Tax tips at the end of the year for entrepreneurs

This year there are again some special features to be considered for investments still planned: declining balance depreciation, accelerated depreciation for buildings and investment-related profit allowance.

1.1 Degressive depreciation
For after the 30.6.2020 acquired or manufactured assets can be depreciated with an unchangeable percentage of up to 30% of the respective (residual) book value (=degressive depreciation). If starting in the second half of the year, they are entitled to a half-yearly allowance. Excluded are:

• Buildings and other assets subject to special depreciation rules,
• Cars with CO2 emission values of more than 0 g/km,
• incorporeal economic goods that are not to be assigned to the areas of digitalization, greening and health/life science,
• used assets,
• Installations for the extraction, transport, storage or use of fossil fuels.

The higher depreciation at the beginning of the useful life leads to liquidity advantages for long-lived assets, since with the maximum rate of 30%, 51% is already depreciated after two years and around 66% after three years. A one-time change from declining balance to straight-line depreciation is possible and will make sense if the straight-line depreciation is higher than the declining balance after a few years.

CONSULTATIO-TIP: The declining balance depreciation can be used up to 31.12.2022 can be selected regardless of company law. For as of 1.1.Fixed assets purchased or manufactured in 2023 must then be returned to the same depreciation method for tax purposes as in the annual financial statements under company law.

1.2 Accelerated depreciation for the acquisition or production of buildings
For buildings constructed after the 30. June 2020 have been purchased or manufactured, accelerated depreciation is provided for. The previously valid depreciation percentage of buildings without proof of useful life is 2.5% or 1.5% for buildings left for residential purposes. In the year in which depreciation is to be taken into account for the first time, a maximum of three times the maximum rate previously permitted (i.e. 7.5% or 4.5%) can be written off, and in the following year a maximum of twice the maximum rate (i.e. 5% or 3%) can be written off. As of the second following year, depreciation is again assessed at the normal rates. The half-year depreciation rule does not apply, so that the full annual depreciation amount is expensed even in the case of acquisition or production in the second half of the year.

Attention: In the case of rental houses built before 1915, a maximum depreciation rate of 2% can be applied even without an expert opinion. This preferential depreciation rate cannot be used in combination with accelerated depreciation. If a long-term lease is sought, the entire depreciation period must be considered. Accelerated depreciation results in a taxable useful life of 63.67 years, while special depreciation for old rental buildings results in a taxable useful life of 50 years. This difference of 13.67 years cannot be compensated by the initially higher accelerated depreciation. A present value analysis shows that already after the 11. year the preferential depreciation rate of 2% of accelerated depreciation is to be preferred.

1.3 Semi-annual depreciation, GWG and hidden reserves

• Half-yearly depreciation: If investments are still made this year and the acquired asset is still subject to the 31. December 2022, the half-yearly depreciation is due.
• GWG: Investments with acquisition costs of up to EUR 800 (excluding VAT for input tax deduction) can be immediately deducted as low-value assets (GWG). The GWG limit will be reduced with effect from 1.1.2023 to EUR 1.000 in 2023. It is therefore possible that a deferral of purchases that lie between EUR 801 and EUR 999 can result in a sustained tax advantage. This must be examined in the individual case, since the "expenditure shift" is opposed by a reduction of the progression tariff of the income tax (incl. Valorisierung of the border amounts) and/or the lowering of the corporation tax starting from the year 2023.
• Under certain conditions, hidden reserves from the sale of fixed assets that have been held as business assets for at least seven years (15 years in the case of real estate) can be transferred to replacement purchases or allocated to a transfer reserve in the case of natural persons.

