Austria: Corporate tax group rules not violated by sale of group member
14 February 2020
The Austrian Federal Finance Court issued a decision that rejected the position of the tax authorities regarding whether a tax group “collapsed“ when one member of the corporate tax group was sold to a third party after other participations were contributed to the parent company.
Under the Austrian corporate tax group rules, a major requirement for applying the group taxation regime is that the qualifying participation must be held for the entire financial year of the group member (restructurings within a tax group will not disqualify application of the group rules if qualifying participations in the group members are still held for the entire respective financial year). Furthermore, the group regime requries that an Austrian tax group must exist for at least three years.
In the case before the Federal Finance Court, there was a group parent company and two group members.
- The participation of one group member (Company A) was held by the group parent company.
- Company A held the shares in a second group member (Company B).
- The participation in Company B was contributed in-kind to the group parent company pursuant to provisions of the Austrian Reorganization Tax Act during the tax group’s second year.
- Company A was then sold to a third party.
The Austrian tax authorities determined that the entire group “collapsed“ because Company B did not satisfy the requirements for qualifying participations in relation to the group parent company.
The Austrian Federal Finance Court disagreed with the tax authorities, and instead found that the taxpayer group did not collapse because there was at least one group member left (Company B) that satisfied the requirements for qualifying participations, given that the contribution in-kind was an intra-tax group transfer that was not harmful.
KPMG observation: The tax authorities have already filed an appeal of this decision with the Austrian Administrative Supreme Court.
For more information, contact a tax professional with the KPMG member firm in Austria:
Markus Vaishor | +43 1 31332-3652 | mvaishor@kpmg.at
Read a February 2020 report prepared by the KPMG member firm in Austria
Other items discussed in the KPMG report include brief descriptions of the following developments:
- Austrian Administrative Supreme Court decision on immediate deduction of low-value assets and adjustments to the balance sheet for tax law
- Outbound dividend distributions after Brexit (Austria has already concluded a new income tax treaty with the UK that is intended to allow for favorable tax treatment of outbound dividends)
- Austrian Federal Finance Court—VAT registration in the country of destination does not affect the applicability of the triangular arrangement
- Exemption of capital gains taxation of real property derived by individuals (Austrian Federal Finance Court)
- Letting of apartments, trade law and income tax law implications
- Amendments to the Austrian ultimate beneficial owner registry (effective 10 January 2020)
- Austrian Constitutional Supreme Court on invalid underlying assessments; restricted application for amendment of derived assessments declared unconstitutional
- Austrian Administrative Supreme Court, challenges allowed of “unlawful“ tax audit announcement