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Austria Provides Extension of Tax Payment Deferrals for COVID-19 — Orbitax Tax News & Alerts

Austria's Ministry of Finance has announced that the time limit for tax payment deferrals for COVID-19 has been extended from 31 March 2021 to 30 June 2021, with no interest charges.

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Blümel: Deferred tax payments extended until end of June

Ministry of Finance making additional contribution, providing optimum support for business

At the beginning of the pandemic, the Austrian federal government swiftly decided to enable businesses to apply for deferral of their tax payments, in order to ensure the liquidity they needed in order to survive. 77 % of these deferrals and reductions relate to small businesses with annual turnover of up to EUR 0.7 million. By 31 December 2020, the Finance Ministry had granted tax relief totalling EUR 6.5 billion. Of this sum, around EUR 5.3 billion in tax deferrals or reductions in payments on account are currently still outstanding. Overall, to date, 894 661 applications have been processed and approved by staff at the tax administration.

According to Finance Minister Gernot Blümel, "The crisis is not yet over. For this reason, the time limit to 31 March 2021 currently in place for existing tax payment deferrals needs to be extended until 30 June 2021. We are ensuring that businesses will not have to repay the tax they owe during the initial recovery phase following lockdown."

In addition, until the end of June, no interest charges will be applied to deferred payments or default penalties. Furthermore, taxpayers will not be required to submit a fresh application, and tax offices will not need to issue further payment notices. The deferral of social security contributions is also being extended.

At the same time, in order to avoid putting excessive pressure on businesses, the option has been created of being able to pay off such Covid-related tax arrears at the best possible terms. The Finance Ministry has therefore devised an attractive instalment plan. Using this new plan, tax arrears can be repaid over a longer period at a far more favourable interest rate.

Insolvency law: Discharge period reduced to three years

With regard to insolvency law, the bankruptcy discharge period is being reduced to three years. A European Directive is imposing a mandatory reduction in the time limit to three years for businesses. Draft Austrian government legislation contains a corresponding provision, which additionally imposes a limit for the next five years for private individuals. The Directive must be transposed into national law by 17 July 2021.

Moreover, for businesses threatened with insolvency, a special preventive restructuring process is being set up. This is intended to create a second chance for businesses and enable insolvency to be avoided. In court, an individual restructuring plan is devised with the consent of the majority of creditors. This enables a balance of interests to be achieved between the indebted business operator and its creditors. Unlike in insolvency proceedings, not all creditors need to be involved. In addition, losses of creditors can be reduced. Claim reductions and deferrals can be applied, even where some creditors withhold their consent. If required, the business will be supported or administered by a restructuring officer.