AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler and Mohamed Hemdan, Schindler Attorneys
9.8 Controlled Foreign Corporation Reform Austria has no territorial tax regime; instead, it applies worldwide taxation for resident corporations, meaning that both domestic and foreign income are generally subject to Austrian corporate income tax. As part of the implementation of the ATAD, Austria introduced a CFC regime on 1 January 2019, which leads to the attribution (taxation in Austria) of low- taxed passive income from foreign subsidiaries under the conditions described in 6.5 Controlled Foreign Corporation-Type Rules . 9.9 Anti-Avoidance Rules Further to recently adopted anti-avoidance rules (eg, CFC rules and the switch-over rule) driven by BEPS and EU legislation, Section 22 of the Austrian Fed - eral Fiscal Code further provides for a relatively new general anti-avoidance rule that applies in the case of abusive tax structures. Thus, Austrian tax law already provides adequate regulations to address the abuse of benefits and tax avoidance in general. Consequent - ly, investors may be affected if they attempt to access treaty benefits through entities or arrangements deemed artificial or lacking economic substance. 9.10 Transfer Pricing and IP Taxation As a result of new amended transfer pricing documen - tation rules implementing country-by-country report - ing (CbCR), as well as the master file and the local file, IP must be documented more extensively. 9.11 Country-by-Country Reporting and Transparency Provisions Transfer pricing reporting standards (including CbCR) have been updated and amended recently by the Austrian Transfer Pricing Documentation Act and published guidelines from the Austrian tax adminis - tration. As part of the implementation of EU Directive 2021/2101, there are also new reporting obligations for financial years beginning after 21 June 2024, for the purposes of “public CbCR” ( CbCR-Veröffentli - chungsgesetz ). More recently, Austria has implemented DAC8 (EU Directive 2023/2226), introducing the automatic exchange of information on crypto-asset income in line with the OECD reporting framework. This includes
cy objective. In recent years, the corporate income tax rates have been reduced from 25% to 24% (2023) and 23% (2024 and subsequent years). However, Austria has also introduced several anti-abuse and CFC rules to limit BEPS, as well as introducing statutory provi - sions to strengthen tax transparency. Austria seeks to achieve international standards for fair and realistic tax competition. 9.5 The Competitive Tax System Austria does not have a competitive tax system, state aid or other similar constraints that might be particu - The BEPS and ATAD proposals addressing hybrid instruments have been implemented in Austria and as such are included in Austrian tax law and/or Aus - trian DTTs. 9.7 Interest Deductibility and Territorial Tax Regime Austria has no territorial tax regime. An Austrian resi - dent corporation is liable to corporate income tax on its worldwide profits (unlimited tax liability), whereas a non-resident corporation is only taxed on its Austrian- source income (limited tax liability). Interest deductibility in Austria is governed by general Austrian tax law, including the arm’s length principle and the corporate interest limitation rules (please see 2.5 Deduction of Interest ). Consequently, recent inter - national proposals on interest deductibility are unlikely to require material changes for Austrian investors or corporations investing abroad, since Austrian tax law already incorporates measures to limit excessive interest deductions. larly affected by anti-BEPS measures. 9.6 Hybrid Instruments and BEPS Implementation The Austrian Supreme Administrative Court is current - ly reviewing the compatibility of the interest barrier rule – which limits the deductibility of interest payments to group companies domiciled in low-tax jurisdictions – with EU law. This follows a Federal Fiscal Court deci - sion finding that the rule infringes the EU freedom of establishment. Depending on the outcome, the deci - sion may have further implications for investments.
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