Profit distributions from an Austrian subsidiary to its parent company are – under certain conditions – tax free. This means that the profit can be paid to the parent company in the EU without further tax deduction in Austria (capital gains tax = CGT).
This CGT exemption for EU dividends in the sense of the “Parent-Subsidiary Directive” can be achieved either via direct relief at source or via a refund process.
No CGT is paid if there is direct relief at source.
A refund process involves initial payment of the CGT by the Austrian subsidiary. In a second step, the EU parent company sends a refund application for the Austrian CGT to the responsible Austrian tax office.
Direct relief at source
CGT direct relief at source is preferable to a refund subsequent to CGT payment, as a refund always involves administration costs and a liquidity outflow.
In order to be eligible for direct relief at source, several requirements must be fulfilled and various pieces of evidence submitted. The provisions governing this can be found in § 94 Austrian Income Tax Act (EStG), in Annex 2 to the Austrian Income Tax Act, in Regulation 56/1995 and in the income tax directives, in particular margin note 7759.
Pursuant to § 94 Austrian Income Tax Act, in the case of profit distributions to other EU countries, the EU parent company must be:
- a company as per the Annex to the Austrian Income Tax Act and
- the EU parent country must own at least 10% of the share capital of the subsidiary and
- the share must have been held for an uninterrupted period of at least one year.
The EU parent company must correspond to the following criteria:
- the parent company is developing activities that go beyond pure asset management and
- the parent company employs its own staff and
- the parent company has its own business premises.
- A recent certification of registration for the EU parent company must be obtained that is not older than 1 year. The form ZS-EUMT must be used for this.
- Since 2016 the certification of registration (= form ZS-EUMT) must be sent to the tax office together with the CGT application (form KA1). These should be sent electronically via FinanzOnline in the form of a “zero entry” while stating the reasons for CGT exemption.
- Important: the deadline for this is only one week after dividend payment
If you have any questions, please do not hesitate to contact us.
Vienna, March 2017