One of the core issues of corporate tax law is Austrian group taxation. In principle, the attributing subject of income is the corporation that has earned this income (individual taxation principle). However, Austrian corporation tax law allows for a compensation of profits and losses between financially related entities (Sec. 9 of the Austrian Corporate Tax Act (KStG) - "group taxation"). Accordingly, corporate profits and losses can be offset by forming a group of companies, thereby reducing (at least temporarily) the tax burden. The key features of group taxation are:
- One (or, under certain conditions, several) group parents (parent company),
- One or more group members (subsidiary),
- A financial connection,
- Profit attribution,
- A group contract (tax compensation in the group),
- A group application.
Group parents are primarily considered to be unlimited taxable corporations (AG and GmbH). Likewise, EU companies with limited tax liability and comparable companies which have their management and registered office in the EEA may, under certain conditions, act as group parents. Group members are companies with unlimited tax liability.
A special feature of Austrian group taxation is the inclusion of foreign group members under certain conditions, in which case only losses (pro rata and after conversion) can be attributed to the Austrian group parent.
As a material prerequisite, only a financial connection of over 50% of the share capital and voting rights applies. A financial connection of over 50% can be established through direct participation, but also through indirect equity interests (through a partnership or through other group members).
In the case of domestic group members, group taxation results in a 100% attribution of the taxable (positive or negative) result, i.e. both the taxation of the entire group profit and the utilisation of the overall group loss are ultimately borne by the group parent.
WTS Austria looks after a large number of Austrian groups and handles all compliance issues.