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Merger Directive and International Corporate Reorganizations LL.M.- Program “European Tax Law”

Merger Directive and International Corporate Reorganizations LL.M.- Program “European Tax Law” Dr. Clemens Philipp Schindler, LL.M. 13.04.2012. Abbreviations. AbgÄG = Tax Amendement Act BAO = Fiscal Code BBG = Budget Supplementary Act EStG = Income Tax Act KöSt = Corporate Income Tax Act

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Merger Directive and International Corporate Reorganizations LL.M.- Program “European Tax Law”

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  1. Merger Directive and International Corporate Reorganizations LL.M.- Program “European Tax Law” Dr. Clemens Philipp Schindler, LL.M. 13.04.2012

  2. Abbreviations • AbgÄG = Tax Amendement Act • BAO = Fiscal Code • BBG = Budget Supplementary Act • EStG = Income Tax Act • KöSt = Corporate Income Tax Act • FRL = Merger Directive (MD) • FRL-E = Amending Merger Directive Draft • MS = Member State • OECD-MA = OECD Model Convention • UmgrStG = ReorganizationTaxAct (RTA) • UmgrRL = DirectivetoTaxReorganizationAct

  3. Merger Directive and International Corporate Reorganizations – Content A. Introduction to EU (Tax) Law B. Case-law on Exit-Taxation C. Merger Directive D. Reform of Austrian Legislator E. Austrian Reorganization Tax Act - Merger

  4. A. Introduction to EU (Tax) Law • Primary EU law • Fundamental freedoms • [free movement of EU-citizens (Art. 21 TFEU)] • [free movement of goods (Art. 28-29 TFEU)] • free movement of persons/workers (Art. 45-48 TFEU) • the freedom of establishment (Art. 49-55 TFEU) • free movement of capital and payments (Art. 63-66 TFEU) • to what extent applicable to third (i.e. non-EU) states? • freedom to provide services (Art. 56-62 TFEU)

  5. A. Introduction to EU (Tax) Law • Discrimination • A prohibition of discrimination on grounds of nationality or origin (market equality) • Distinctions based on criteria other than nationality of person, such as place of residence or incorporation –mainly– disadvantaging foreigners or foreign investment (covert or indirect discrimination) are just as prohibited as direct discrimination • application of different rules to comparable situations • application of the same rule to different situations • unfavorable treatment of residents in cross-border situations (secondary discrimination)

  6. A. Introduction to EU (Tax) Law • Restriction • A measure that without any distinction is disadvantageous to cross-border situations as compared to purely domestic situations • Or a measure that is able to hinder or make less attractive the exercise of the fundamental freedoms • Relationship to tax regimes of the member states • EU Treaty leaves direct taxation to the competence of the MS • I.e., MS have legislative competence to the extent exercised consistently with EU Law

  7. A. Introduction to EU (Tax) Law • Justifications • Direct discriminations • mandatory requirements of public interest listed in the Treaty: public policy, public security and public health • Indirect discriminations or restrictions • coherence (cohesion), fiscal control and supervision, territoriality • ‘four conditions test’ developed in the Gebhard-Case [‘rule of reason’]: • (i) provisions must be applied in a non-discriminatory manner; • (ii) provisions must be justified by imperative requirements in the general interest [also ‘mandatory requirements of public interest’, ‘matters of overriding general interest’, ‘pressing reasons of public interest’, etc.]; • (iii) provisions must be suitable for securing the attainment of the objective which they pursue; • (iv) and provisions must not go beyond what is necessary in order to attain it.

