November 18, 2021
Austrian Ministry of Finance publishes draft bill to reduce Corporate Income Tax and introduce Carbon Tax
On 8 November 2021, the Austrian Federal Ministry of Finance (MOF) published the legislative text of the “Ecological Social Tax Reform Act 2022” (Ökosoziales Steuerreformgesetz 2022) for review until 6 December 2021. Key elements are the introduction of a new Carbon Tax and tax measures to balance the additional tax burden. Taxation of cryptocurrencies as capital income are also introduced.
Carbon Tax will be introduced by way of a national emission certificate trading that shall start on 1 July 2022. The goal is to create cost truth in the pricing of greenhouse gas emissions and to reduce greenhouse gas emissions. National emissions trading will start with a fixed price phase. The initial value for the emission of one ton of carbon dioxide will be €30; this value increases to €35 as of 2023, to €45 as of 2024 and to €55 as of 2025. Trading participants placing on the market sources of energy such as mineral oil, fuels, gas or coal will be liable to acquire national emission certificates.
Corporate Income Tax (CIT) shall be reduced from the current flat 25% to 24% as of calendar year 2023 and to 23% as of calendar year 2024. Withholding Tax (WHT) on profit distributions to corporations will also be reduced from the current 25% to 24% as of 1 January 2023, and to 23% as of 1 January 2024.
In addition to the reduction of the CIT rate, the MOF announced the following tax measures:
- Introduction of an investment allowance (Investitionsfreibetrag) of 10% of the acquisition or production costs of depreciable assets in the year of acquisition/production for business income starting 1 January 2023. The rate will be 15% for ecological investments. The assessment basis shall be limited to €1m per fiscal year and per taxpayer. Assets must have a useful life of at least four years and be used in a business in Austria. Certain assets such as buildings, passenger cars (except fully electric passenger cars), low-value assets, intangible assets and used assets are excluded. The investment allowance must be claimed in the tax return.
- The amount limit for immediate depreciation of low-value assets, currently €800 per asset, will increase to €1,000 for fiscal years starting after 31 December 2022.
- As of 1 January 2022, a new tax exemption for profit participation for employees up to €3,000 per employee and per year is to be introduced. Profit participations must be either granted to all or certain groups of employees. The overall tax exemption is limited in accordance with the prior year taxable profit.
- Starting 2022, private expenses for thermal refurbishment of buildings and for the replacement of a heating system based on fossil fuels with a climate-friendly system (e.g., district heating) will be eligible for a lump-sum deduction as extraordinary expenses for private persons. Prerequisite is entitlement and payment of a federal subsidy.
- For individuals, reduction of the second income tax rate from 35% to 30% as of 1 July 2022 and reduction of the third rate from 42% to 40% as of 1 July 2023. Also, there will be an increase of the family bonus from currently €1,500 to €2,000 per child and per year from 1 July 2022.
- Reduction of the health insurance contributions paid by the insured person for low and medium income and for pensioners from 1 July 2022. This will be implemented through a graduated reduction from the current 3.87% for monthly remuneration below €2,500.
- Exemption from electricity tax for self-generated electrical energy from renewable energy sources that is not fed into the grid but is directly consumed by the producers. The current limitation of the exemption to 25,000 kWh per year will be abolished (effective as of 1 July 2022).
- As a measure to balance the additional tax burden from carbon tax for private households, in 2022 a regionally differentiated climate bonus shall be implemented as a cash bonus. The regional climate bonus consists of a base amount of €100 per year and an additional regional compensation (33%, 66% or 100%). Individuals below age of 18 are entitled to 50% of the overall bonus.
- As of 1 March 2022 (applicable for cryptocurrencies acquired after 28 February 2021), the current system of taxation of capital income will be expanded to income from cryptocurrencies (current income from cryptocurrencies (fruits) as well as realized capital gains regardless of a holding period). Income from cryptocurrencies will be subject to the special tax rate of 27.5% and will be subject to WHT (Kapitalertragsteuer). WHT will have to be withheld at source from 2023 provided that a WHT agent exists. WHT can already be withheld voluntarily on income accruing from 1 January 2022. After deduction of WHT, income from cryptocurrencies will generally be subject to final settlement effect (final taxation with 27.5%, no necessity to declare in the individual tax return).
The next steps in the legislative process, following the review until 6 December, are yet to be announced.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Steuerberatungsgesellschaft m.b.H., Vienna