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7.1. General Rules

General

Austria allows resident companies to carry-forward tax losses indefinitely for offset against taxable income in future periods. However, such offset of loss carry-forwards is limited to 75% of the company’s taxable income in a particular period. Any remaining balance may be carried forward to subsequent periods, with the same 75% limitation. No loss carry-back is allowed.

When there is a change in share ownership of a company, any loss carry-forwards will generally remain, unless there are significant changes in the business of the company after the change in ownership. Generally, loss carry-forwards are disallowed if the identity of the taxpayer changes following a significant change of the organizational, economic, and shareholder structure, all three requirements cumulatively fulfilled. A 75 % change in the shareholder structure is considered as ‘significant’ unless the change results from an inheritance or a gift.

On 13 September 2017, Austria’s Supreme Administrative Court  issued a decision in which it is clarified that change in the shareholding structure means the direct transfer of (economic) ownership of the shares and an indirect transfer of shares in an Austrian company would not be regarded as a ‘significant change’ in the shareholding structure, hence the loss carry-forwards will not be forfeited in such cases.

COVID-19 Emergency Measures

In response to the COVID-19 pandemic, a one-time loss carry-back relief is provided for setting off the losses for the tax year 2020 against the profits of the tax year 2019 up to a maximum of EUR 5 million. If offset for the tax year 2019 is not possible, losses may be carried back to offset the profits for the tax year 2018, subject to certain conditions. If losses are not carried back, the losses may be deducted in accordance with standard loss carry-forward rules in subsequent years.

Losses Under Tax Consolidation

Austria allows tax consolidation for company groups (covered Sec. 5.3.). In regards to loss utilization in a tax consolidated group, limitations are placed on losses of foreign subsidiaries.

Foreign losses must be recalculated according to Austrian tax law, with the lower of the loss calculated under Austrian or Foreign law allowed as a deduction for Austrian tax purposes. In addition, the loss may only be applied in proportion to the shareholding percentage of the foreign subsidiary by the head of the group.

In the event the utilized loss of the foreign subsidiary is carried forward and used to offset in its foreign jurisdiction in a subsequent period, the loss is added back as profit to the tax base in Austria. Furthermore, losses are added back as profit if the foreign subsidiary leaves the group or there is a significant reduction in the foreign subsidiary's business.

Effective 1 January 2015, the utilization of qualifying foreign losses in a given year is limited to 75% of the taxable income of Austrian resident group members. Any unutilized foreign losses can be carried forward to the subsequent years, indefinitely.

As discussed in Sec 5.3, effective 1 March 2014, group tax regime was amended to provide that only corporations’ resident in other EU member countries or countries that Austria has concluded a comprehensive mutual administration assistance agreement are eligible to be foreign group members. Any existing group members, from non-qualifying countries, were allowed to retain their status until 1 December 2014, post which their membership status was automatically terminated. As a result, foreign losses of such non-qualifying group members previously utilized by the Austrian head of the tax group and not subject to recapture or taxation until 1 December 2014, triggered recapture and taxation from 1 January 2015 onwards. However, to mitigate the impact, the recapture is allocated over a three-year period, and the three-year minimum term for group participation will not apply for a foreign group member leaving the group (See Sec 5.3, for the three-year group participation rule)