Austria Limited

TAXATION

Corporate profits are subject to a corporate income tax (Körperschaftssteuer) at a rate of 25%. Payments where the recipient is not disclosed (Empfängerbenennung) may attract a 25% surcharge. Only certain income of legal entities which are neither seated in Austria nor have their effective place of management in Austria are subject to corporate income tax in Austria. Such income would be treated as connected with Austria under the applicable rules.

The annual financial statements prepared in accordance with commercial law are the basis for determining the taxable income. Valuation methods may be used for both assessment pursuant to commercial law as well as for tax purposes unless tax laws provide otherwise. Adjustment of profit or loss shown in the financial statements is to be made in order to level out any difference resulting from applying tax law or commercial law. Depreciation for tax purposes is generally in line with depreciation in financial statements. If depreciation stated in the financial statement exceeds the amount admissible under tax law, the provisions of tax law prevail resulting in a difference between taxable income and the annual result. Goodwill acquired in the course of a takeover (asset deal) may be amortized over a period of 15 years. Buildings may be depreciated. The depreciation rate ranges between 3% (e.g., a factory) and 2%(e.g., residential buildings) on a straight-line basis.

Corporations are subject to a minimum corporate income tax of 5% of the statutory minimum capital. Special provisions apply for banks and insurance companies.

Since January 1st, 2011, an Advanced Ruling is available. A complete disclosure is required. A notification is only issued subject to the condition that the applicable legal facts, on which the tax authorities’ assessment is based, do not change. A request for an Advanced Ruling may only be filed with the financial authority which is competent locally with regard to the subject matter for the relevant facts. With respect to content, such Advanced Ruling is limited to the areas of restructuring (Umgründungen), transfer prices and group taxation (Gruppenbesteuerung). An Advanced Ruling is subject to an administrative fee (Verwaltungskostenbeitrag) whereby amounts from €1,500.00 up to a maximum of €20,000.00 can be charged, depending on the requesting company’s turnover.

In 2005, a new system of group taxation (Gruppenbesteuerung) was introduced. The system of group taxation allows allocating profit or loss of members of such tax group to the holding company, which is the only taxpayer for the whole group with respect to corporate income tax. The only requirement for becoming a group member of a tax group is a direct or indirect major shareholding in a corporation. Furthermore, the group members must apply for group taxation with the competent tax authorities. A tax group must be in existence for a period of at least three years. If a group member withdraws from the group before this period has elapsed, such group member’s tax will be assessed as if they had never been a group member.

Austrian dividends distributed to a resident company are exempt from corporate income tax under the national participation exemption rules (Beteiligungsertragsbefreiung). Foreign dividends distributed to a resident company are also exempt from corporate income tax. However, there are special provisions that differ between companies that are resident in an EU member state, in a state Austria signed an extensive assistance agreement with or companies that are resident in a third country.

Capital gains resulting from the sale of a shareholding in a resident company are subject to corporate income tax. Capital gains resulting from the sale of a shareholding in a foreign company are in principle exempt from corporate income tax. However, there are detailed special provisions that apply.

Dividends paid to an individual are subject to 25% capital gain tax (Kapitalertragsteuer). Austria’s double tax treaties usually provide for a reduced withholding tax rate. Although companies are obliged to withhold the full rate according to most of the tax treaties and the recipient of a dividend is to apply for a refund of the withheld tax at the competent local tax authority, unilateral relief is usually possible if the foreign recipient of a dividend presents a certificate of residence. Austrian dividends paid to resident individuals are not subject to further income tax if 25% capital gain tax has already been withheld at source. Such withholding tax is therefore a final taxation (Endbesteuerung) of a shareholder who is an individual. Dividends distributed to foreign corporations are also subject to 25% capital gain tax. The unilateral relief provided for the double tax treaties mentioned above may only be applied if such foreign corporation confirms in addition that its activities exceed those of a mere holding company, that staff is being employed and business premises are used. Austria implemented the EU Parent-Subsidiary Directive, which provides for an exemption from withholding taxes of dividends distributed to an EU parent company provided that the following conditions are met: (i) the shareholder is a corporation resident in another EU member state; and (ii) the shareholder has held at least a 10% interest for one year.

AUDIT AND FINANCIAL RETURNS

The GmbH is obliged to keep books and records under corporate and tax law. For the GmbH and other companies limited by shares as well as for all other entrepreneurs exceeding the turnover threshold of € 400,000.- in two consecutive fiscal years (and/or € 600,000.- in one fiscal year), the regulations of the Austrian Business Code (Unternehmensgesetzbuch) on accounting shall apply.

The managing directors shall be obliged to maintain an accounting system corresponding to the requirements of the company, have an internal control system and prepare the annual accounts for the past fiscal year. The annual accounts consist of the balance sheet, profit and loss statements as well as the notes. Furthermore, the management report is to be prepared. The annual accounts and the management report as well as the consolidated accounts and the consolidated management report are to be sent to each shareholder without delay after preparation. Each shareholder shall be entitled to inspect the books of the company and check these documents prior to the ordinary general meeting. The ordinary general meeting for determination of the annual accounts has to take place within the first eight months of the subsequent fiscal year.

Financial statements (Jahresabschluss) must be provided annually and must disclose all assets, provisions, liabilities, prepayments, income and expenses. They must give a “true and fair” view of a company’s assets, its financial condition and earnings. A statutory audit is required for: banks, insurance companies and investment funds, every AG (equivalent to a public limited company), “large” and “medium-size” GmbHs (equivalent to a private limited company) or GmbH & Co KGs (partnership where the fully liable partner is a GmbH, ie no physical person is fully liable) and “small” GmbHs with a mandatory supervisory board. GmbHs and AGs have to submit their (possibly abbreviated) annual reports to the Commercial Register (Firmenbuch).

The annual accounts and the management report of large and medium-sized GmbH’s as well as of GmbHs, for which a supervisory board is mandatorily stipulated, are to be audited by an independent auditor. All companies limited by shares have to file the annual accounts and the management report at the latest within nine months as of the end of the fiscal year with the company register. For small and medium-sized GmbH’s, there are forms of relief regarding the contents of the publication.