  8. A. Introduction to EU (Tax) Law • Secondary EU law • Merger Directive • Parent-Subsidiary Directive • Interest and Royalty Directive • Savings Income Directive • Mutual Assistance Directive • (Arbitration Convention)

  9. A. Introduction to EU (Tax) Law • Legal Basis (Direct Taxation) is Art. 115 TFEU • Requirement of unanimity • Directives Require National Implementation Measures • MS are in default with implementation: direct effectiveness of directive in situations improving the taxpayer’s position if • (i) time limit for implementation has expired • (ii) provision in question is unconditional and unambiguous (i.e., leaving no room for Member States to exercise discretion) • (iii) provision's purpose was sufficiently clear and precise

  10. Merger Directive and International Corporate Reorganizations – Content A. Introduction to EU (Tax) Law B. Case-law on Exit-Taxation C. Merger Directive D. Reform of Austrian Legislator E. Austrian Reorganization Tax Act - Merger

  11. Former Country of Residence Deferral in what situation? Revaluation or compen- (EU, EEA, non-EU/EEA- sation? How to proceed countries? in cases of decrease in Deferral for how long? Tax base, especially in cases of impairment? Determination of applicable tax rate, exemption, etc? B. Case-law on Exit Taxation • Taxation ofcapitalgainsand EU law New Country of Residence value? Prohibition of Taxation is (double) permissible, taxation of but within ”incoming” llimits of EU law hidden reserves? Obligation to cooperate? No taxation of capital Or: “Free move- Or: “Free move- No Revaluation, since Gains; the reason is a ment of hidden ment of hidden compensated with loss set off with profits from reserves in the caused by “outgoing” reserves in the “incoming” hidden re- EU“? hidden reserves EU”? serves

  12. B. Case-law on Exit Taxation • ECJ 21.11.2002, C-436/00, X and Y • X and Y, individuals of Swedish nationality and resident in Sweden, transferred shares in X-AB at cost value to Z-AB in Belgium, in which the transferors indirectly held a participation • If the receiving company had been seated in Sweden and had no foreign shareholders, a deferral of taxes on hidden reserves in the shares transferred would have been granted to the receiving company until the transfer of those shares to third parties • However, due to the foreign participation in Y-SA, hidden reserves were already subject to taxation at the first transfer. • Violation of freedom of establishment X Y Y-SA X-AB Z-AB X-AB

  13. B. Case-law on Exit Taxation • ECJ 11.3.2004, C-9/02, Lasteyrie du Saillant • French individual moves from France to Belgium. • Rational of statute was the prevention of abuse, not income realization. • Included are unrealized gains in shares, which have granted profit sharing rights of more than 25% during the last 5 years before the relocation. The unrealized gains were taxed immediately as they were to erode in the course of relocation. • The triggering event for taxation was the cross-border relocation. • A deferral of taxes was only possible if security and yearly tax declarations were provided by the taxpayer. • After five years (or the return to France), taxes were remitted ex officio unless shares were sold. • Violation of freedom of establishment H H 50% Y-SA

  14. B. Case-law on Exit Taxation • ECJ 7.9.2006, C-470/04, N • Dutch individual moves from the Netherlands to Great Britain; effectively, the management of all three Dutch companies had ever since been on the Dutch Antilles • Rational of statute is income realisation (among others) • Subject of the exit tax were hidden reserves in substantial shareholdings (≥ 5%) • The triggering event for taxation was cross-border relocation • Deferral of tax required • application of taxpayer and tax declaration  EU-conform • security  not proportionate • no consideration of decrease in value  not proportionate • Violation of freedom of establishment (ECJ on the other hand did not discuss Art. 21 TFEU) N N 100% X-BV Y-BV Z-BV management

  15. AT 89,5% C-GmbH G-SA B. Case-Law on Exit Taxation • ECJ 11.12.2008, C-285/07, A.T. • The acquiring company had not valued the shares that it recieved at their book value as of the fiscal balance sheet of the transferor, but at their market value as specified in the transfer agreement • ECJ determines that all MS must grant the same tax advantages for exchange of shares as stated in the Merger Directive unless the incentive was tax evasion or tax avoidance • The MS can nevertheless tax the profit from a later transfer in the same way as the profit from the sale of shares which existed already before the acquisition • The protection of the MS’ competence to taxation does not serve as justification for a such taxation

