New legislation to promote economic growth

13/07/20

New legislation to promote economic growth

The Austrian government has announced tax measures in response to COVID-19 intended to boost the economy and promote investment. In what follows, we provide an overview of the planned new legislation.

1.       Changes to tax bands and thresholds

The income tax rate for the lowest tax band will be reduced retrospectively from 25% to 20% as of 2020. This will result in annual tax reduction of up to EUR 350. At the same time, the highest tax band of 55% for incomes above EUR 1m will be extended for an additional five years until 2025.

2.      Declining balance method for depreciation

Previously, the declining balance method was not permissible under Austrian tax law. It will now be introduced for fixed assets in the amount of max. 30% p.a., based on the applicable residual book value. In future, the taxable person will be able to freely choose between the straight-line method and the declining balance method, and will be able to freely choose the depreciation rate in the context of the declining balance method up to a max. amount of 30%.

The declining balance method will not apply to intangible and used assets, buildings, goodwill, certain kinds of passenger vehicles and estate cars/station wagons, as well as fixed assets used for promotion, transport or storage of non-renewable energy sources and fixed assets that make direct use of non-renewable energy sources (e.g. planes).

A change from the declining balance method to the straight-line method in the course of the useful life is permissible, but not vice-versa. Such a change may be advantageous in particular in the last three years of the useful life.

Likewise, the declining balance method does not require any specific type of profit determination and can also be used in non-operational contexts. For companies which also prepare a corporate balance sheet, the depreciation also needs to be recognised here.

The rule will initially apply for assets which were acquired or created after 30 June 2020.

3.      Accelerated depreciation for buildings

For buildings acquired or constructed after 30 June 2020, an accelerated depreciation is envisaged in the max. amount of three times the statutory percentage rate in the first year, and two times the statutory percentage rate in the second year. Furthermore, in the first year the half-year depreciation will not apply for buildings. This rule will apply in both operational and non-operational contexts.

4.      Loss carry-back

For the assessment year 2020, there will be a one-off opportunity to implement a loss carry-back to 2019, and where applicable to 2018. Companies with financial years that differ from the calendar year will be able to choose between a loss carry-back for the assessment year 2020 or 2021.

The loss carry-back will be limited to max. EUR 5m. For groups of companies, this amount will be available for the group parent and each group member. In addition, to improve liquidity, it will be possible to recognise the loss carry-back before the tax return for 2020 is carried out (e.g. through creation of a reserve in 2019).

Further details on the requirements and procedure will be announced in the context of a government directive (ordinance).

Author: Ines Hofbauer-Steffel

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Copyright and Publisher: PwC Österreich GmbH Wirtschaftsprüfungsgesellschaft, Donau-City-Straße 7, 1220 Vienna, Austria

Editor: Ines Hofbauer-Steffel, ines.hofbauer-steffel@at.pwc.com

The above information is intended to provide general guidance only. It should not be used as a substitute for professional advice or as the basis for decisions or actions without prior consultation with your advisors. While every care has been taken in the preparation of the publication, no liability is accepted for any statement, option, error or omission.

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