employees and the character of the revenues. A company is considered to be a passive company if it derives more than 50% of its revenues from passive operations.
If the passive income and low taxation tests described above are not met, dividends and capital gains are taxed at the general Austrian corporate tax rate of 25%. For dividends, income taxes paid by the foreign subsidiary (underlying tax), as well as withholding taxes imposed, are credited against the income tax payable by the Austrian parent company (this represents a switchover from the exemption method to the credit method). Abuse may also be assumed if one of the criteria is “strongly given” and the second element is “almost given.” “Strongly given” means that the statutory threshold is exceeded by more than 25%. “Almost given” means that the company fails to meet the statutory threshold by less than 25% of such threshold. If the creditable foreign tax exceeds the amount of tax to be paid in Austria, the excess amount of foreign tax can be carried forward and credited in future tax periods.
International portfolio participation. Dividends from participations that do not meet the criteria for international participations are subject to the general corporate income tax rate of 25%. However, shareholdings in EU corporations, certain European Economic Area (EEA) corporations (currently only Liechtenstein and Norway) and corporations that are resident in third countries and that have agreed to exchange tax information qualify as international portfolio participations. Dividends from such international portfolio participations are exempt from tax. Capital gains (and losses) are tax-effective (the treatment corresponds to the treatment of national participations).
If a foreign entity is subject to no corporate income tax, an exemption from corporate income tax or a tax rate lower than 15%, the exemption for dividends from portfolio participations does not apply. Instead, dividends are taxed at the general Austrian corporate income tax rate of 25%. Income taxes paid by the foreign subsidiary (underlying tax), as well as withholding taxes imposed, are credited against the income tax payable by the Austrian parent company (this represents a switchover from the exemption method to the credit method). If the creditable foreign tax exceeds the amount of tax to be paid in Austria, the excess amount of foreign underlying tax can be carried forward and be credited in future tax periods.
Hybrid financing. Dividends from international participations (including portfolio participations) are not exempt from tax in Austria if such payments are deductible for tax purposes in the country of the distributing company.
Expenses. Business expenses are generally deductible. However, an exception applies to expenses that are related to tax-free income. Although dividends from national and international participations and portfolio participations are tax-free under the Austrian participation exemption, interest incurred on the acquisition of such participations is deductible for tax purposes. How ever, interest from debt raised to finance the acquisition of participations from affiliates is generally not deductible. In addition, interest and royalty payments to domestic and foreign-affiliated corporations are not tax deductible if the income of the recipient corporation is not subject to tax or taxed at a (nominal or effective) rate of less than 10%. If the recipient corporation is not the beneficial owner, the taxation of the beneficial owner is relevant. An exception applies to payments to entities that meet the EU law privileges for risk capital measures, which are contained in Regulation (EU) No. 345/2013 of the European Parliament and of the Council of 17 April 2013 on European venture capital funds. If these specific rules of EU law are fulfilled and if the income of the recipient corporation is taxed at a rate of less than 10%, interest and royalty payments to domestic and foreign affiliated corporations remain deductible for tax purposes.
Capital gains. Capital gains derived from sales of shares in Austrian companies are treated as ordinary income and are subject to tax at the regular corporate tax rate. Capital gains derived from sales of shares in non-Austrian companies may be exempt from tax under the international participation exemption; otherwise, they are treated as ordinary income and subject to tax at the regular corporate tax rate.
Withholding taxes on dividends and interest
Dividends. Effective from 1 January 2016, the general withholding tax rate for dividends is 27.5% if the distribution does not constitute a repayment of capital. The withholding tax rate may be reduced to 25% if the investor is a corporation. In practice, this means that if the distributing entity lacks information on the status of an investor (corporate or individual), the 27.5% rate applies. In general, the 27.5% rate applies to dividends paid with respect to portfolio investments, including those paid to corporate investors. If the person required to withhold has information that the investor is a corporation, the 25% tax rate can be applied at source (for example, intercompany dividends). If 27.5% is withheld, corporate investors may reduce their tax burden in Austria to 25% in an assessment and refund procedure, based on their corporate status.
However, this withholding tax does not apply to dividends (other than hidden profit distributions) paid to either of the following:
- An Austrian parent company (fulfilling certain criteria) holding directly or indirectly an interest of at least 10% in the distributing company.