  16. B. Case-law on Exit Taxation • EuGH 16.12.2008, C-210/06, Cartesio v. SzegediÍtélötábla • The freedom of establishment does not prevent a MS from prohibiting companies incorporated under the laws of that MS to transfer its seat to another MS, whilst retaining its status as a company governed by the law of the MS of incorporation. • Such relocation has to be distinguished from cases, where a company moves from one MS to another, becoming subject to a different legislation and at the same time converting to a company under the laws of the new MS of residence. • The freedom of establishment allows for a company to convert without having to be dissolved and wound up in the MS of incorporation, as far as the legislation of the new state of residence permits such conver-sion unless justified by overriding reasons in the ge-neral interest C C

  17. B. Case-law on Exit Taxation • ECJ 23.11.2011, C-371/10, National Grid Indus BV • A company incorporated in the Netherlands transfer-red its place of effective management to the UK. • The triggering event for the taxation was the cross-border relocation of the company‘s seat. • Subsequent increases or decreases in value were not taken into account. • ECJ confirmed applicability of Art 49 TFEU and mainly relied on the argument of preserving the allocation of powers of taxation • Establishment of amount due vs. recovery of tax • Establishment of amount with no consideration of de-crease in value was considered proportionate • Immediate collection, on the other hand, constitutes a violation of the freedom of establishment • ECJ acknowledged the potential administrative burden in some cases and found that giving the taxpayer the choice would be a solution • Coherence and balanced allocation of power of taxation coincide according to the EJC NG-BV H NG-BV

  18. ECJ, 13. 12. 2005, C-411/03, Slg 2005, I-10805,SEVIC German court of registration refused to register the merger of SVC (founded in Luxemburg) to SEVIC (incorporated in Germany) AG Tizzano B. Case-law on Mergers SEVIC SVC • Art 49 and 55 TFEU are applicable: (i) primary freedom of establishment of transfer-ring company and (ii) secondary freedom of establishment of absorbing company • A regulation of a MS such at the German Conversion Act that does not allow the re-gistration of a merger of a company seated in Germany with a company seated in another MS interferes with Art 49 and 55 TFEU  no justification possible • AG distinguishes between discrimination and limitation • Also violation of free movement of capital and payments  no justification possible • See item 45: [Also prohibited is] limitation of “exit”

  19. ECJ 13. 12. 2005, C-411/03, Slg 2005, I-00000, SEVIC Merger of SVC (incorporated in Luxemburg) to SEVIC (incorporated in Germany) ECJ B. Case-law on Mergers SEVIC SVC • A regulation of a MS leading to the refusal of the registration and hence a merger where once company has its seat in another MS while the merger of a company with another company incorporated under the laws of that MS interferes with Art 49 and 55 TFEU (uncertain whether discrimination or limitation) • It cannot be ruled out that overriding reasons in the public such as the protection of creditors, shareholders and employees as well as the effectiveness of fiscal super-vision and fairness of commercial transactions can under certain conditions and under adherence to certain requirements justify a limitation of the freedom of establishment  an absolute prohibition of cross-border transfer is not acceptable – in this specific case there is no room for justification • ECJ does not go into Art 63 TFEU (free movement of capital and payments)

  20. Merger Directive and International Corporate Reorganizations – Content A. Introduction to EU (Tax) Law B. Case-law on Exit-Taxation C. Merger Directive D. Reform of Austrian Legislator E. Austrian Reorganization Tax Act - Merger

  21. C. Merger Directive (90/434/EEC of 23 July 1990) • Transactions Covered • Merger • merger by acquisition • merger by formation • upstream merger of a wholly owned subsidiary into parent • Division • Transfer of assets • transfer of a branch of activity (all the assets and liabilities of a division of a company that from an organizational point of view constitute an independent business) in exchange for shares • Exchange of shares • to acquire a majority of the voting rights in target

