Investment in Progress
Recently, the government has presented draft laws to stimulate the economy after the COVID 19 crisis. In the following, the main aspects are summarized in an overview.
1. Tax measures
a.) Introduction of a declining balance method of depreciation
For assets acquired or manufactured after 30.6.2020, the possibility of declining balance depreciation should be implemented irrespective of the method of determining taxable income.
In the year of acquisition/production the taxpayer can choose whether straight-line or declining balance depreciation is to be applied, whereby different depreciation methods can be selected for different assets. If the taxpayer chooses to use the declining balance method, he is free to choose the depreciation rate within a maximum of 30%. This rate of depreciation must then remain unchanged. However, it is possible to switch from the declining balance method to straight-line depreciation in a later year.
In January 2021 an entrepreneur acquires essential assets in the amount of EUR 100,000 (normal useful life 8 years). Depending on the depreciation method, depreciation would develop as follows in the first few years:
b.) Accelerated depreciation in connection with buildings
Furhtermore a separate form of accelerated straight-line depreciation should be provided for buildings (including buildings purchased, manufactured or also buildings contributed from private assets).
In the first year the depreciation from the acquisition or production costs is three times the usual depreciation rate (7.5% or 4.5% for buildings let for residential purposes), in the second year it is two times the usual depreciation rate (5% or 3% for buildings let for residential purposes) and from the third year onwards the usual depreciation rate is applied. The half-year depreciation rule does not apply (e.g. full depreciation can also be applied to acquisitions made in the second half of the year).
c.) Reduction of the initial rate of payroll and income tax
In order to strengthen the position of taxpayers with low incomes in particular in times of the Corona crisis and thereafter, the initial rate of payroll and income tax is to be reduced from 25% to 20% in a first step.
The reduction is to take effect retroactively from 1.1.2020. For the months of January 2020 until the adjustment of the payroll accounting software, the tariff reduction is to be taken into account accordingly within the framework of a roll-up to be carried out by the employer. In this context the employer shall carry out the roll-up as quickly as possible, but no later than the end of September 2020.
d.) Temporary loss carry-back
Temporarily limited a loss carry-back should in principle be possible under the same conditions as a loss carry-forward, i.e. it should be available for negative operating income that has been properly determined.
In the tax assessment for 2020, the maximum amount eligible for loss carry-back must be determined (max. EUR 5 million). This amount can then be offset by means of an application with the income of 2019. If the loss carry-back cannot be fully used in 2019, an application should also be possible for year 2018. In this context, a separate ordinance with more precise regulations is to be issued.
e.) Legal extension of deferrals for outstanding tax payments
The deferrals previously granted by the tax or customs offices are to be extended by law until 15.1.2021. In addition, the statutory deferral will also include those levies that have been booked to the tax account until 25.9.2020. In the case of advance payments of income or corporate tax, the advance payment of the last quarter 2020 will also be included.
Other current taxes that are added after 25.9.2020 are to be paid by the taxpayer unless a separate application for payment relief (e.g. payment by instalments, deferral application) is submitted.
2. COVID-19 investment premium
The investment premium in the form of a subsidy (in principle 7% or 14% for investment in digitisation, greening, health and life science) is intended to create an incentive for investments.
Subsidies are available for new tangible and intangible investments of depreciable fixed assets that are realised in an operating facility in Austria. Explicitly excluded are climate-damaging new investments, undeveloped land, financial assets, company takeovers and own work capitalised.
The support programme starts on 1.9.2020 (applications can be submitted until 28.2.2021) and is handled by Austria Wirtschaftsservice GmbH (aws). A budget of EUR 1 billion is available for this programme. The corresponding directive on the exact implementation of the investment premium will be issued separately.
As the above measures are currently being evaluated, the final implementation remains to be seen. Up-to-date information or further information on the COVID-19 aid measures can be found at: https://www.ecovis.com/at/aktuelles/steuern-recht/.
Christoph Puchner, Managing Director and Tax Advisor & David Gloser, Partner, Chartered Accountant and Tax Advisor from ECOVIS Austria.