Currently, in order to foster the internationalization of the Austrian economy, there are a series of tax incentives for limited liability companies with their headquarters in Austria. Highlights are:
- The international intercorporate privilege:
Dividend earnings from foreign subsidiaries are tax free to the Austrian parent company if the participation is at least 10% and has existed continuously for at least one year. - The ability to deduct third party interest on capital in connection with loans on acquiring the participation:
While dividends from foreign subsidiaries are regularly tax free because of the international intercorporate privilege, third party interest on capital for obtaining loans to finance the acquisition of a participation are still subject to a tax deduction. - Cross-border group taxation:
Since 2005, Austria applies the notion of group taxation which allows for its application to foreign affiliated companies. Its attraction arises from the asymmetric treatment of profits and losses of foreign affiliated companies which are included in the group. Losses of the foreign affiliated companies reduce the percentage amount of the group’s income participation in Austria, while profits of the foreign affiliated companies have no tax effect in Austria. However, the tax advantage obtained in Austria must be rolled back in later periods (retrospective taxation), i.e. as soon as these foreign losses are realized abroad for tax purposes. - Domestic consideration of losses incurred at foreign operating sites:
Losses of Austrian limited liability companies incurred at foreign operating sites can be deducted in Austria as a matter of principle. Losses from foreign operating locations, however, must be determined under Austrian regulations, but this also allows for structuring possibilities. As soon as the losses from foreign operations can be realized abroad from a tax perspective, the tax advantage in Austria must again be rolled back (retrospective taxation).