2 DISPOSITION OF INCOME / REVENUE AND EXPENSES / EXPENDITURES

Balance sheet preparers have some leeway by bringing forward expenses and deferring income. Note also that in the case of semi-finished works and products, there is no realization of profits.
Income-expenditure calculators can also control their income by bringing forward expenditures (e.g., advance payment on purchases of goods, rents in 2023 or GSVG contributions for the year 2022) and deferring income. It should be noted that regularly recurring income and expenses paid 15 days before or after year-end should be attributed to the year to which they economically belong.
These dispositions are particularly interesting in 2022, as the following sustainable tax relief will be implemented in 2023:

• Reduction of 2. income tax rate step from 32.5% to 30% and the 3. Tax bracket from 42% to 41
• Abolition of the "cold progression" (valorization of the tariff limits)
• Reduction of the corporate income tax from 25% to 24%

CONSULTATIO TIP: These tax cuts generally mean that expenses (if offsettable against profits) should be utilized in 2022, or income in 2023 if possible. An exception to this may be the investment in climate-friendly assets, since for this from 1.1.2023 is entitled to an investment allowance.

3 TAX-OPTIMAL LOSS UTILIZATION

3.1 Offset of losses carried forward
Losses that can be carried forward can only be offset against up to 75% of the total amount of income for corporate income tax purposes. Among others, liquidation and reorganization gains as well as gains from the sale of (partial) businesses and co-entrepreneurial shares are exempt from this 25% minimum taxation. For income tax, losses carried forward must be offset 100% against total income. This regulation leads to disadvantages in those cases in which the losses that can be carried forward are approximately as high as the total amount of income, since the advantages of the low tax brackets cannot be used for income tax and also special expenses and extraordinary burdens are not taxed.

CONSULTATIO TIP: A revenue accountant's loss can also be carried forward indefinitely.

3.2 Loss utilization for corporations through group taxation
Losses incurred within a group of companies by individual domestic or foreign corporations can be utilized in a tax-optimized manner within the framework of group taxation. In order to establish a tax group of companies, in addition to the financial connection required from the beginning of the fiscal year (capital participation of more than 50% and majority of voting rights), it is necessary to file a group application with the competent tax office.

This must be submitted at the latest before the balance sheet date (of the company to be included) of the year for which it is to be effective for the first time. Corporations, which are based on the 31.12.2022 balance and which already since beginning of their financial year (as a rule since 1.1.2022) are financially linked in the sense of the above, can therefore be covered by submitting a group application by 31.12.2022 nor form a tax group of companies for the entire year 2022 or be included in an existing group. You can thus still deduct losses generated in 2022 at individual group companies from the 2022 profits of other group companies for tax purposes. Also note that the 75% loss offset limit does not apply to pre-group losses of group members that are to be offset against the group member's own winnings.

Due to the inclusion of foreign subsidiaries, foreign losses – in accordance with the shareholdings – can also be processed in Austria. However, only foreign capital companies from an EU country or a third country with which there is comprehensive administrative assistance can be included in the group of companies. Losses of foreign group members can be taken into account in the year of loss imputation at most to the extent of 75% of the total domestic group income. The remaining 25% goes to the loss carry forward of the group carrier.

CONSULTATIO TIP: Group taxation can also be used for the tax-optimized utilization of financing costs in connection with the acquisition of shares in a corporation, unless the shares were acquired by a group company or a shareholder with a controlling influence.

3.3 Losses for capitalistic co-entrepreneurs can only be carried forward
In the case of natural persons, losses are not compensable as capitalistic co-entrepreneurs, insofar as this results in a negative tax capital account. Such losses can be carried forward as waiting losses for future profits (or deposits) from the same source of income.

4 PROFIT ALLOWANCE / INVESTMENT ALLOWANCE

4.1. Profit allowance
As compensation for the preferential taxation of the 13./14. Salary taxpayers are entitled to the profit allowance (GFB) for all individuals subject to income tax, regardless of the method of profit determination. GFB from the year 2022 is up to 15% of the profit, max EUR 45.950 pa.

A basic allowance of 15% of up to EUR 30.000 profit is automatically entitled to taxpayers (15% of EUR 30.000 = EUR 4.500). For profits over EUR 30.000 is entitled to a GFB (investment-related) in excess of the basic allowance only if the taxpayer has made certain investments in the year in question. Unused, depreciable tangible assets with a useful life of at least four years are eligible for the investment allowance, such as machinery, office furniture and equipment, trucks, hardware and investments in buildings from the date of completion. Excluded are cars, software and used assets. Certain securities can also be used to claim an investment-related GFB. These are all bonds, as well as bond and real estate funds, which are permitted as cover securities for the pension provision.