- A parent company (fulfilling certain criteria) resident in another EU country holding directly or indirectly an interest of at least 10% in the distributing company for at least one year.
Furthermore, the withholding tax rate may be reduced for dividends paid to foreign shareholders in accordance with double tax treaties. De pending on the situation, this reduction may be in the form of an upfront reduction at source or a refund of withholding tax.
For dividends paid to parent companies resident in the EU or EEA (if the EEA country grants full administrative assistance; currently only Liechtenstein and Norway meet this condition) that are subject to tax in Austria, Austrian withholding tax is refunded if the shareholder can prove that the withholding tax cannot be credited in the state of residence of the shareholder under tax treaty law.
Interest. Interest paid on loans (for example, intercompany loans) is generally not subject to withholding tax in Austria. A 27.5% withholding tax is imposed on interest income paid by Austrian banks, Austrian branches of foreign banks or Austrian paying agents. An exception from the 27.5% rate applies to interest on bank savings and other non-securitized loans from banks (except for compensation payments and lending fees), which are subject to a 25% tax rate. Interest paid to nonresident companies is generally exempt from Austrian withholding tax if certain evidence is provided. In addition, interest income is exempt from withholding tax if the debtor has neither an ordinary residence nor a registered office in Austria and if it is not a domestic branch of a foreign bank. EU withholding tax may apply if certain requirements are met.
Interest income earned by a company engaged in business in Austria through a permanent establishment is considered business income and must be included in the taxable income of the permanent establishment. For such companies, the withholding tax (if due) is credited against the corporate income tax. If the withholding tax exceeds the tax due, it is refunded. The withholding tax is not imposed if a declaration of exemption stating that the interest is taxed as business income is filed with the Austrian bank.
Administration. In principle, the Austrian tax year corresponds to the calendar year. However, other fiscal years are possible. The tax base is the income earned in the fiscal year ending in the respective calendar year. Annual tax returns must be filed by 30 April (30 June, if submitted electronically) of the follow ing calendar year. Extensions may be granted. A general extension to 31 March (or 30 April) of the second following year is usually granted if a taxpayer is represented by a certified tax advisor (tax returns may be requested earlier by the tax office).
Companies are required to make prepayments of corporate income tax. The amount is generally based on the (indexed) amount of tax payable for the preceding year, and payment must be made in equal quarterly installments on 15 February, 15 May, 15 August and 15 November.
Interest is levied on the amount by which the final tax for the year exceeds the total of the advance payments if this amount is paid after 30 September of the year following the tax year. To prevent interest, companies may pay the amount due as an additional advance payment by 30 September of the year following the tax year.
Foreign tax relief. In general, resident companies are taxed in Austria on their worldwide income, regardless of where that income is sourced. However, the following exceptions exist:
- The Finance Ministry may, at its discretion, allow certain types of income that have their source in countries with which Austria has not entered into a double tax treaty to be excluded from the Austrian tax computation, or it may allow foreign taxes paid to be credited against Austrian corporate income tax. Under a decree of the Ministry of Finance, an exemption is granted in case of active income and taxation of at least 15%. Otherwise, only a credit of foreign taxes is allowed.
- Income earned in countries with which Austria has a double tax treaty is taxable or exempt, depending on the treaty.
- Dividends and capital gains derived from participations of 10% or more in foreign subsidiaries can be exempt from corporate income tax under the international participation exemption (see Participation exemptions).
- Dividends from foreign portfolio shareholdings in companies resident in countries that have agreed to exchange tax information are exempt from tax unless the subsidiary is low-taxed (see Participation exemptions).
Determination of trading income
General. In general, taxable income is based on the profit or loss shown in the financial statements prepared in accordance with Austrian generally accepted accounting principles. The financial statement profit or loss must be adjusted in accordance with special rules set forth in the tax acts. Taxable income is calculated as follows.
Profit per financial statements X
+ Nondeductible taxes (such as corporate
income tax) X
+ Nondeductible expenses (such as donations,
lump-sum accruals and certain interest) X
– Special allowances and non-taxable
income (intercompany dividends
and loss carryforwards*) (X)
= Taxable income X
* The offset of loss carryforwards against taxable income is limited to 75% of taxable income in most cases.
