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Tax Incentives for Companies at the Business Location Austria

There is no general answer to the question of which tax benefits companies in Austria can take advantage of. Many tax privileges are linked to a series of specific prerequisites. However, it turns out that from an overall tax perspective, equity stakes and forming tax groups can be worthwhile. Investments in research and development also pay off. It is crucial to inform oneself about potential obstacles.

Numerous tax concessions for holdings

Particularly for holding structures, Austria has proven to be a favorable business location featuring numerous tax advantages for the companies involved. In this country, domestic companies can be used as a holding regardless of their other business activities. The financial added value of holding companies is that the earnings they generate from foreign investments are principally exempt from the corporate income tax. This income from associates is generally applicable when the Austrian company holds a stake of at least 10% in the foreign subsidiary. This holding has to exist for a period of at least one year without interruption. If these prerequisites are fulfilled, dividends, capital gains and losses as well as other changes in value of these investments are tax-free, unless the holding opts for taxation. The exemption from the corporate income tax even applies to dividends from companies in Austria, the EU or countries with comprehensive administrative assistance regardless of the holding period and the extent of the respective shareholding.  

Other advantages for holdings arise as a result of the deductibility of interest for the debt-financed acquisition of equity stakes in non-group companies. Moreover, the broad network of double taxation agreements as well as the possibility of tax-neutral restructuring on a national and cross-border level are positive conditions for holding companies in Austria.  

Tax relief for group taxation

Group taxation comprises another tax advantage for Austrian companies. In line with this system, profits and losses of the members of a tax group are automatically assigned to the head of the tax group. In this way, profits and losses within a corporate group are offset against each other. Accordingly, it is possible to include losses on a cross-border basis. Every fully taxable corporation can serve as the tax group parent in Austria.

In order to include a company in a corporate tax group, a stake of more than 50% in the equity capital and voting rights of the subsidiary is required. A domestic corporate tax group is permitted to calculate up to 100% of the losses of the domestic group members. In contrast, foreign tax groups can only take the business results of the domestic members of the tax group into account in proportion to the pro rata amount of the equity stakes which are held.  

Entitlement to the research tax credit

In Austria, companies also have a financial motive to focus on innovative research projects. The tax credit applying to research and innovation currently equals 12% and will rise to 14% starting at the beginning of 2018. Applications for the research tax credit can be submitted by every company investing in research, innovation and development, regardless of the company’s size, sector or corporate structure. A company is also entitled to claim the research tax credit if it generates no profits or only a small profit. The payment takes place as a cash payment - quickly and relatively unbureaucratically.

A company’s in-house research as well as contract research are eligible within the context of the research tax credit. Moreover, the experimental development of models, products and processes beyond the current state-of-the-art technology is also taken into account. Frequently, companies fail to include all research and development costs for purposes of the research tax credit. These costs can be claimed regardless of the project’s success. Loan costs arising before the beginning of the project can also be included as well as salaries and wages, capital investments in fixed assets and real estate as well as expenditures relevant to research such as purchased services, financing and overhead costs.  

The pre-requisite is soundly-based information

There are a diverse range of possibilities to take advantage of tax incentives. The most important thing is that business people inform themselves in detail. In case of doubt, it is also recommended to get professional advice. This will prevent companies from failing to exploit potential tax benefits.

Mag. Herbert Kovar

Partner at Deloitte in Vienna +43-1-537 00-3600

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