These securities must be dedicated as fixed assets for at least four years from the date of acquisition. The easiest way is still to provide the investment coverage required for the investment-related GFB for profits over EUR 30.000 to be fulfilled by the purchase of the favored securities. Securities acquired for the GFB can be pledged at any time. In order to make the best use of the GFB, the expected annual taxable profit in 2022 should be estimated together with the tax advisor by about mid-December, and the expected taxable profit in excess of EUR 4.500 (= basic allowance!) the profit allowance is determined according to the above steps and securities are purchased in the corresponding amount. The securities must be deposited by 31.12.Be deposited in your securities account in 2022!

CONSULTATIO TIP: The GFB is also available for self-employed supplementary income (e.g. from a contract for work or a freelance service contract), remuneration of a self-employed shareholder-managing director or supervisory board and foundation board remuneration.
Note: When claiming a flat-rate operating expense allowance, only the basic allowance (15% of EUR 30.000 = EUR 4.500) at.

Note that in the event of a sale or termination of the business, the GFB must be taxed subsequently if the minimum retention period of 4 years is not met. In case of termination of the business due to force majeure (e.g. death of the taxpayer without transfer or continuation of the business as part of the succession) or as a result of official intervention, there is no subsequent taxation.

4.2 Investment allowance
For after 31.12.Fixed assets acquired or manufactured in 2022 can be claimed an investment allowance (IFB) Therefore, when making investments around the turn of the year, it is important to check very carefully at which time the investment is most favorable.

The investment allowance leads to an additional depreciation of 10% (15% for climate-friendly investments) of the acquisition costs of the fixed assets (for a maximum of EUR 1 million acquisition costs pa). The prerequisite for claiming the investment allowance is that the corresponding assets have a useful life of at least four years and are assigned to a domestic business or company. are attributable to a domestic permanent establishment. The following assets are excluded from the investment allowance:

• Assets for which the investment-related profit allowance is claimed
• Assets for which a special form of depreciation is expressly provided for, except for motor vehicles with a CO2 emission value of 0 grams per kilometer
• Low-value assets
• Incorporeal assets (except from digitalization, greening and health/life science)
• Used assets
• Installations used for the extraction, transport or storage of fossil fuels

CONSULTATIO TIP: The investment allowance is an option that must be exercised in the year of acquisition or manufacture with the tax return. Since the investment allowance cannot be claimed at the same time as the investment-related profit allowance, it is advisable to make a benefit comparison for each asset. Therefore, it should already be considered in 2022 in the context of the dispositions of income/expenses or investment decisions whether a postponement to 2023 could be advantageous.

5 WHAT YOU SHOULD BEAR IN MIND WHEN PLANNING YOUR TAXES FOR 2022

5.1 Long-term provisions
Long-term provisions must be discounted at a fixed rate of 3.5% over the expected life of the asset.

5.2 Manager salaries
The tax deductibility of managerial compensation is limited to EUR 500.000 gross per person and fiscal year capped. However, this provision does not only apply to manager salaries, but also to all genuine employees and comparable organizationally integrated persons (including seconded persons), irrespective of whether they are actively engaged or have performed work or services in the past. Voluntary severance payments and settlements are only deductible as business expenses to the extent that they are subject to favorable taxation at 6% for the recipient pursuant to § 67 (6) EStG.

5.3 Lump-sum bad debt allowances and lump-sum provisions
Since fiscal year 2021, lump-sum bad debt allowances and the creation of lump-sum provisions are permitted for tax purposes. In both cases, the company-law approach is decisive for the formation. However, the tax allowance for lump-sum accruals is limited to accruals for other uncertain liabilities. Flat-rate provisions for impending losses and provisions for expenses remain excluded for tax purposes.
A lump-sum allowance for doubtful accounts may also be recognized for receivables that were already recognized prior to 1.1.2021 have arisen. Lump-sum provisions may also be formed if the reason for the initial formation already existed prior to 1.1.2021 is. In such cases, however, the value adjustment or provision amounts must be distributed over the year 2021 and evenly over the following four fiscal years.