Inventories. In determining trading income, inventories must be valued at the lower of cost or market value. Cost may, at the tax-payer’s option, be determined using any of the following methods:
- Historical cost
- Average cost
- First-in, first-out (FIFO)
- Under certain circumstances, last-in, first-out (LIFO)
The highest-in, first-out (HIFO) method is not allowed.
Provisions. Accruals for severance payments and pension costs are allowable to a limited extent. Accruals for corporate income tax and lump-sum accruals are not deductible for tax purposes. Provisions with a term of 12 months or more are subject to a mandatory fixed discounting rate of 3.5%, except for accruals for severance payments and pension costs, which are tax deductible to the extent of 100% of their tax value.
Depreciation. In general, depreciable assets are depreciated over the average useful life. For certain assets, such as buildings and passenger cars, the tax law provides depreciation rates. The following are some of the applicable annual rates.
|Office equipment||10 to 25|
|Plant and machinery||10 to 20|
Research and development. Companies may claim a research and development (R&D) bonus (cash payment) equal to 12% of certain expenses for research and experimental development (according to the Frascati manual, these expenses consist of material costs, labor costs, energy costs and attributed interest). The R&D must be conducted by an Austrian company in Austria or by an Austrian permanent establishment of a foreign company.
Relief for losses. Losses incurred by resident companies may be carried forward without time limit. The offset of loss carryfor-wards against taxable income is in most cases limited to 75% of the taxable income. The remaining balance of the loss carryfor-ward may be offset against income in future years, subject to the same 75% limitation.
The loss carryforward is attributable to the corporation, not to the shareholders. Consequently, a change in shareholders does not affect the loss carryforward, provided no corresponding substantial change in the business and management of the company occurs. Losses may not be carried back. Foreign companies with permanent establishments in Austria may claim tax losses only under certain circumstances.
Groups of companies. The group taxation regime allows parent and subsidiaries to consolidate their taxable income. Under the Austrian law, the head of the tax group must be an Austrian corporate entity or branch of an EU/EEA corporate entity that has held more than 50% of the capital and voting rights in the subsidiary since the beginning of the subsidiary’s fiscal year. The shareholding can be direct, or it can be held indirectly through a partnership or a group member. Only corporations (not partnerships) qualify as group members. If the holding requirement is satisfied, 100% of the taxable income (profit or loss) of domestic group members is allocated to the taxable income of the group parent, regardless of the percentage of the shareholding in the subsidiary. No actual profit or loss transfer takes place (only an agreement on the split of the tax burden is required). The tax group must exist for at least three full financial years. Otherwise, retroactive taxation on a stand-alone basis applies.
Group taxation also allows a cross-border tax consolidation if the foreign subsidiary is directly held by an Austrian parent (first foreign tier) and if the type of entity is comparable to an Austrian corporation from a company law perspective. Effective from 1 March 2014, certain companies are excluded from the group taxation regime. Only corporations resident in the EU and in countries with which Austria has agreed on comprehensive administrative assistance can be included in a tax group. The Austrian Ministry of Finance has published a list of all qualifying third countries.
Existing foreign group members that are resident outside the EU or in countries without a comprehensive administrative assistance agreement are suspended from the group tax regime as of 1 January 2015, as a matter of law. If, based on this rule, the three-year minimum holding period cannot be fulfilled, no retroactive reversal of group taxation tax effects will occur. The recapture of foreign prior year losses of the suspended group members may be spread over three years (see below for details regarding the recapture of foreign losses).
Foreign losses must be recalculated under Austrian tax law. In addition, the deductibility of foreign losses is limited to the lower of the amount according to Austrian tax law and actual losses calculated under foreign tax law. Losses from foreign group members can be deducted from the Austrian tax base in proportion to the shareholding only. Beginning with the 2015 tax year, the utilization of losses of foreign group members is limited to 75% of the domestic group income. Excess losses are included in the loss carryforwards for subsequent years. Profits of a foreign group member are generally not included in the Austrian group parent’s income.
To avoid double utilization of losses of a foreign group member, foreign losses that have been deducted from income of the Austrian group shareholder are added to the Austrian profit if the losses can be offset in the foreign jurisdiction at a subsequent time. Con sequent ly, if the foreign country uses the losses in subsequent years (as part of a loss carryforward), the tax base in Austria is increased by that amount in order to prevent a double dip of losses. Foreign losses must also be added to the Austrian income tax base if the foreign subsidiary leaves the group. A recapture is also required if a significant reduction occurs in the size of the foreign subsidiary’s business. This measure is designed to prevent dormant foreign entities from remaining in the group to avoid the recapture of foreign losses. Relief for capital losses is provided only in the event of a liquidation or insolvency.
