Finance Committee approves extensive package of measures The Finance Committee passed many requests for tax measures benefiting Austrian citizens and businesses before the summer

Research tax credit increased

As stipulated in the government programme for 2017/2018, the research tax credit (Forschungsprämie) will increase from 12 to 14 percent starting in 2018. The government parties approved the additional increase proposed by the Minister of Finance based on international studies that clearly show the benefits that indirect research subsidies provide in a proactive regional economic policy. “The research credit is an important tax measure for promoting research and development that benefits all companies”, stated Minister of Finance Hans Jörg Schelling. “The credit is a highly sensible complement to direct research subsidies, and the increase to 12 percent under the Austrian tax reform was highly successful. This additional increase to 14 percent is part of our package aimed at once again making Austria one of the most attractive locations for business and research.”

Employee Share Ownership Foundation Act 2017 (Mitarbeiterbeteiligungsstiftungsgesetz 2017)

This new form of employee share ownership plan is aimed at protecting Austrian companies from potential outside takeovers. “This measure is aimed at protecting jobs and making Austria more attractive as a location for business. And the most important point is that the employees will be owners, and share in the success of the company”, stressed the Minister of Finance. The employee share ownership foundation manages the shares in trust for employees and becomes a strong principal shareholder. Employee shares with a value of up to EUR 4,500 per year are exempt from tax and social security contributions. This tax benefit (allowance) applies if the shares are held in the employee share ownership foundation until the end of employment.

Stock Exchange Act 2018 (Börsegesetz 2018) / Securities Supervision Act 2018 (Wertpapieraufsichtsgesetz 2018)

The amendments to the EU Financial Market Directive (MiFID II/MiFIR) include the revised Markets in Financial Instruments Directive (MiFID II) and the associated Markets in Financial Instruments Regulation (MiFIR), which govern the provision of financial instruments both on regulated exchanges and in off-exchange trading. “These amendments add to the activities of investment service providers with, for example, stricter client and investor protection rules”, stated Minister of Finance Schelling. “In general, the transparency provisions are expanded and the supervisory and sanction powers of the Financial Market Authority are expanded and strengthened”, according to Schelling. The new provisions must be implemented in national law by 3 July 2017 with entry into effect on 3 January 2018. The Austrian Stock Exchange Act and Securities Supervision Act are affected in Austria.

SME Financing Company Act 2017 (Mittelstandsfinanzierungsgesellschaftengesetz – MiFiGG 2017)

The new SME financing company regime provides state aid in the form of risk capital and must be approved by the European Commission. Entry into force of the MiFiGG therefore depends on Commission approval in accordance with EU law on state aid. “We want to promote more investment in Austrian companies by taking full advantage of the possibilities for state aid provided by this new law. We expect this to generate strong growth stimulus while making it easier for companies to access equity capital. This will mainly be achieved by providing tax incentives for investors and SME financing companies to provide risk capital”, explained Minister of Finance Schelling. Up to EUR 15,000 per year in distributions from SME financing companies will be tax-exempt for private investors. SME financing companies will be exempt in the area of financing from corporation tax (KöSt) on capital gains and other changes in value, such as write-ups and write-downs of interests in target companies. Another key aspect is mobilisation of private capital for corporate investments, which is achieved by amending the Alternative Investment Fund Manager Act (Alternative Investmentfondsmanagergesetz – AIFMG). “It will also be easier for private investors to invest in SME financing companies and company interests in the future. This provides benefits for both investors and companies, particularly during times when interest rates are low”, stated Schelling, indicating specific benefits of the draft legislation.

Beneficial Owner Register Act (Wirtschaftliche Eigentümer Registergesetz – WiEReG)

This law represents a major step in the implementation of the 4th Anti-Money Laundering Act, where Austria introduces the most internationally advanced and administratively efficient anti-money laundering and terrorist financing register. Introduction of the register was also discussed in the OECD in connection with the Financial Action Task Force (FATF). “The beneficial owner register is an effective measure for preventing money laundering and terrorist financing. Rapid implementation allows us to set international standards, which will also have a positive effect on the FATF evaluation. In the end, the register will be viewed as one of the most innovative and administratively efficient registers in Europe. Given the FATF plenary meeting in October 2017, we should not give up this pioneer role”, emphasised Schelling.

Carinthian Fund Waiver Act (SvK-Verzichtsgesetz): liquidation of the Carinthian Fund (“Future Fund”)

This federal law allows mutually agreeable liquidation of the Carinthian Future Fund. Under budget law, the Austrian federal government waives EUR 1.7 billion in claims against the “Carinthian Fund in Liquidation” (Sondervermögen Kärnten in Abwicklung), which also would have been uncollectible in the event of insolvency. The Carinthian Fund is to be liquidated by 1 August 2017. The state of Carinthia has agreed to make partial payments of at least EUR 67 million to the federal government. “This solution provides a better financial result for the federal government and all creditors than would have been achieved in the event of insolvency, avoids length proceedings and reduces the legal risks for creditors. In addition, the federal and state governments receive an immediate cash inflow from liquidation of the Carinthian Fund. The state government will also be able to service its debts to the federal government more quickly”, clarified Schelling.

MLI ratification: Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting

Austria signed the multi-lateral instrument (MLI) prepared by the Organisation for Economic Cooperation and Development (OECD) on 7 June. This instrument mainly serves to implement the OECD project for preventing profit shifting by international corporate groups (anti-BEPS; Base Erosion and Profit Shifting).

One of the main objectives of the agreement that was signed in Paris was to allow the anti-base erosion and profit shifting measures that were prepared by the OECD to be implemented in existing double-taxation treaties (DTT) between affected participating states without requiring each individual treaty to be re-negotiated. “Austria’s signature made double-taxation treaties with 38 countries BEPS-compliant in one stroke”, stated Minister of Finance Dr. Hans Jörg Schelling.

In detail, the MLI included the following measures:

  • Hybrid structures: These are hybrid structures of companies that take advantage of different tax treatments in different tax areas, so that in the end no taxes are paid anywhere on the profits earned
  • Prevention of artificial circumvention of permanent establishment status
  • Prevention of treaty misuse
  • Provisions for improving dispute resolution

Tobacconist package

This private members’ bill includes the following two points. An increase in the tobacconist minimum trade margin to EUR 26 (previously EUR 24.60) per 1,000 cigarettes for tobacco specialty shops and EUR 14 (previously EUR 13.30) per 1,000 cigarettes for tobacco sales outlets starting 1 August 2017 by means of changes to the Tobacco Monopoly Act (Tabakmonopolgesetz – TabMG), together with a reduction of 1.5 percent in the value-based tax component and an increase of EUR 5 per 1,000 cigarettes in the quantity-based tax component starting 1 April 2018. In the case of fine-cut tobacco for rolling cigarettes, the minimum excise duty will be increased by EUR 10 per kg starting 1 April 2018. Both of these measures are anchored in the Tobacco Tax Act (Tabaksteuergesetz – TabStG).