6 DONATIONS FROM BUSINESS ASSETS

Donations from business assets to certain beneficiary institutions mentioned in the law are generally tax deductible up to a maximum of 10% of the profit of the current fiscal year. The upper limit is the profit before taking into account the profit allowance. In order for such donations to still be deductible in 2022, they must be made no later than 31.12.2022 (for further details, please refer to the comments on "Donations as special expenses").
In addition to these donations, donations in cash and in kind in connection with assistance in the event of (national and international) disasters (in particular flood, landslide, mudslide and avalanche damage) are also deductible as business expenses, without limit as to amount! Warlike events, terrorist attacks or other humanitarian catastrophes (e.g. epidemics, famines, refugee catastrophes) also qualify as catastrophes under the Austrian Income Tax Act (EStG), which has unfortunately become more important due to the war in Ukraine. The prerequisite is that they are marketed accordingly as advertising (e.g. by mentioning them on the homepage or in advertising brochures of the company).

Note: In addition to the usual monetary donation, a promotional "donation of housing" is also possible, so that the temporary, free of charge (or low-priced) transfer of real estate to refugees from Ukraine by domestic corporations can be assumed to be a business reason for this donation.

CONSULTATIO TIP: Sponsorship contributions to various non-profit, cultural, sports and similar institutions (opera, museums, sports clubs, etc) are also tax-deductible if they are linked to an appropriate consideration in the form of advertising services. Such payments are then not donations, but genuine advertising expenses.

7 RESEARCH PREMIUM

A research premium of 14% can be applied for research expenses (research expenditures) from in-house research. The premium-subsidized research expenses (expenditures) for in-house research are not capped in terms of amount. Premiums for contract research, on the other hand, can only be claimed for research expenditures (expenses) up to a maximum of EUR 1 million per fiscal year. In general, expenses (expenditures) "for research and experimental development" (i.e. basic research as well as applied and experimental research in the production and service sector, e.g. also expenses or expenditures for certain software developments and fundamentally new marketing methods) are supported. The research must be done in a domestic plant or facility.

CONSULTATIO-TIP: Remember that from this year for the first time you can also take into account a fictitious entrepreneur's salary (as sole proprietor, co-entrepreneur and unpaid partner of a corporation) for an activity demonstrably carried out in research and experimental development in the research expenses. As a fictitious entrepreneur's wage, EUR 45 per hour for a maximum of 1.720 hours (= EUR 77.400 per person and WY) can be applied.

Note: For the 2022 premium application, a so-called annual report from the Research Promotion Agency (FFG) must be obtained electronically after the end of the business year. In order to obtain greater certainty about the tax recognition of research expenses, it is possible to apply in advance to the tax office for a confirmation of the favored research for a specific research project. For this purpose, it is necessary to obtain a so-called project appraisal from the FFG.

8 ADVANTAGES OF ELECTROMOBILITY

Investments in electromobility still eligible for tax allowance in 2022. Despite the comparatively lower subsidies compared to the previous year, electric vehicles are preferable to internal combustion engines in terms of taxation. Electric vehicles (CO2 emission value of 0 g/km) can claim the following advantages over conventional vehicles powered by combustion engines:

• Input tax deductibility: However, the full input tax deduction is only available for acquisition costs of the car or motorcycle up to a maximum of EUR 40.000 gross to. Between EUR 40.000 and EUR 80.000 gross there is an aliquot input tax deduction. If the electric car costs more than EUR 80.000 gross, there is no right to deduct input tax.
• Note: hybrid vehicles are not included in the benefits of pure electric cars.
• The running costs such as electricity costs and the costs for electricity delivery points are fully pre-tax deductible, regardless of the acquisition costs.
• E-mobility subsidy: In 2022, the purchase of electric cars for businesses will be subsidized with a total of EUR 2.000 funded (EUR 1.000 to apply and EUR 1.000 directly at the dealer). For private individuals, the total subsidy is still EUR 5.000. Hybrid vehicles and electric bikes are also subsidized, but to a lesser extent. Furthermore, the e-charging infrastructure (e.g. wallbox, intelligent charging cables) is also subsidized.
• Attention: The e-mobility subsidy is only granted if the gross list price (base model without special equipment) of the passenger car is EUR 60.000 is not exceeded.
• Degressive depreciation: Electric vehicles with an emission value of 0 g/km enjoy the advantages of degressive depreciation (see point 1.1)
• no NoVA: since NoVA is calculated based on CO2 emissions, electric vehicles with an emission value of 0 g/km are completely exempt from it.
• no benefit in kind: for employees who are allowed to use the employer-owned electric car privately, no benefit in kind is due.
• No motor-related insurance tax: pure electric vehicles are completely exempt from motor-related insurance tax.

CONSULTATIO-TIP: For from 1.1.An investment allowance can be claimed for electric vehicles purchased in 2023. It is therefore worth considering postponing the purchase of an electric vehicle until 2023 in order to receive the increased investment allowance (15%).

9 SECURITIES COVERAGE FOR PENSION PROVISION

At the end of each fiscal year, securities with a nominal value of at least 50% of the taxable pension provision amount reported at the end of the previous fiscal year must be held as business assets. Claims from a reinsurance policy can also be counted towards the coverage requirement. If the required securities coverage is even temporarily less than the required 50% of the provision, the profit must be increased by 30% of the securities coverage shortfall as a penalty (except to the extent that the provision is no longer recognized at the end of the year as a result of a decrease in pension entitlements or redeemed securities are replaced within 2 months).
Eligible securities are primarily bonds and bond funds issued in euros (whereby, in addition to bonds issued by Austrian debtors, bonds issued by debtors domiciled in an EU or EEA member state are also permissible), as well as domestic real estate funds and foreign open-end real estate funds domiciled in an EU or EEA member state. The securities must not be pledged.

10 TIPS FOR SMALL BUSINESS OWNERS

10.1 Small business in sales tax
Entrepreneurs with an annual net turnover of up to EUR 35.000 are small entrepreneurs for sales tax purposes and therefore exempt from sales tax. Depending on the applicable VAT rate, this corresponds to gross sales (incl. VAT) of EUR 38.500 (in the case of only 10% turnover, such as apartment rental) to EUR 42.000 (with only 20% sales). From the calculation of the small business limit are excluded certain tax-exempt sales, such as from medical practice or as a supervisory board member. Also exempt from the calculation of the small business limit are sales declared under the EU-OSS (OneStopShop – mail order business). If you use the small business rule, you may not be charged sales tax. Moreover, the input tax deduction for all expenses related to the sales is lost.

Small business owners who are exempt from sales tax and whose turnover is close to the small business limit should check in good time whether they exceed the turnover limit of net EUR 35.000 in the current year still to be exceeded. A one-time excess of 15% within 5 years is harmless. If the limit is exceeded, corrected invoices with VAT must still be issued in 2022 at the most for services to entrepreneurs. In the case of services to non-entrepreneurs, experience has shown that it is difficult to correct invoices, which is why the sales tax then owed must be deducted from the gross revenue amount.

In many cases, it may make sense to waive the tax exemption for small businesses (for example, in order to thereby enjoy the input tax deduction for expenses related to sales, e.g., investments). The waiver will be easier especially if the customers are entrepreneurs entitled to deduct input tax.

CONSULTATIO TIP: A small business owner can waive the application of the small business regulation in writing to the tax office until the sales tax assessment becomes final. However, the waiver binds the entrepreneur for five years!

10.2 Small business flat rate for income-expense accountants
If the sales of the business year 2022 are not more than EUR 35.000 from a self-employed or commercial activity, so the profit can be determined on a flat rate basis. However, income as a shareholder-managing director, supervisory board member and foundation board member are excluded. When determining profits, this involves a flat rate of 45% for operating expenses, or 20% for service businesses. In addition, only social security contributions, the workplace allowance and the 50% allowance for network cards for mass transportation used for business purposes can be deducted. The basic allowance of the profit allowance is also available.