  22. C. Merger Directive - Prerequisites • Prerequisites for the Applicability of the Merger Directive • Companies must be listed in the Annex to the Merger Directive • Companies must be resident for tax purposes in a MS • The companies must be subject to one of the national corporate taxes listed in Art. 2(c) of the Directive • [No specific requirements apply to the shareholders exchanging their shares in the case of a merger, division or exchange of shares] • Cross-Border Element • Merger Directive only covers reorgs of companies from different MS

  23. C. Merger Directive - Applicability • Applicability of the Merger Directive • Tax deferral at corporate level (Art. 4) • Tax deferral at shareholder level (Art. 8) • Carry-over of losses (Art. 6) • To a PE situated in the territory of the transferring company • Carry-over of (tax-free) provisions or reserves (Art. 5) for, e.g., exchange risks or contingencies • Cancellation of shares (Art. 7) • acquiring company has a qualified holding in the target • minimum shareholding required is being gradually reduced from 25 per cent to 10 per cent

  24. C. Merger Directive - Amending Directive • Amendments to the 1990 Merger Directive by Directive 2005/19/EC of 17 February 2005 • Inclusion of additional companies in the annex, among others • European Company (SE) • European Co-operative Society (SCE) • Inclusion of the transfer of the registered office of an SE or an SCE • Inclusion of the ‘partial division’ (respective ‘split-off’) • Clarification that Merger Directive applies to conversion of branches into subsidiaries • New provisions on reorganizations involving hybrid entities (but opt out option to the MS)

  25. C. Merger Directive - Amending Directive • Full Division v. Partial Division l 25

  26. C. Merger Directive – Rejected Provisions • Changes which have not been passed • Economic double taxation for exchange of shares and transfer of assets – Art 8 Para 10, 9 Para 2 MD(draft) • see also following two slides • Transferor residing in a non EU-country – Art 8 Para 12 MD (draft) • but see Council Document 6504/05 ADD 1 of 8 March 2005 • "The Council and the Commission agree that Article 8 of Directive 90/434/EEC does not deprive shareholders resident in Member States of the benefits of the Directive in a case where the majority holding is acquired from Community residents and from residents of third countries."

  27. C. Merger Directive – Rejected Provisions • Exchange of shares – issue of economic dou-ble taxation • Doubling of hidden reserves (i.e. capital gains) leads to double taxation • continuation at book value on shareholder level (shares of X in B) and no direct taxation of exchange of A shares against B shares (Art 8 Para 1 MD) • evaluation of acquired shares in A by B is not determined in the Directive, normally at book value or acquisition cost • Proposal of Commission: • Art 8 Para 10 MD (draft)  ‘In an exchange of shares, the acquiring company values the received shares at the market value of the shares which have been assigned to the shareholders of the acquired company‘ • Proposal was not incorporated into the finally adopted Amending Directive

  28. C. Merger Directive – Rejected Provisions • Transfer of assets – issue of economic double taxation • Continuation of book value of the transferred as-sets by the acquiring company (Art 4 Merger Di-rective) • Evaluation of acquired assets is not determined in Directive, normally at book value • Proposal of Commission • Art 9 Para 2 MD (draft)  The assets should be valued at actual value of acquired as-sets and debts directly before transfer • The proposal was not incorporated into the finally adopted Amending Directive (danger of circumven-tion since tax-free sale of assets would have been possible)

  29. C. Merger Directive – Merger • Personal Scope • Stock Corporations (Aktiengesellschaften), Company with limited liability (GesellschaftenmitbeschränkterHaftung), European Companies – SE (EuropäischeGesellschaften – SE)] • Tax neutrality of merger (part I) • No taxation of hidden reserves in country of residence of the transferring company, as far as a permanent establishment remains after the merger – Art 4 FRL • permanent establishment • assets are effectively connected to such permanent establishment • continuation at book value by the receiving company

  30. C. Merger Directive – Merger • Tax neutrality of merger (part II) • Tax neutrality also applies to reserves and provisions – Art 5 MD • No discrimination of take-over of losses – losses to be taken over under the same conditions as those that apply to domestic mergers – Art 6 MD • Book gains accruing at the receiving company on the cancellation of its shareholding do not trigger taxation to the extent that the Parent-Subsi-diary-Directive is applicable – Art 7 MD • no corresponding provision regarding book losses

