AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler and Mohamed Hemdan, Schindler Attorneys
taxation will be based on the true facts that the tax - payer sought to conceal. 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. Furthermore, due to Austria’s participation in the MLI, the proportion of general anti-abuse rules (GAARs) in Austrian DTTs has gradually increased, especially since the inclusion of a GAAR under Article 6 MLI is part of the “minimum standard” and must therefore be included in all DTTs for which the respective contract - Beyond the previously mentioned provisions con - tained in the Austrian Fiscal Criminal Act and the GAAR under the Austrian Federal Fiscal Code (see 5.1 Definition and Identification of Tax Fraud, Evasion, Tax Avoidance and Abusive Schemes ), Austrian tax law has been heavily influenced by the OECD’s efforts to combat BEPS. Hence, Austrian tax law contains several additional anti-avoidance measures – some of which implement the OECD’s recommendations and EU directives – generally designed to combat and reduce the attractiveness of abusive tax structures by limiting the tax advantages that might otherwise arise. In particular, these include the following. • The non-deductibility of interest that is not at arm’s length. • The non-deductibility of interest paid to associated companies in low-tax jurisdictions (tax level below 15%). ing states have opted to apply the MLI. 5.2 Anti-Avoidance Mechanisms • The non-deductibility of interest on loans taken out for the acquisition of a participation in another associated company. • The inclusion of Controlled Foreign Company (CFC) rules. • The switch-over from the exemption method to the credit method in the case of dividends distributed from low-taxed subsidiaries (tax level below 15%) to Austria, if the main source of income of the
low-tax foreign entity stems from passive income – whereas this rule will not apply if the CFC rules already apply. • The denial of relief at source for WHT in cases of potential tax avoidance (eg, companies with little or no substance). • The implementation of the ATAD and the OECD’s recommendations to combat BEPS, some of which have already been mentioned (such as the CFC and GAAR rules), but also including, for example: (a) mandatory disclosure rules for certain cross- border arrangements (DAC6); (b) hybrid mismatch rules; (c) an interest limitation rule in line with ATAD, lim - iting the deductibility of interest to 30% of tax EBITDA when debt leverage exceeds the group average – whereas several key exceptions exist (EUR3 million de minimis, standalone entities, loans prior to 17 June 2016, equity test based on consolidated accounting); and (d) incorporating the global minimum tax rules (Pillar Two) into national law (Minimum Taxation Act). Moreover, Austrian tax law contains exit taxation rules for individuals as well as for corporations that apply whenever Austria’s right to tax hidden reserves acquired in Austria is restricted or forfeited. 5.3 Blacklists and Non-Cooperative Jurisdictions Austria generally follows the EU list of non-coopera - tive jurisdictions for tax purposes, commonly referred to as the “EU blacklist”, which includes jurisdictions that are assessed on the basis of a number of criteria established by the European Council, including tax transparency, fair taxation and the implementation of international standards aimed at preventing BEPS. For Austrian companies, the EU blacklist is particu - larly relevant for the (blanket) classification of foreign subsidiaries as low-taxed for the purposes of the CFC rules, for reporting obligations under DAC6 in the case of certain cross-border intra-group payments to asso - ciated companies resident in such jurisdictions, and for the publication of country-by-country public tax reports (CbCR).
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