BFG (Austrian Federal Tax Court): Forfeiture of outstanding certain tax attributes due to lack of asset linkage

On 18 March 2026 (RV/5101268/2020), the Austrian Federal Tax Court (BFG) decided that specific tax attributes cannot be transferred in a merger if the linkage to the underlying object that originally gave rise to the tax attribute no longer exists as of the merger date.  

In Austria, write-downs and capital losses on shares are, subject to numerous exceptions, generally spread over 7 years for tax purposes (“1/7”). Where such a 1/7 results in a tax loss, both an object test and comparability test apply. A specific provision of the Austrian Reorganisation Tax Act provides that tax losses transfer from the transferring to the absorbing entity only if the loss-making object or business unit still exist in a comparable manner as of the merger date.

The court held that the object test – originally developed for ordinary tax loss carry-forwards – applies by analogy to outstanding, not-yet-utilised 1/7 as well. Since the underlying shares had already been sold prior to the merger date, no asset remained to which the outstanding 1/7 could be allocated, and the transfer was therefore denied.

An appeal to the Austrian Supreme Administrative Court (VwGH) has been permitted but as far as is known, has not yet been filed.

Facts of the Case

In the underlying case, the appellant merged upstream with its subsidiary, a purely asset-managing holding company without its own business operations. Although the transferring company no longer had tax loss carry-forwards, it still had outstanding, not-yet-utilised 1/7 arising from a write-down of a shares. However, these shares had already been sold prior to the merger date. As no asset remained to which the outstanding 1/7 could be allocated, the Austrian Federal Tax Court denied the transfer of the outstanding write-downs to the acquiring company, by analogy to the rules governing the transfer of tax loss carry-forwards.

This interpretation of the Federal Court is in line with the existing administrative practice.

Notes in practice

Holding structures without operational business activities are particularly exposed to the risk of a forfeiting such tax attributes resulting from the spreading of write-downs and capital losses on shares (1/7).  For practical purposes, it is therefore advisable to carefully plan the timing sequence between any disposal of shares and any tax-effective merger date. Although the court’s ruling directly addresses only the object test, in our reading the comparability test will also become relevant when applying the provisions on loss carry-forwards by analogy.

While the object test, in the case of a mere holding entity, would generally be based on each of the shares, the comparability test would typically focus on the shareholding ratio as such.