National rules in respect of a Tax Control Framework, differences due to size
In May 2016, the OECD released a report on “Co-operative Tax Compliance” outlining the essential features of a Tax Control Framework (TCF) and the tax authorities’ expectations with respect to a TCF. Although the Austrian Ministry of Finance is very anxious to follow the OECD’s recommendations, currently no domestic legislation exists requiring taxpayers to install such an instrument.
However, following the Netherlands example, the Austrian MoF had already introduced an enhanced relationship called “Horizontal Monitoring” (HM) in 2011 which was offered to Austrian corporate taxpayers on a voluntary basis. To participate in this process of continuing and permanent tax auditing, the existence of an internal TCF was required or at least the willingness to develop such a tool in cooperation with the tax authorities in the course of the monitoring process. In fact, this requirement limited the participants to large Austrian corporate groups. Between 17 June 2011 and 30 June 2016, a total of 17 Austrian corporate groups covering 249 tax IDs participated in the HM. An evaluation report about experiences collected by the tax authorities is available for download at: https://www.bmf. gv.at/services/publikationen/BMF_Evaluationsbericht_Horizontal_Monitoring. pdf?5s3qa1.
Benefits for the taxpayer resulting from a TCF
The final evaluation of the HM project, which came to its preliminary end in mid-2016, came to the conclusion that this form of enhanced cooperation brings more legal certainty for taxpayers, promotes tax compliance, can reduce compliance costs and secures contemporary and lawful collection of taxes in favour of the state budget. Between 2011 and 2016, the HM process was not set by law but based on a manual developed by the MoF together with the Federation of Austrian Industries and the Chamber of Austrian Auditors and Tax Consultants. The MoF is currently working on HM legislation in order to create a legal basis for the HM process in the future. It is expected that such legislation will be passed by the end of 2017.
Are the tax authorities bound to check or consider the TCF? If yes, also for past years?
The MoF has already announced that future participation in the HM programme will require corporate taxpayers to have introduced an effective TCF. So it is to be expected that a taxpayer’s TCF will be examined by the tax auditors before the HM starts. In the course of tax audits, an existing effective TCF can avoid the application of financial penal law.
Cooperative compliance – is it agreed by the fiscal authority? Cross-border applicability of cooperative compliance
Cross-border activities of Austrian enterprises are subject to Austrian taxation and, in many cases, to foreign taxation as well. Experience shows that non-compliance with tax obligations abroad may result in sensitive penalties for the enterprise, its managers and employees. In practice, “cooperative compliance” has to cover both domestic and foreign tax requirements in order to avoid such impacts.
Are there any rules regarding digitisation of tax processes?
In Austria there are no special regulations as far as digitisation of TCF is concerned. However, most of the filings, tax returns and appeals to be done by the Austrian taxpayer, including tax returns and assessment notices issued by the tax authorities, have to be communicated electronically via “FinanzOnline” based on a particular regulation released by the MoF. This online platform can be accessed by visiting http://finanzonline.bmf.gv.at after the taxpayer has duly registered.