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Roland Rief
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International Tax and Transaction Services – International Corporate Tax Advisory
Roland Rief
Klaus Pfleger
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Markus Stefaner
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International Tax and Transaction Services – International Capital Markets
Roland Rief
Thomas Wilhelm
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International Tax and Transaction Services – Operating Model Effectiveness and Transfer Pricing
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Business Tax Services
Markus Stefaner
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Business Tax Advisory
Johannes Volpini de Maestri
Legal Services
Katrin Speigner
A. At a glance
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Corporate Income Tax Rate (%) 23 (a)
Capital Gains Tax Rate (%) 23
Withholding Tax (%)
Dividends 23/27.5 (b)
Interest (from Bank Deposits and Securities only) 0/25 (c)
Royalties from Patents, Know-how, etc. 20 (d)
Net Operating Losses (Years)
Carryback 0 (e)
Carryforward Unlimited (f)
(a) This rate applies to distributed and undistributed profits.
(b) In general, this withholding tax applies to dividends paid to residents and nonresidents. An Austrian corporation is generally required to withhold tax at a rate of 27.5%. However, if the distributing company has evidence of the corporate status of the investor, it may withhold tax at a rate of 23%. Certain dividends paid to Austrian and European Union (EU) companies are exempt from tax (see Section B). In addition, a reduction in or relief from dividend withholding tax may be possible under double tax treaties.
(c) For details, see Section B.
(d) This withholding tax applies to nonresidents.
(e) There is an exception for losses from 2020. For details, see Relief for losses in Section C.
(f) The offset of loss carryforwards against taxable income is limited to 75% of taxable income in most cases (see Section C).
B. Taxes on corporate income and gains
Corporate income tax. In general, all companies resident in Austria and foreign companies with Austria-source income are subject to corporate income tax. (For the scope of income subject to tax, see Foreign tax relief.) A company is resident in Austria if it has its legal seat or its effective place of management in Austria.
Rates of corporate income tax. The corporate income tax rate is generally 23%.
All companies, including those incurring tax losses, are subject to the minimum tax. In general, the yearly minimum tax is EUR500 for an Austrian private limited company (Gesellschaft mit beschraenkter Haftung, or GmbH; and flexible Kapitalgesellschaft, or FlexCo), EUR3,500 for a stock corporation (Aktiengesellschaft, or AG) and EUR6,000 for a European stock corporation (Societas Europea, or SE). For banks and insurance companies, the minimum tax is EUR5,452. Minimum tax may be credited against corporate tax payable in future years.
Participation exemptions. The Austrian tax law provides for national and international participation exemptions.
National. Dividends (including hidden profit distributions) received by an Austrian company from another Austrian company are exempt from corporate income tax (no minimum holding is required). Capital gains derived from the sale of shares in Austrian companies are treated as ordinary income and are subject to tax at the regular corporate income tax rate. In general, capital losses on and depreciation of the participation may be deducted from taxable income, spread over a period of seven years.
International participation. An Austrian company is entitled to the international participation exemption if it holds at least 10% of the share capital of a foreign corporation that is comparable to an Austrian corporation for more than one year. The one-year holding period begins with the acquisition of the participation. The international participation exemption applies to dividends and capital gains.
A decrease in the value of an international participation is generally not tax deductible, but an Austrian company can irrevocably opt for such tax deductibility in the annual tax return for the year of acquisition. If this irrevocable option is exercised, capital gains are subject to tax, and decreases in value and capital losses are tax deductible. In general, capital losses and depreciation of the participation may then be deducted from the taxable income, spread over a period of seven years. In the event of insolvency or liquidation, final losses may be deducted even if the option for tax effectiveness was not exercised. The option does not affect the tax treatment of dividends (that is, they remain tax exempt).
International portfolio participation. Dividends from participations that do not meet the criteria for international participations are subject to the general corporate income tax rate of 23%. However, shareholdings in EU corporations, certain European Economic Area (EEA) corporations (currently only Liechtenstein and Norway) and corporations that are resident in third countries and that have agreed to exchange tax information qualify as international portfolio participations and may benefit from exemptions. Dividends from such international portfolio participations are exempt from tax. Capital gains (and losses) are tax effective (the treatment corresponds to the treatment of national participations; that is, they are tax effective).
The tax exemptions for international participations and international portfolio participations do not apply if the participation is in a company that generates mostly passive income and is located in a low-tax country (low taxation as defined in the controlled foreign company [CFC] regime; see Controlled foreign companies and anti-abuse rules in Section E). Instead, they are taxed at the general Austrian corporate income tax rate of 23%. For international participations and international portfolio participations of at least 5%, foreign tax is credited (switchover to credit method). If the income has already been attributed to the Austrian controlling entity according to the CFC rules, no switchover to the credit method is allowed.
calendar year. Extensions may be granted. A general extension to 31 March (or 30 April) of the second following year is usually granted if a taxpayer is represented by a certified tax advisor (tax returns may be requested earlier by the tax office).