CONSULTATIO-TIP: Since in the case of part-time income (e.g. lecturing activities, author fees) very often only low business expenses are incurred anyway, the use of the lump sum can become interesting.

11 "SMALL BUSINESS" GSVG EXEMPTION UP TO 31.12.APPLY IN 2022

Tradesmen and physicians (dentists) can make a statement by no later than 31.12.2022 retroactively for the current year apply for exemption from health and pension insurance under GSVG (doctors only pension insurance), if the taxable income in 2022 maximum EUR 5.830.20 and the annual turnover 2022 maximum EUR 35.000 from all entrepreneurial activities will be taken. Are eligible to apply

• Young entrepreneurs (maximum 12 months GSVG obligation in the last five years), who have the 57. Have not yet reached the age of majority.
• People who have reached the age of 60. Have reached the age of 18, as well as
• Men and women who have reached the 57. Age (but not the 60. The juvenile must have reached the age of 18), if they have not exceeded the relevant sales and income limits in the last five years.

The exemption can also be applied for while receiving childcare allowance or if partial insurance exists while raising children, if the monthly income does not exceed EUR 485.85 and the monthly turnover does not exceed EUR 2.916.67 amount.

CONSULTATIO-TIP: The application for 2022 must be submitted by 31 December at the latest.12.2022 to arrive at the SVS. If health insurance benefits have already been received in 2022, the exemption from KV contributions will not apply until the application is received.

12 WORKPLACE ALLOWANCE AND NETWORK CARD FOR SELF-EMPLOYED WORKERS

What was introduced for employees as a home office allowance in 2021 can now be claimed by self-employed persons as a workplace allowance starting in 2022. The workplace allowance is available for expenses arising from the (partial) business use of one's own home if no other space is available for the business activity. A distinction is made between the "large" and the "small" lump sum:

• EUR 1.200 per year is allowed if there is no other income from active employment of more than EUR 11.000 are achieved, for which another room is available outside the home.
• EUR 300 per year are entitled to, if the other active income more than EUR 11.000 amount. In addition, expenses for ergonomic furniture are deductible (also max EUR 300 per year).

As of this year, self-employed persons can also deduct 50% of the expenses for a weekly, monthly or annual ticket for means of mass transportation as a lump sum as business expenses, provided that these tickets are also used for business trips. The lump sum can also be taken into account in the basic lump sum or small business lump sum as an additional operating expense.

13 END OF STORAGE FOR 2015 DOCUMENTS

To the 31.12.In 2022, the 7-year retention requirement for 2015 books, records, vouchers, etc. expires. These can therefore be covered from 1.1.2023 to be destroyed. Please note, however, that documents must be kept if they are of importance in a pending appeal procedure (according to BAO) or for a pending judicial or official procedure (according to UGB) in which you are a party.
For properties that have been sold as of 1.4.Used for business purposes for the first time in 2012, a 20-year input tax adjustment period applies in the event of a change in circumstances that were the basis for the original input tax deduction. The retention period for records of such properties is 22 years.

Note: extended retention period of all documents, receipts and working time records related to:

• Short-time work: 10 years from the end of the year of the last payment of the total subsidy
• Investment premium: 10 years from the end of the calendar year of the last payment
• COFAG eligibility requirements: 7 years

CONSULTATIO TIP: Regardless of what the law says, as an individual you should keep all receipts related to property. In addition to the purchase contract, this includes above all the receipts for incidental acquisition costs (e.g. lawyer's and notary's fees, land transfer tax, appraisal costs) as well as for all investments made after the purchase. In fact, all these costs increase the actual acquisition costs when determining the capital gain and thus reduce the taxable gain.

Electronic archiving of all accounting records saves space. In this case, it must be ensured that the same content, complete and orderly reproduction is guaranteed at all times until the expiry of the statutory retention period.