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Austria‘s Tax Reform in a nutshell: What’s new in 2020

Just before the National Council elections in September 2019, the Tax Amendment Act 2020 as well as the Tax Reform Act 2020 were passed in the free play of forces in the National Council. Here is a quick overview of the main changes in 2020 and 2021 for companies and entrepreneurs.

Value Added Tax (VAT)

As of 1.1.2020, the turnover limit for the application of the so-called „small business exemption“ will be extended from EUR 30,000 to EUR 35,000.

Also, the tax exemption of intra-community deliveries is, beside of previous legal requirements, subject to a valid VAT identification number of the purchaser and the correct filing of the intra-community delivery in the recapitulative statement (EC Sales List). Therefore, a standardized process should be established in a company in the course of the creation of new customers, in which the master data also includes the VAT identification number.

There are also significant changes for online-marketplaces: starting with 2020, online platforms (e.g. AirBnB) will be obliged to record and, at the request of the tax authorities, electronically transmit certain tax-relevant information (from 1 Mio. Euro mediated turnover the transmission has to take place unsolicited), that will be defined in the „Due Diligence VAT Ordinance“. Besides, online platforms will be classified as suppliers and tax debtors for VAT purposes for cross-border deliveries from third countries to end customers from 2021 on.

In addition, the application of the MOSS system will be extended in 2021: the one-stop shop portal for VAT purpose can be used for all B2C services and mail order sales within the EU, as well as for the import mail order business (IOSS – Import-One-Stop-Shop)

Income Tax

The Tax Reform Act includes significant changes for small businesses and low-income earners: small entrepreneurs have the possibility to apply for a flat rate for operating expenses up to 45%. Besides, the limit for the immediate deduction of low-value assets is raised from EUR 400 to EUR 800.

In recent times, exit transactions – especially for Startups – often involve not only cash payments but also payments in the form of an exchange of shares with the buyer, i.e. the shareholders of the Austrian company are compensated for the transfer of their shares not only with cash but also with shares in the buyer shareholder. If, in this context, a cross-border exchange of shares is to take place on the basis of the purchaser’s specifications, this has so far been associated with tax disadvantages, i.e. also the share exchange in the form of an „exit tax“ was taxed so far with 27,5%, independent of cash inflow (so-called „dry income“). According to a new regulation as of 2020, the seller could apply for a tax deferral for the capital gain on the cross-border exchange of shares within the EU/EEA. The tax liability will basically not be determined until the shares in the foreign buyer company, that were received as part of the share exchange, are actually sold.

Authors

Barbara Hölzl, Managing Director and Tax Advisor and David Gloser, Partner, Chartered Accountant and Tax Advisor,  ECOVIS Austria