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Austria Extending COVID-19 Support Measures as Part of Winter Package and Introducing ATAD Interest Deduction Restriction — Orbitax Tax News & Alerts

Austria's Ministry of Finance has announced the initiation of the parliamentary process to enact the required law changes for the legislative winter package, which includes extended support measures in response to COVID-19. The changes are provided for in the draft COVID-19 Tax Measures Act.

In addition to the measures highlighted in the announcement below, the legislation also includes measures to implement the interest deduction restriction measures of the EU Anti-Tax Avoidance Directive (ATAD). Although Austria previously considered its interest limitation rules to be equally effective to the ATAD rules, the European Commission did not, and requested that Austria implement the ATAD rules. For this purpose, the legislation provides for the standard 30% of EBITDA limitation with a EUR 3 million safe harbor and excess interest expense or unused interest capacity allowed to be carried forward up to five years. Exemptions from the limitation are provided for stand-alone entities and for group entities where an entity's equity ratio is no more than 2% lower than the group's equity ratio. The rules are to apply for financial years beginning after 31 December 2020.

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Blümel: Proposed initiative for legislative winter package extends existing support

Parliamentary process initiated to enact required changes to the law

"Unfortunately, we are not at the end, but in the middle of this global economic and health crisis. It is therefore important to extend existing and well-functioning assistance measures in order to continue saving as many jobs and businesses as possible. For this reason, we have put together a legislative winter package enabling us to implement the necessary statutory changes," declared Finance Minister Gernot Blümel, explaining the corresponding proposed initiative introduced yesterday in the National Council.

The proposed initiative will cover a wide-ranging extension of Covid-19 assistance measures, including the following:

Extension of 5% VAT reduction in the areas of hospitality, the hotel industry and the cultural sector until 31 December 2021

In order to continue providing support to hospitality, the hotel industry and the cultural sector, which are particularly affected by the Covid-19 crisis, the reduced VAT rate of 5% is to be extended until the end of 2021.

In addition, all food and drink in hospitality will be subject to the preferential tax rate of 5% until the end of 2021. The cultural sector too will benefit from the same 5% reduced tax rate on specific sales. These relief measures are intended to prevent insolvencies, to provide financial support to particularly hard-hit businesses, and to secure jobs. The measures will provide relief to affected companies to the tune of around EUR 1.5 billion.

Extension of existing tax payment deferrals and no interest charges on tax arrears until 31 March 2021

At present, there is a limit on existing tax payment deferrals until 15 January 2021. This deadline is now to be extended until 31 March 2021. In parallel to the extension, and new deferrals to be granted up to 31 March 2021, during this period, there will also be no interest charges on deferred payments or late payment fines.

Similarly, there will be no demands for interest on tax payment arrears relating to retrospective claims for the 2019 tax assessment, since the determination of additional claims may place an additional burden on business liquidity.

Extension of time-limited Covid-19 tax measures until 31 March 2021

  • Extension of beneficial tax treatment for employees notwithstanding short-time working, working from home or quarantine, until the end of March 2021:

The commuting allowance will continue to be granted until the end of March 2021 in the same amount as prior to the Covid-19 crisis, in spite of working from home, quarantine or short-time working due to the virus. In addition, tax-free treatment of allowances (for dirty, difficult and dangerous work) and additional payments (for overtime) will continue as before the pandemic, in spite of working from home, quarantine or short-time working.

  • Extension of special payments for short-time working:

In the calendar year 2021 too, for periods of short-time working, when calculating the relevant threshold of one sixth of annual regular remuneration, a flat-rate premium of 15% will be applied.

Short-time working affects calculation of this threshold. Extension of preferential taxation is intended to prevent the portion of Christmas bonus lying above what will be a lower threshold (based on short-time working) being subject to standard taxation. With tax of only 6% over the coming year, this will prevent regular salaries from being reduced.

"At present, EUR 6.4 billion has been approved in tax deferrals alone. This cash will remain with businesses and increase their liquidity. In addition, we are prolonging tax reductions for affected sectors and providing individual taxpayers with relief by continuing preferential tax treatment," added Finance Minister Blümel, stressing the necessity of economic support measures, since, he added "fighting the virus and supporting all those suffering from its impact is our central concern."

0% VAT on Covid-19 tests and vaccinations

The supply, intra-Community purchase and import of Covid-19 in-vitro diagnostic tests and Covid-19 vaccines, as well as services closely related to these diagnostic tests or vaccines, will be tax-free until 31 December 2022. This will apply 20 days following enablement at European level through an announcement of the relevant amendment to the EU Directive, i.e. 0% VAT on vaccines and tests until the end of 2022, as soon as the European legal basis is valid and, in anticipation, Austria has already implemented this policy element.