If an Austrian participation is acquired and if the acquired company becomes part of the group, goodwill depreciation (from a share deal) over a period of 15 years is possible. The goodwill is computed as the spread between the equity of the acquired company (pro rata to the acquired shares) and the acquisition price for the shares. This spread is reduced by hidden reserves attributable to non-depreciable long-term assets (primarily real estate). The basis for the goodwill depreciation is capped at 50% of the acquisition cost. Acquisitions of participations after 28 February 2014 are no longer entitled to goodwill amortization. Remaining amortization amounts (1/15 per year) from past acquisitions basically remain deductible for tax purposes under certain requirements in accordance with the rules discussed above. The European Court of Justice has held that the requirement that only Austrian participations qualify for the goodwill depreciation is incompatible with the fundamental freedoms of the EU.
Depreciation to the fair market value of a participation within the group is tax-neutral.
Other significant taxes
The following table summarizes other significant taxes.
|Nature of tax||Rate (%)|
|Reduced||10 / 13|
|Payroll taxes, paid by employer:|
|Family allowance fund; varies by state||4.86 to 4.94|
|Real estate sales tax (including 1.1% registration fee)||4.6|
|Stamp duties, on certain legal transactions, such as leases and hire contracts||0.8 to 2|
|Stability tax for banks; on adjusted balance sheet total (an additional stability surcharge of 45% applies from 2015 through 2017)||0.09 to 0.11|
Foreign-exchange controls. No restrictions are imposed on the transfer of nominal share capital, interest and the remittance of dividends and branch profits. Royalties, technical service fees and similar payments may be remitted freely, but routine documentation may be required.
Debt-to-equity rules. Austrian tax law does not provide special debt-to-equity rules. Although, in general, shareholders are free to de ter mine whether to finance their company with equity or loans, the tax authorities may reclassify loans granted by shareholders, loans granted by group companies, and loans granted by third parties guaranteed by group companies as equity, if funds are transferred under legal or economic circumstances that typify equity contributions, such as the following:
- The equity of the company is insufficient to satisfy the solvency requirements of the company, and the loan replaces equity from an economic point of view.
- The company’s debt-to-equity ratio is significantly below the industry average.
- The company is unable to obtain any loans from third parties, such as banks.
- The loan conveys rights similar to shareholder rights, such as profit participations.
If a loan is reclassified (for example, during a tax audit), interest is not deductible for tax purposes, withholding tax on hidden profit distributions may become due, and capital duty of 1% on the loan amount is imposed. This duty will be abolished, effective from 1 January 2016.
Transfer pricing. Austria has accepted the Organisation for Economic Co-operation and Development (OECD) transfer-pricing guidelines and published a summary of the interpretation of the OECD guidelines by the Austrian tax administration in 2010. Under these guidelines, all transactions with related parties must be conducted at arm’s length. If a transaction is considered not to be at arm’s length, the transaction price is adjusted for corporate income tax purposes. This adjustment may be deem ed to be a hidden profit distribution subject to withholding tax or a capital contribution subject to capital duty.
Treaty withholding tax rates
The following summary is intended purely for orientation purposes; it does not reflect the various special provisions of individual treaties or the withholding tax regulations in domestic tax law.
