AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler and Mohamed Hemdan, Schindler Attorneys
tax structure if it only makes sense when taking into account the related tax-saving effect, given that the main purpose or one of the main purposes is to obtain a tax advantage that defeats the object or purpose of the applicable tax law. Individuals are also covered by the general anti-avoid - ance rule (Section 22 of the Austrian Federal Fiscal Code). A new version of the provision was introduced in 2018 and clearly follows the EU Anti-Tax Avoidance Directive (ATAD) in the decisive passages. The legis - lative materials for Section 22 also reveal the imple - mentation of the ATAD as the legislator’s clear main objective. In addition, Section 21 of the Austrian Federal Fis - cal Code can be considered as another general anti- avoidance rule that provides for the “substance over form” approach. Per this approach, the economic substance of facts and circumstances ‒ rather than their formal appearance ‒ is to be taken into consid - eration when assessing tax questions. Austria has no periodic routine audit cycle. Tax audits are typically carried out at the discretion of the tax authorities. 9. BEPS 9.1 Adoption of BEPS Recommendations The status of implementation of the BEPS recom - mended changes in Austria can be summarised as follows. • Action 1 (address the challenges of the digital economy) – implemented through the Digital Tax Act. In 2019, Austria independently passed the Digital Tax Act, under which, since 1 January 2020, online advertising income above certain thresholds is subject to a 5% digital tax. • Action 2 (neutralise the effect of hybrid mismatch arrangements) – implemented through domestic legislation regarding hybrid mismatch rules that 8. Audit Cycles 8.1 Regular Routine Audit Cycle
aligns with the ATAD (introduced on 1 January 2020 and 1 January 2022 with regard to reverse hybrid mismatch rules). • Action 3 (strengthen CFC rules) – implemented through the adoption of the ATAD. • Action 4 (limit base erosion via interest deduc - tions and other financial payments) ‒ implemented through the adoption of the ATAD. • Action 5 (counter harmful tax practices more effec - tively and strengthen transparency) – implemented through Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation and through the adoption of several provisions of the Austrian Federal Fiscal Code (as regards the transparency framework of Action 5). As regards the assessment of preferen - tial (harmful) tax regimes of Action 5, no domes - tic legislation was required, as Austria does not maintain preferential (harmful) tax regimes (such as patent boxes or IP boxes, etc) that would require such nexus rules. • Action 6 (prevent treaty abuse) – implemented through the MLI and the introduction of the prin - cipal purpose test (PPT) and an adaptation of the existing general anti-abuse provision. • Action 7 (prevent the artificial avoidance of perma - nent establishment status) – implemented through the MLI. • Action 8 (assuring that transfer pricing outcomes are in line with value creation: intangibles) – new OECD standards implemented through the trans - fer pricing guidelines ( Verrechnungspreisrichtlinien (VPR) 2021). • Action 9 (ensure that transfer pricing outcomes are in line with value creation: risks and capital) – new OECD standards implemented through the VPR 2021. • Action 10 (ensure that transfer pricing outcomes are in line with value creation: other high-risk transactions) – new OECD standards implemented through the VPR 2021. • Action 11 (establish methodologies to collect and analyse data on BEPS and the actions to address it) – the data collected in compliance with the Aus - trian Transfer Pricing Documentation Act ( Verrech- nungspreisdokumentationsgesetz , or VPDG) could be used for corresponding analysis.
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