Group Taxation

 

One of Austria’s fiscal advantages is the group taxation scheme. Under the group taxation scheme two ore more companies exercise their option to form a tax group. The taxable results of the domestic group members are attributed to their parent company and will be taxed on this level. Therefore, tax losses of group members can be consolidated with the taxable profits of other group companies. Profits can be attributed for tax purposes. In order to qualify for a tax group one company must participate in more than 50 % of the share capital of the other company. Holding companies may participate in a tax group without active business. Fulfilment of additional criteria’s such as organizational and economic integration, as well as a profit and loss takeover agreement are not required. Depreciations of participations within a tax group are tax neutral. Foreign losses of a tax group may also involve foreign group members and therefore, losses of foreign subsidiaries within a tax group can be accumulated with profits in Austria. Furthermore, profits realised by foreign subsidiaries are not subjected to taxation in Austria. 

 

Private Foundations

 

Another advantage worth mentioning is the benefits that come from the Austrian Private Foundation Act. According to the Act a private foundation is a legal entity and is in the ordinary course established during founder’s lifetime. The establishment of a private foundation avoids division of family business and can also serve as a shareholder in a corporate structure. The establishment of a private foundation is an appropriate way to ensure that the founder’s lifework will be preserved beyond his death and will be managed in accordance with his directives.

 

Until recently, the abolished Austrian Gifts and Inheritance Tax Law provided the basic legal framework for the taxation of natural persons as well as donations to private foundations in Austria. Contributions of capital to Austrian Private Foundations are now taxed at a flat rate of only 2.5 %.

 

Subsequent distributions to beneficiaries are subject to 25 % capital gains tax. Contrary to Liechtenstein, the Austrian Private Foundations are deemed to be vested with legal capacity and their income is therefore fiscally not attributed to the foreign founder within the European Union. Similar to Liechtenstein, the identity of the founder is not publicly disclosed. Additionally, in comparison to other jurisdictions within the EU, Austria provides for an effective protection of assets as the Austrian time limit for claiming the legal portion in inheritance matters or in view of other creditors is very short.   

 

Summary

 

Numerous factors speak in favour of investments in Austria. As a centre for international private banking activities, Austria offers a wide and diversified range of investment categories. In a world in which traditional bastions of private banking are coming under increasing international pressure, with erosion of banking secrecy and changes in the tax and legislative environment, Austria has successfully positioned itself as an European financial centre of international importance.

 

The stability and reliability of Austria as a banking centre, the attractive tax conditions for international investors, true banking secrecy and the highly educated workforce have helped make Austria an unostentatious alternative to more conventional banking locations. The succinct advantages of Banking in Austria are an outstanding political and economic stability, advantageous tax climate for non-residents, banking secrecy, strong legal framework, strictly regulated financial markets, large number of double taxation agreements and the advantageous geographical location at the heart of Europe.

 

Florian Pröll