At a glance: tax law enforcement in Austria

Enforcement

How does the tax authority verify compliance with the tax laws? Does this vary for different taxpayers or taxes?

Tax returns are usually subject to a plausibility check before a tax assessment is filed.

A review is normally only undertaken if certain aspects of the tax return are unclear to the tax office. It is also possible that a certain number of tax returns are randomly chosen for a comprehensive review.

The duration of a review depends on the workload of the tax office, the complexity of the tax return and the taxpayer’s responses to questions. A review might take up to several months.

If the review takes place as part of a tax audit, specific rules apply.

What is the typical procedure for the tax authority to review a tax return and how long does the review last? What limitation periods apply?

A resident taxpayer must file an income tax return if his or her annual income exceeds €11,000 (or €730 in addition to received employment income). A non-resident taxpayer must file a tax return if his or her annual income taxable in Austria exceeds €2,000.

In the case of business income, the taxpayer’s accounts serve as the basis for income taxation. Under commercial law, individuals or partnerships are obliged to prepare financial statements if their annual gross turnover exceeds €700,000. The financial statements are then the basis for the determination of taxable profits (after correction for deviating provisions in tax law, known as ‘book-to-tax adjustments’). Austrian corporations must always prepare financial statements and file an annual corporate income tax return.

With regard to partnerships, the partnership must file a tax return to determine its taxable income, and the partners must file their annual tax returns, in which they have to include their share of the partnership’s income (the partnership is transparent for tax purposes).

There are numerous other filing obligations (eg, regarding real estate transfer tax or for stamp duty), and for entrepreneurs there is an obligation to file monthly or quarterly, as well as annual VAT returns. Notifications of certain donations have to be filed. Contributions to Austrian private foundations are mostly subject to a trust-entrance duty of 2.5 per cent (25 per cent in the case of non-Austrian trusts and foundations under certain circumstances).

Normally, the assessment is filed by the tax office. Additionally, in the case of electronic filing of the tax return, a review can take place after the assessment in an ex-post control decree within a year to adjust the result without further reasons.

Further, after the decree has become final and binding from the side of the tax office, tax audits may be performed. The frequency of tax audits depends on the size of the business. Large businesses are audited on a permanent basis.

Generally, reassessments by the tax authorities may happen within the statute of limitations, which generally is six years after the year for which the tax return was filed (this results from a standard five years plus one year for the investigative actions performed by the tax authorities). In the case of tax evasion, the statute of limitation is extended to 10 years. If the Austrian tax authorities undertake investigative actions within the respective last year, the statute of limitation is extended by one year. In any case, the statute of limitation bars the tax authorities from any tax (re)assessments at the latest 10 years after the tax claim arises. 

What types of information may the tax authority request from taxpayers? Can the tax authority interview the taxpayer or the taxpayer’s employees? If so, are there any restrictions?

Tax authorities can request all types of information. The most intensive form of review will be a tax audit.

In a tax audit, taking place every few years, the taxpayer is obliged to cooperate with the tax authority. In particular, the taxpayer must clarify his or her standpoint, prove the content of their declarations and supply to the tax authorities all the information that is needed to ascertain the facts alleged that are relevant for taxation. This includes business books, accounts and records, financial information and copies of invoices or transaction documents and the information necessary to understand the records.

The tax authority can also interview third parties, including the taxpayer’s employees.

The voluntary system of ‘horizontal monitoring’, which entered into force on 1 January 2019 for large enterprises, involves an additional obligation to cooperate with the tax office on an ongoing basis for enterprises that have opted to participate.

What actions may the tax authority take if the taxpayer does not provide the required information?

During a review or a tax audit, an unjustified refusal to answer an information or document request from the tax authority constitutes a violation of the taxpayer’s obligation to cooperate with the tax authority. In such cases, the tax authority has a right to assess the tax based on its justified estimation, applying certain rules as laid down in law and in interpretation by the courts. This assessment cannot be appealed unless the estimation has been wrongfully made.

There is no possibility of conducting compulsory measures (eg, house search or seizures) in the ordinary fiscal audit procedure. By contrast, in a criminal tax audit, the tax authorities may investigate documents on the premises or in the home of the taxpayer and seize what is relevant for the case, unless these are excluded from seizure (eg, because of attorney–client privilege).

How may the tax authority collect overdue tax payments following a tax review?

Enforcement by the tax authorities is possible as soon as a title for execution is given, which is an excerpt of the arrears on the taxpayer’s tax account. The tax office may itself perform execution on assets (except immovable assets), receivables and other property rights. Movables belonging to the debtor may be seized and sold at auction. Monetary claims are executed by preventing the debtor from making any payments to his or her creditors. The tax office requires court assistance for the execution of immovable assets.

How are penalties calculated?

If a tax return is not filed on time, the tax office can impose a late filing charge. The amount of the late filing charge is at the discretion of the Austrian tax authority, but must not exceed 10 per cent of the assessed tax.

If a tax amount is not paid when due, the tax authority can assess a late payment charge, which is usually the case when VAT or withholding taxes are levied ex-post a tax audit. The late payment charge is always 2 per cent of the amount of tax due, increased by an additional 1 per cent three months after the initial imposition of the late payment penalty and another 1 per cent (to a total interest of 4 per cent) after a further three months have elapsed. No further increases are possible.

If a difference arises between Austrian income tax or corporate income tax prepayments and the assessed tax, such difference bears interest beginning on 1 October of the year following which the tax arises until such time that the difference amount is actually paid. This situation may arise also as a result of ex-post tax audits. The interest rate is the base interest rate plus 2 percentage points (currently resulting in an interest rate of approximately 1.38 per cent).

Additionally, the tax authorities may impose enforcement charges to enforce certain actions of taxpayers (eg, to file a tax return), which may amount to up to €5,000.

What defences are available if penalties are imposed?

Both the late filing penalty and the late payment penalty are administrative acts against which an appeal is possible. If, however, the underlying tax is appealed against, then no separate appeal is necessary against the late payment penalty.

In what circumstances may the tax authority impose penalties?

If a tax return is not filed on time, the tax office can impose a late filing penalty. If a tax amount is not paid when due, the tax office can assess a late payment penalty. Additionally, the tax office may impose fines to enforce certain actions of taxpayers (eg, to file a tax return).

Can criminal consequences arise as a result of tax non-compliance? Are these different for different types of taxpayers?

The taxpayer must notify the tax office and disclose to the tax office truthfully all information relevant for matters of his or her taxation. If a deliberate breach of this obligation leads to a reduction in taxes, criminal tax evasion occurs, for example, in case of deliberately wrong tax returns.

Criminal tax evasion is punishable with a fine of up to twice the reduced tax amount or up to two years’ imprisonment. In the case of qualified forms of tax evasion (eg, use of falsified documents or fictitious structures), up to 10 years’ imprisonment is possible. In other cases, the punishment is up to five years (eg, in the case of commercial tax evasion, which occurs if the taxpayer has intentionally evaded taxes in a criminal manner for several (ie, more than two) years; or for tax evasion as a gang). If the tax evasion is committed with gross negligence, it is considered a tax offence that can be punished with a monetary fine up the amount of the evaded tax.

The Austrian Fiscal Criminal Act applies to individuals and – according to the Association Responsibilities Act – to legal entities if a decision-maker or an employee commits the act for the benefit of the legal entity and duties that affect the legal entity are violated; in the case of ordinary employees only, this applies if the decision-makers have violated duties of supervision. This means that the legal entities are also subject to large fines.

What is the recent enforcement record of the authorities?

There is no information available.