Austria: Indefinite use of loss carryforwards | KPMG | GLOBAL

Austria: Tax rules for indefinite use of loss carryforwards upheld

Austria: Indefinite use of loss carryforwards

Austria’s Administrative Supreme Court issued a decision that addresses the ability to use loss carryforwards when there is a change of indirect shareholder(s).

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Loss trafficking rule

As a general rule, taxpayers can use loss carryforwards indefinitely. However, if the identity of the taxpayer changes after a significant change of the organizational, economic, and shareholder structure, the loss carryforward claims are disallowed. All three conditions must be satisfied for disallowance of the loss carryforwards. A 75% change in the shareholder structure is deemed significant (unless the change resulted from an inheritance or gift transfer).

The court found that there was a significant change of the shareholder structure, and thus, the tax loss carryforward ceased to exist (because the other two criteria were also met). According to the court, there was no “look-through” approach for purposes of the Austrian loss trafficking rules.

Accordingly, transactions within a group of companies, if the direct shareholding changes significantly, can cause the tax loss carryforwards to no longer be available for use. However, if an entire group is acquired by a new shareholder, there would appear to be no adverse consequences to the ability to use the loss carryforwards of any indirect Austrian subsidiaries.

 

Read a November 2017 report [PDF 187 KB] prepared by the KPMG member firm in Austria

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