Companies are required to make prepayments of corporate income tax. The amount is generally based on the (indexed) amount of tax payable for the preceding year, and payment must be made in equal quarterly installments on 15 February, 15 May, 15 August and 15 November.
Interest is levied on the amount by which the final tax for the year exceeds the total of the advance payments if this amount is paid after 30 September of the year following the tax year. To prevent interest, companies may pay the amount due as an additional advance payment by 30 September of the year following the tax year.
Foreign tax relief. In general, resident companies are taxed in Austria on their worldwide income, regardless of where that income is sourced. However, the following exceptions exist:
• The Finance Ministry may, at its discretion, allow certain types of income that have their source in countries with which Austria has not entered into a double tax treaty to be excluded from the Austrian tax computation, or it may allow foreign taxes paid to be credited against Austrian corporate income tax. Under a decree of the Ministry of Finance, an exemption is granted in case of active income and taxation of at least 15%. Otherwise, only a credit of foreign taxes is allowed.
• Income earned in countries with which Austria has a double tax treaty is taxable or exempt, depending on the treaty.
• Dividends and capital gains derived from participations of 10% or more in foreign subsidiaries can be exempt from corporate income tax under the international participation exemption (see Participation exemptions).
• Dividends from foreign portfolio shareholdings in companies resident in countries that have agreed to exchange tax information are exempt from tax unless the subsidiary is low-taxed (see Participation exemptions).
C. Determination of trading income
General. In general, taxable income is based on the profit or loss shown in the financial statements prepared in accordance with Austrian generally accepted accounting principles. The financial statement profit or loss must be adjusted in accordance with special rules set forth in the tax acts. Taxable income is calculated as follows:
Profit per financial statements
+ Nondeductible taxes (such as corporate income tax)
+ Nondeductible expenses (such as certain interest)
– Special allowances and nontaxable income (intercompany dividends and loss carryforwards)* (X)
= Taxable income
* The offset of loss carryforwards against taxable income is limited to 75% of taxable income in most cases.
General interest expense limitation. The interest expense limitation rule applies as of 1 January 2021 to all loans (that is, group and third-party loans, regardless of recourse) and to companies resident in Austria, companies residing abroad with a permanent establishment in Austria and partnerships with an Austrian branch.
Under the interest expense limitation rule, the deduction of interest expense exceeding interest income (net tax deductible interest expense) is limited to 30% of taxable earnings before (net) interest, tax, depreciation and amortization (EBITDA). Tax-exempt income and partnership income should not be considered in the calculation of the taxable EBITDA.
Unused EBITDA can be carried forward over a five-year period. However, the carryforward does not apply if one of the exemptions from the interest expense limitation rule mentioned below applies or if a positive net interest balance exists. Nondeductible interest expense can be carried forward indefinitely but is subject to the change of ownership rules (see Relief for losses). A deduction is possible in the following years in accordance with the interest expense limitation rules.
The limitation rule does not apply if one of the following exemption rules applies:
• Exemption threshold. The annual net interest expense is less than EUR3 million.
• Group clause. The company is a member of a tax group (see Groups of companies). In the case of tax groups, the interest limitation rule is only to be applied at the level of the head of the tax group when determining the combined taxable profit. In principle, tax groups are also entitled to an allowance of EUR3 million (group allowance), but this amount applies to the entire group of companies (that is, to the head of the tax group and all group members together). Any group interest surplus exceeding the allowance of EUR3 million is in turn only deductible to the extent that it is covered by the offsettable group EBITDA (30% of the taxable group EBITDA). Any group interest surplus or offsettable group EBITDA can be carried forward in accordance with the general rules and can be offset in subsequent years. The head of the tax group that is fully included in consolidated financial statements can deduct the interest surplus for tax purposes without restriction if the equity ratio equals or exceeds the equity ratio of the group.
• Equity ratio escape clause. This clause applies to entities that are fully included in consolidated financial statements prepared in accordance with Austrian generally accepted accounting principles (GAAP), International Financial Reporting Standards (IFRS) or other comparable accounting standards, such as US GAAP. For these companies, interest expense may be fully deducted if the equity ratio (ratio between equity and total assets) of the entity equals or exceeds the equity ratio of the consolidated group, whereby a shortfall of up to two percentage points (rule of tolerance) is not harmful. The equity ratios are determined on the basis of the consolidated and the individual financial statements, but in both cases based on the accounting standards used in the consolidated financial statements. In the case of a tax group, the equity ratio is determined based on a
Foreign losses must be recalculated under Austrian tax law. In addition, the deductibility of foreign losses is limited to the lower of the amount according to Austrian tax law and actual losses calculated under foreign tax law. Losses from foreign group members can be deducted from the Austrian tax base in proportion to the shareholding only. Beginning with the 2015 tax year, the utilization of losses of foreign group members is limited to 75% of the domestic group income. Excess losses are included in the loss carryforwards for subsequent years. Profits of a foreign group member are generally not included in the Austrian group parent’s income.
