Austria Abolishes Tax on Credit and Loan Agreements
Vienna/Munich, 26 January 2011 – At the beginning of 2011 group financing in Austria was made significantly easier. Following pressure from banks and politicians the legislator decided to abolish taxes on credit and loan agreements. The amendment which was incorporated into the Austrian legislation accompanying the budget 2011 as a new tax regulation was introduced as an "exchange deal" between the banks and the government to compensate for the stability tax to be paid by banks as of the beginning of this year.
"The legislation accompanying the budget 2011 includes only very few pleasant innovations, but by abolishing the tax on credit and loan agreements the Austrian legislator has brought about a simplification in the area of group financing“, says Dr. Hartwig Reinold of WTS Tax Service in Austria.
Until the end of 2010 a one-off tax of 1.5 per cent on (longer-term) credit facility agreements and 0.8 per cent on loan agreements as well as short-term credits was levied. This tax had to be paid irrespective of whether a consumer loan was taken out by the man in the street or whether financing activities of large corporation were involved. Since the respective provisions in the Stamp Duty Act are based on the “deeds principle”, avoidance strategies such as oral agreements, written quotations with implied acceptance could be found quite frequently. In 1993 the legislator responded by stipulating alternative facts and circumstances for credits or loans granted by the shareholder. Upon the registration of the loan or credit in the accounts of the subsidiary the tax became due. The abolishment coming into effect now does not only apply to bank loans but also to all other loans or credit facilities granted by the shareholders or private individuals.
This easing of these tax regulations can also have a positive effect on German entrepreneurs. The simplification of processes offers additional attractive arguments to choose Austria as the holding location. "In conjunction with the many positive changes in the tax law in the past few years one more obstacle has been removed and Austria has become a more attractive location for holdings or group finance companies. Establishing companies or finance corporations in Austria has hence also become more interesting for German businesses“, thinks Christoph Möslein of WTS AG Steuerberatungsgesellschaft in Munich.
At the same time Mr Möslein points out critically that the interest expense for the debt financing of shareholdings acquired by a group company is no longer tax deductible in Austria as of 1 January 2011. On principle interest expenses remain tax deductible if the shareholding was acquired by a non-group member. Also the concept of group taxation will be upheld and continued in Austria.
Capital tax amounting to 1 per cent of the capital contribution or the voluntary payment of a shareholder to the Austrian - direct- subsidiary remains in effect, although the complete elimination of this tax was demanded years ago. The EU Commission had recommended abolishing this tax on capital movements as well. Meanwhile, it is tolerated as a result of the amendment of the so-called Capital Duty Directive. Besides Austria six other EU member states levy this capital tax. So-called contributions by a grandparent company are generally not subject to capital tax.
The Austrian tax on credit and loan agreements was initially introduced at the time of Empress Maria-Theresa – titled stamp duty. Stamp duties are duties (taxes as well as charges) levied when the respective documents or items are literally stamped or marked with a fiscal stamp. Also in other countries the concept of stamp duty is applied according to which a tax has to be paid for the production of documents. The Austrian stamp duty was introduced in those days to generate additional tax revenue and its definition and scope of application has been modified since in accordance with the applicable regulations.
