[ESTABLISHING A BUSINESS ENTITY IN AUSTRIA]
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6. Taxation The tax burden on corporate profits in Austria depends on the legal form of the company, the amount of profit generated and lastly on whether the profit is distributed or withdrawn by the shareholders or not. 6.1 Income tax and corporate income tax Austrian tax law knows two different income taxes: income tax ( Einkommenssteuer , ESt ) and corporate income tax ( Körperschaftssteuer , KÖSt ). While the income tax ( ESt ) for individuals is designed as a progressive tax- system depending on the actual amount of income, the corporate income tax ( KÖSt ) is set uniformly at 23 % (as of January 1 st , 2024) of the taxable income or, in the case of limited liability, at 23 % of the taxable income earned within Austria. Legal entities that fall under the corporate income tax are limited companies (most notably GmbH and AG ), institutions and foundations, but also regional authorities and professional bodies (e.g., Chamber of Commerce). In contrast to other EU countries, there are no other taxes on the profit (e.g. a trade tax). Losses may be carried forward indefinitely. In each subsequent profit year, only 75% of the profit may be compensated. This means that 25% of the profit is taxable even with existing loss carry-forwards. Branches of foreign companies are also subject to Austrian corporate income tax ( KÖSt ) with their income earned in Austria. 6.2 Group taxation Austria has a modern group taxation system, which allows compensation of profit and loss within a group. Even foreign entities may be part of this system. Austrian group taxation has the effect of balancing the profits and losses of the parent
company and its subsidiaries by forming a group of companies. The group parent then combines the results of the group members and subjects them to taxation. The requirements for the eligibility of the group taxation are: - Capital participation (share capital, share capital or cooperative capital) of more than 50% and majority of voting rights of the group parent in the group members (financial link); - Submission of a group application to the tax authority; - Conclusion of a group agreement for the purpose of tax equalization within the group; - Financial link during the entire financial year and/or retention in the group for at least 3 years. 6.3 Tax relief and international box participation In general, taxation of foreign income is based on the provisions for avoiding double taxation. The so-called international box participation ( Schachtelbegünstigung ) is an objective tax exemption within the framework of the corporate income tax ( KÖSt ) for distribution and capital gains from certain participations in foreign corporations. The goal of the regulation is to ensure that profits earned by corporations are taxed only once, as long as they do not flow to natural persons. The rules for an international box participation apply if
an Austrian parent company
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has a share of at least 10%
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- in a foreign subsidiary (that is like an Austrian company)
- for an uninterrupted period of at least
ILN Corporate Group – Establishing a Business Entity Series
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