  31. C. Merger Directive – Merger • Tax neutrality of merger (part III) • No permanent establishment – no attribution to permanent establishment • according to Merger Directive, country of residence of transferring company has right to levy taxes • limitation of right to levy taxes on the grounds of ECJ jurisdiction concerning exit taxes? • Is immediate taxation the most appropriate mean? • Contradiction between Merger Directive and jurisdiction of ECJ? • Contradiction between Merger Directive and fundamental freedoms?

  32. C. Merger Directive – Merger • Tax neutrality of merger (part IV) • Permanent establishment in a third country – Art 10 MD • such third country (i.e. neither that of the transferring company nor that of the absorbing company) has no right to levy taxes on a permanent establishment that continues to exist • also applies to country of residence of the transferring company • exception: losses of foreign permanent establishment that have not yet been offset by profits  recapture of such losses if the applicable DTT applies the exemption method – in case of credit method taxation of the profit under crediting of (deemed) foreign taxes

  33. C. Merger Directive – Merger • Tax neutrality of merger (part V) • Taxation of shareholders – Art 8 MD • No taxation of capital gains, but continuation of former acquisition cost / book value • termination of a certain (percentage of) shareholding – right to taxation? • transfer from operating assets to private assets – right to taxation?

  34. C. Merger Directive – Taxation of capital gains • Permanent establishment condition • Cross-border merger  Art 4 Merger Directive • requirement for tax deferral is that the transferred assets and liabilities effec-tively stay with the permanent establishment of the receiving company in the MS of the transferring company • transformation of the transferring company into a permanent establish-ment of the receiving company • assets are attributed to the (existing) permanent establishment of the receiving company • Transfer of registered office  Art 10b Merger Directive • requirement for tax deferral it that transferred assets and liabilities effectively stay with the permanent establishment of the “exit”-country • The Merger Directive does not cover • transfer of assets to another MS • relocation of mere holding companies

  35. C. Merger Directive – Taxation of capital gains • Export-Merger • If business unit is no permanent establishment in the sense of DTT, Republic of Austria loses right to levy taxes • Taxation of capital gains following Art 4 MD is possible (permanent establishment condition) • infringement of primary EU law? • if yes, does Merger Directive justify such a limitation? • if no, how to tax capital gains and is taxation possible according to EU law? A EU-MS Austria I PE

  36. C. Merger Directive – Taxation of capital gains • Export-merger with connection to Austria (permanent establishment) • Qualification as “permanent esta-blishment” ceases to apply due to change of DTT regime because of merger • Art 10 Para FRL – Austria applies Merger Directive as if it was coun-try of residence of the transferring company • Taxation is possible according to Merger Directive, but also accor-ding to EU law?

  37. A limitation of the fundamental freedoms by means of seconday EU law is not possible! C. Merger Directive • Primary EU law vs. secondary EU law • Jurisdiction on exit tax • ECJ-Judgementon “Hughes de Lasteyrie du Saillant“ • ECJ-Judgement on “N v Inspecteur van de BelastingdienstOost/KantoorAlmelo“ • ECJ-Judgement on “National Grid Indus BV” • Relationship Merger Directive and fundamental freedoms • Can secondary law (especially directives) constrain fundamental freedoms? • Is European legislator bound to fundamental freedoms?