To avoid double utilization of losses of a foreign group member, foreign losses that have been imported into the Austrian tax group are added to the Austrian profit if the losses can be offset in the foreign jurisdiction in subsequent years. Foreign losses must also be added to the Austrian income tax base if the foreign subsidiary leaves the group. A recapture is also required if a significant reduction occurs in the size of the foreign subsidiary’s business. This measure is designed to prevent dormant foreign entities from remaining in the group to avoid the recapture of foreign losses. Relief for capital losses is provided only in the event of a liquidation or insolvency.
Depreciation to the fair market value of a participation within the group is tax-neutral.
D. Other significant taxes
The following table summarizes other significant taxes.
Payroll taxes, paid by employer
Family allowance fund; varies by state (under certain circumstances, the range of rates is reduced to 4.02% to 4.1%)
Environmental taxes; comprising energy taxes, transport taxes, resource taxes and pollution taxes; according to the Eco Social Tax Reform Act, a new carbon tax was introduced beginning on 1 October 2022 (starting with EUR30 per ton and increased annually up to EUR55 per ton in 2025); a carbon leakage rule prevents companies from relocating; a hardship clause is in place for companies with high energy intensity
E. Miscellaneous matters
Foreign-exchange controls. No restrictions are imposed on the transfer of nominal share capital, interest and the remittance of dividends and branch profits. Royalties, technical service fees
and similar payments may be remitted freely, but routine documentation may be required.
Debt-to-equity rules. Austrian tax law does not provide a special debt-to-equity ratio. Although, in general, shareholders are free to determine whether to finance their company with equity or loans, the tax authorities may reclassify loans granted by shareholders, loans granted by group companies, and loans granted by third parties guaranteed by group companies as equity, if funds are transferred under legal or economic circumstances that typify equity contributions, such as the following:
• The equity of the company is insufficient to satisfy the solvency requirements of the company, and the loan replaces equity from an economic point of view.
• The company’s debt-to-equity ratio is significantly below the industry average.
• The company is unable to obtain any loans from third parties, such as banks.
• The loan conveys rights similar to shareholder rights, such as profit participations.
If a loan is reclassified (for example, during a tax audit), interest is not deductible for tax purposes and withholding tax on hidden profit distributions may become due. Capital duty was abolished, effective from 1 January 2016.
In addition, under Austrian corporate law there is the requirement of a minimum equity ratio of above 8% (and in addition, a notional debt repayment period of less than 15 years). If these criteria are not fulfilled, a defined (insolvency mitigation) procedure must be initiated.
Transfer pricing. Austria has accepted the Organisation for Economic Co-operation and Development (OECD) transferpricing guidelines and published a summary of the interpretation of the OECD guidelines by the Austrian tax administration in 2010. Under these guidelines, all transactions with related parties must be conducted at arm’s length. If a transaction is considered not to be at arm’s length, the transaction price is adjusted for corporate income tax purposes. This adjustment may be deemed to be a hidden profit distribution subject to withholding tax or a capital contribution. The Austrian transfer-pricing guidelines were updated in 2021. They take into account the changes that have occurred since 2010 in the area of the interpretation of the arm’s-length principle at the OECD level, particularly in the context of the Base Erosion and Profit Shifting (BEPS) project.
In 2016, Austria introduced the Transfer Pricing Documentation Law (TPDL), which follows the three-tier documentation approach consisting of a Country-by-Country Report (CbCR), the master file and the local file. The master file and local file must be prepared if an Austrian constituent entity generated over EUR50 million turnover in the two preceding fiscal years. A CbCR must be prepared if the whole multinational group exceeded a threshold of consolidated turnover of EUR750 million in the preceding fiscal year. By the last day of the fiscal year for which a CbCR is prepared, each Austrian constituent entity of a multinational group exceeding the threshold must inform the competent Austrian tax office of the entity that is preparing or filing the CbCR and where this entity is a resident. Starting from 2022, the
A General.
B Dividends received from subsidiary company. Shareholding required varies from 10% to 95%, but generally is 25%.
C General.
D Mortgages.
E General.
F Royalties from 50% subsidiary.
(a) Under domestic tax law, a 25% withholding tax is imposed only on interest income from bank deposits and securities. However, interest paid to nonresidents is generally not subject to withholding tax. For details, see Section B.
(b) No reduced rate applies.
(c) No withholding tax is imposed, but the income is subject to tax at the regular corporate rate.
(d) Austria is honoring the USSR treaty with respect to the republics comprising the Commonwealth of Independent States (CIS), except for those republics that have entered into tax treaties with Austria. Austria has entered into tax treaties with Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, the Russian Federation, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. The withholding tax rates under these treaties are listed in the above table.
(e) Interest paid by banks is subject to a 4.95% withholding tax.
(f) Trademark royalties are subject to a 25% withholding tax. The withholding tax rate is 15% for royalties paid for literary, artistic and scientific items.
(g) The rate is 10% for royalties paid for the use of films or other means of production used for radio or television.