|A (%)||B(%)||C (%)||D (%)||E (%)||F (%)|
|Azerbaijan||15||5/10 (h)||10||10||10 (i)||5/10 (i)|
|A (%)||B(%)||C (%)||D (%)||E (%)||F (%)|
|Bosnia and Herzegovina||10||5||5||5||5||5|
|Brazil||15||15||15||15||15 (f)||15 (f)|
|Canada||15||5||10||10||10 (k)||10 (k)|
|Czech Republic||10||0||0||0||5 (j)||5 (j)|
|From Egypt||15||15||15||— (b)||0||0|
|Estonia||15||5||10||10||5/10 (q)||5/10 (q)|
|Hong Kong SAR||10||0||0||0||3||3|
|Korea (South)||15||5||10||10||10 (n)||10 (n)|
|Latvia||10||5||10||10||5/10 (q) 5/10 (q)|
|Liechtenstein||15||15||10||10||10 (l) 10 (l)|
|Lithuania||15||5||10||10||5/10 (q) 5/10 (q)|
|From Malaysia||Special arrangements||15||15||10 (j)||10 (j)|
|From Austria||10 5||15||15||10||10|
|From Malta||Special arrangements||5||5||10||10|
|Montenegro||10||5 (w)||10||10||5/10 (x)||5/10 (x)|
|A (%)||B(%)||C (%)||D (%)||E (%)||F (%)|
|Nepal||15||5/10 (r)||15 (s)||15 (s)||15||15|
|Philippines||25||10||10 / 15||10 / 15||10 / 15||10 / 15|
|Serbia||15||5||10||10||5 / 10||5 /10|
|From Thailand||(b)||15/20||10 / 25||10 / 25||15||15|
|From Austria||(b)||10||10 / 25||10 / 25||15||15|
|Tunisia||20||10||10||10||15 (p)||15 (p)|
|Turkey||15||5||15 (v)||15 (v)||10||10|
|Ukraine||10||5||2 / 5||2 / 5||5||5|
|United Arab Emirates||0||0||0||0||0||0|
|United States||15||5||0||0||0 (g)||0|
|Venezuela||15||5||10 (e)||10 (e)||5||5|
|Vietnam||15||5/10 (t)||10||10||10||7.5 (u)|
|Non-treaty countries||27.5 (y)||25 (y)||0 (y)||0 (c)||20||20|
A – General.
B – Dividends received from subsidiary company. Shareholding required varies from 10% to 95%, but generally is 25%.
C – General.
D – Mortgages.
E – General.
F – Royalties from 50% subsidiary.
a) Under domestic tax law, a 25% withholding tax is imposed only on interest income from bank deposits and securities. However, interest paid to nonresidents is generally not subject to withholding tax. For details, see Section B.
b) No reduced rate applies.
c) No withholding tax is imposed, but the income is subject to tax at the regular corporate rate.
d) Austria is honoring the USSR treaty with respect to the republics comprising the Commonwealth of Independent States (CIS), except for those republics that have entered into tax treaties with Austria. Austria has entered into tax treaties with Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, the Russian Federation, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. The withholding tax rates under these treaties are listed in the above table.
e) Interest paid by banks is subject to a 4.95% withholding tax.
f) Trademark royalties are subject to a 25% withholding tax. The withholding tax rate is 15% for royalties paid for literary, artistic and scientific items.
g) The rate is 10% for royalties paid for the use of films or other means of production used for radio or television.
h) The 5% rate applies if the participation of the recipient of the dividends exceeds USD250,000. The 10% rate applies if the participation of the recipient of the dividends exceeds USD100,000 but does not exceed USD250,000.
i) The rate is 5% for royalties paid for technologies not older than three years.
j) The rate is 0% for royalties paid for literary, artistic and scientific items.
k) Royalties paid for computer software, patents and know-how are exempt if the royalties are taxed in the state of residence of the recipient.
l) The rate is 5% for royalties paid to licensors engaged in industrial production.
m) This rate applies to dividends received from a 10%-subsidiary.
n) The rate is 2% for amounts paid for the use of commercial or scientific equipment.
o) The rate is 20% for dividends paid by non-industrial Pakistani corporations.
p) The rate is 10% for royalties paid for literary, artistic and scientific items.
q) The 5% rate applies to amounts paid for the use of industrial or scientific equipment.
r) The 5% rate applies to dividends received from a 25%-subsidiary; the 10% rate applies to dividends received from a 10%-subsidiary.
s) The rate is 10% for interest paid to a bank if the interest arises from the transacting of bank business and if the recipient is the beneficiary of the interest.
t) The 5% rate applies to participations of at least 70%. The 10% rate applies to participations of at least 25%.
u) The rate is 7.5% for technical services.
v) The rate is reduced to 10% for interest received from a bank. Interest on loans granted by the Österreichische Kontrollbank to promote exports or similar institutions in Turkey is subject to a withholding tax rate of 5%.
w) A shareholding of at least 5% is required.
x) The 10% rate applies to industrial royalties.
y) See Section B.
The tax treaty with Argentina was suspended by Argentina, effective from 1 January 2009.