  38. C. Merger Directive – Transfer of registered office • SE: Transfer of registered office • Art 7 SE-Statute and Art 8 SCE-Statute • Process, where a SE or SCE transfers its registered office from one MS to another with-out winding up or creating a new legal person (Art 2 lit j FRL) • SE and SCE were included in Annex to Mer-ger Directive • Generally: • Art 10b  Art 4 MD (shareholder level) • Art 10c Para 1  Art 5 (provisions/reserves) • Art 10c Para 2  Art 6 (losses) • Art 10d  Art 8 (shareholder level) • No provision corresponding to Art 10 FRL regarding permanent establishments

  39. C. Merger Directive – Transfer of registered office • Foreign permanent establishments in cases of transfer of registered office (Art 10 MD) • Valid for mergers, divisions and transfer of assets but not for transfer of registered office • DTT with exemption method: Recapture of losses that have been realized in the MS concerned following Art 10 Para 1 MD (e.g. § 2 Para 8 EStG) • DTT with tax credit method: Taxation of sale proceeds with crediting of deemed foreign taxes (Art 10 Para 2 MD) • No provision for cases of transfer of registered office • Art 10b Para 3 FRL-E explicitly refers to Art 10 (“…notwithstanding the fact there was no actual transfer of assets and liabilities between the compa-nies”) • No. 8 of Preamble to FRL-E: the transfer or registered office does not prevent the former Member State of residence from reinstating losses of the permanent establishment in due time.

  40. C. Merger Directive – Transfer or registered office • Implications for Austrian Tax Law: • Need for adoption only concerning the inclusi-on of SE and SCE in Annex to UmgrStG • “Outbound-Transfer” • change from unlimited to limited taxability • hidden reserves in domestic permanent esta-blishments stay taxable according to Art 4 MD • otherwise deferred taxation of net capital gai-ns following § 6 no 6 lit b EStG • “Inbound-Transfer” • change from limited to unlimited taxability • hidden reserves in foreign permanent esta-blishments continuation at book value (Art 4 FRL) • “imported” hidden reserves  revaluation to reach market value (§ 6 no 6 lit c EStG)

  41. C. Merger Directive – Various Changes • Exchange of shares – amendment concer-ning existing majority shareholding – Art 2 lit d MD • Former prerequisite of exchange of shares according to Art 2 lit d MD was that “ … a company acquires a holding in the capital of another company such that it obtains a majority of the voting rights,…“ • Expansion of an already existing majority shareholding was not covered by former wording of the Directive • “obtains a majority of the voting rights or – holding such a majority, acquires a further holding” was now added to Para 2 lit d MD

  42. C. Merger Directive – Gains accruing on the cancellation of a holding (Art 7 MD) • Art 7 MD  tax exemption of book gains since tax-free distribution would have been possible following PSD • So far, no “fine tuning” • Art 3 PSD (old version): “at least 25%” • Art 7 Para 2 MD (old version): MS could de-rogate from Art 7 Para 1 where holding “do-es not exceed 25%” • i.e. at exactly 25%, taxation was allowed un-der the MD, although a tax-free distribution was possible according to the PSD • Solution in Amending Directive: • Art 3 PSD version 2003/123/EC: “at least 20%” (15% or 10%) • Art 7 Para 2 MD new: MS can derogate from Art 7 Para 1 MD where “the receiving com-pany has a holding of less than 20% [15% or 10%] in the capital of the transferring com-pany”

  43. C. Merger Directive – Coverage of Art 7 MD? • Hidden reserves in cancelled shareholding? • Nr 24 of preamble to FRL-E: “hidden reser-ves” • wording of Art 7 Para 1 MD: “any gains ac-cruing to the receiving company on the can-cellation of its holding” • Amendment of PSD? • If tax free transfer of profit to parent com-pany, e.g. in course of a merger according to MD, is possible, should PSD not also include sale proceeds?

