Although it is expected that the tax reform will enter into force by January 2022, various amendments are scheduled to be implemented gradually until 2025.
Below we provide an overview of the most important amendments from a business perspective:
Main amendments under the Austrian Corporate Income Tax Act
The Austrian corporate income tax rate will be reduced from 25 % to 24 % in 2023 and to 23 % in 2024.
A carbon dioxide tax will be introduced for climate protection purposes. Effective from July 2022, the levy will start at EUR 30 per ton of CO2, rising up to EUR 55 per ton by 2025. To mitigate the volatility of fossil energy prices the yearly price per ton of CO2 will additionally depend on a price stabilisation mechanism. Based on the existing German model, relief is provided to CO2 intense companies to avoid "carbon leakage". This measure is designed to ensure that companies do not relocate production to countries with less stringent environmental regulations. The degree of compensation lies between 65 % and 95 % of the additional costs due to CO2 pricing, depending on the emission intensity of the sector. A large part of compensation must be reinvested in CO2 reducing measures. Besides, a hardship clause will be introduced for companies whose operating costs mainly arise from various forms of energy consumption and thus would extraordinarily be burdened by respective CO2 pricing.
"The Austrian corporate income tax rate will be reduced from 25 % to 24 % in 2023 and to 23 % in 2024."
Main amendments under the Austrian Income Tax Act
From July 2022 onwards, parts of the progressive income tax rate groups will be reduced. The progressive income tax rate for earnings between EUR 18,000 and EUR 31,000 will be reduced from 35 % to 30 % and a year later the income tax rate for earnings between EUR 31,000 and EUR 60,000 will be reduced from 42 % to 40 %. In addition, the tax reform draft contains a tax and social security exemption for bonus payments of up to EUR 3,000 that may be granted as participation in the employer's success.
The outlined draft comprises significant amendments to the Austrian taxation regime of crypto assets held as business assets or held privately. For further details on the new crypto tax regime we recommend reading our article "Does a new era of crypto tax transparency lie ahead?".
The tax-free profit allowance ("Gewinnfreibetrag") will be increased from 13 % to 15 %. All individuals with different types of business income can take advantage of this profit allowance, regardless of whether they determine their profits by means of income and expenditure or via balance sheet and profit loss calculation. This will provide targeted relief for sole proprietorships and forms of partnerships, which will not benefit from a reduction of the corporate income tax rate. Moreover, an investment allowance comprising "greening components" ("Investitionsfreibetrag") of up to 15 % on the acquisition or production costs of specific business assets will be introduced.
Additionally, depreciable property and equipment with a value of up to EUR 1,000 (previously EUR 800) will be considered as "low-value assets" and thus can be completely deducted as operating expenditures effective immediately. This will affect individuals with diverse types of business income under the Income Tax Act as well as corporations under the Corporate Income Tax Act. The draft also comprises an extension of existing tax benefits for "own electricity" on all renewable energy sources and thus abolishes the existing benefit limit of 25,000 kilowatt hours per year.