Austria: Allowance for profits

In the framework of the fiscal reform approved by the Austrian Government in February 2009, beginning with 1 January 2009, a new form of allowance for reinvested profits has been introduced. It is considered by experts to be an attempt to grant also for income derived from self-employed activities the relief applied to the thirteenth and fourteenth wage received by employed persons.
At the same time the allowance has been increased from 10% of 13% and renamed into “allowance for profits”. The renaming is motivated by the fact that, as a difference to the previous regime, for profits up to 30,000 euro it is not necessary to make investments to be able to claim the allowance. Taxpayers are entitled to a so-called “basic allowance” amounting to 3,900 euro (13% of 30,000) which is applied automatically without the taxpayer having to take any initiative.
Besides the basic allowance, there is also an allowance depending on investments which is applied when the taxpayer intends to claim it for profits above the threshold of 30,000 euro. In this event the taxpayer has to make investments into so-called “privileged assets”. This category refers to fixed assets not yet being used and subject to depreciation, which have a useful economic live of at least 4 years and are employed in establishments in Austria, in the EU and the European Economic Area.  Excluded are buildings, land, passenger cars, assets with a value of less than 400 euro, used objects.
The category of privileged assets comprises also certain securities such as bond issues, treasury bills etc. All securities must be held for at least four years.
The prerequisite for claiming the allowance for profits is that the assets remain in the company for a period of four years. If the assets should be withdrawn at an earlier period – for example because of major force – they will be subject to subsequent taxation.
The maximum amount of the allowance for profits will continue to be limited to 100,000 euro per company and taxpayer. This means that a maximum profit of approximately 770,000 euro will be eligible for the allowance. The allowance can be claimed also by partners of private partnerships according to their share, but limited to 100,000 euro for the whole company. Partners must therefore find an agreement of how to divide the allowance.

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