  44. C. Merger Directive – Hybrid Companies • Fiscally transparent (hybrid) companies • Ground rule  Art 4 Para 3, Art 8 Para 3 • Possible exceptions  10a • Shareholder level: Art 4 Para 2 MD • Where Art 4 Para 1 applies and where MS con-siders a non-resident transferring company as fiscally transparent “it shall not tax any income, profits or capital gains calculated by reference to the difference between real values of the assets and liabilities transferred and their value for tax purposes” • Application of Directive also on fiscally transpa-rent companies on shareholder level

  45. C. Merger Directive – Hybrid Companies • Fiscally transparent (hybrid) companies • Ground rule  Art 4 Para 3, Art 8 Para 3 • Possible exceptions  10a • Shareholder level: Art 8 Para 3 MD • Where MS considers a shareholder as fiscally trans-parent, “it shall not tax this person on income, profits or capital gains from the allotment of secu-rities representing the capital of the receiving or ac-quiring company to the shareholder” • Application of Directive also on fiscally transparent companies on shareholder level

  46. Merger Directive and International Corporate Reorganizations – Content A. Introduction to EU (Tax) Law B. Case-law on Exit-Taxation C. Merger Directive A. Reform of Austrian Legislator E. Austrian Reorganization Tax Act - Merger

  47. D. Reform of Austrian Legislator • Revision of exit tax regime in § 31 EStG (part I) • Optional deferral in case of an „exit“ to another EU-MS • EEA-MS: Further prerequisite is full assistance in administration and en-forcement(currently only Art 27 DTT Austria/Norway) • infringement of EEA-treaty? • Non EU-/EEA-countries: Even if double taxation treaty entails extensive provision on assistance in administration and enforcement, no deferral possible • infringement of free movement of capital and payments? See case van Hilten • Tax deferral upon request of taxpayer; hence determination of tax due, but no collection in the year of the exit • request to be submitted with (last) tax return for the year of exit • for each shareholding in a company, request can be exercised separately • tax deferral • until sale of shares • until (subsequent) exit of taxpayer to non EU-country • alternative realization events: the current law refers to “circumstances leading to loss of taxing rights“ (before it referred to “other measures“); transfer to non-resident taxpayers without consideration?; (tax neutral) reorganizations?; transfer to a non-operational sphere?

  48. D. Reform of Austrian Legislator • Revision of exit tax regime in § 31 EStG (part II) • Sale or other “circumstances“ are event with retroactive effect in the sen-se of § 295a BAO  imposition of tax by means of alteration of initial tax assessment • (absolute) limitation period of 10 years from (the day of) exit • despite retroactive effect no interest (Anspruchszinsen) as in § 205 BAO • problem: tax rate, progression, exemptions etc. • Subsequent impairment: “double upper limit for tax due” • lower amount of • capital gains at time of exit and • capital gains at (actual/fictitious) time of sale/other realization event (since BBG 2007: not if impairment in new country of residence) • Shares subject to § 31 entering the Austrian tax regime (inbound)  revaluation with step-up to market value • Rebound-”enterance” after deferred exit taxation (e.g. UmgrStG) • valuation at acquisition cost (proven increases in value within EU/EEA to be deducted from sale proceeds)

  49. D. Reform of Austrian Legislator • Revision of § 6 no 6 EStG • Taxation of exit / outbound transfer – following § 31 Para 2 no 2 EStG • upon request of taxpayer deferred collection of tax • in case of transfer of assets between operational units of the same taxpayer • Difference in evaluation between domestic and cross-border cases: partial value vs. transfer price • in case of relocation of businesses or operational units • special case: headquarter  taxation of goodwill? • AbgSiG 2007: specialprovisionfor immaterial assets (65%) • Sale or other ways of disposal • retroactive event in the sense of § 295a BAO • subsequent transfer or relocation to non EU-country considered as sale • § 6 no 6 lit c EStG: inbound-transfer to Austria • usually revaluation (step-up to market value); special case:“Rebound-inbound transfer”: book value; proven increases in value within EU/EEA to be deducted from sale proceeds

  50. D. Reform of Austrian Legislator • Taxpayer‘s obligations • §§ 120 f BAO – notification of (actual or fictitious) realisation • see § 120 Para 3 BAO (introduced through AbgÄG 2005) • No on-going obligation to cooperate (such as yearly reports on the pro-ceedings of transferred assets) • No infringement of EU law since §§ 120 f BAO is applied to domestic and cross-boarder cases • also see cases N and National Grid

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