Tax reliefs for research, development and education: an overview

The economic stimulus package decided in early 2002 and the recently passed flood disaster compensation law have created a confusing web of provisions in addition to the existing tax reliefs. The following attempts to systematically present the applicable forms of depreciation, tax-free allowances, and premiums. To make it easier to find the relevant legal provisions, the paragraphs of the Income Tax Act are cited.

1.) Depreciation

Building
– Up to 3 % for buildings directly used for business purposes at 80 %
– Up to 2.5 % for buildings used for banking or insurance business; however, if 80 % of the building is intended for customer traffic, the depreciation rate increases to 3 %
– Up to 2 % for buildings used for other business purposes
– 1.5 % for letting and leasing, without proof of useful life. If a shorter useful life is proven, a higher depreciation rate may be applied. For buildings constructed before 1915, the depreciation rate is 2 %.
:: Passenger car 12.5 % (excluding driving school vehicles and motor vehicles used for commercial passenger transport with a capacity of at least 80 %).
Company value The acquisition costs can be deducted over 15 years.
Residential building
– Maintenance costs are to be spread over 10 years upon application
– Maintenance costs are to be spread over 10 years
– Production costs are to be spread over 15 years
:: Investments
In accordance with Section 12, Paragraph 3 of the Corporate Tax Act (KStG), the partial value depreciation on
To spread over 7 years.

2.) Investment incentives

2.1. Temporary early depreciation § 10 a (3)
7% for acquisition and production costs up to a maximum of
€3.8 million relating to buildings for which depreciation is allowed at a rate of 3 %, for the period from 1 January 2002 to 31 December 2003.
2.2. Temporary early depreciation § 10 c
For disaster-related replacement purchases during the period from 1 June 2002 to 31 December 2003 (no upper limit): 12 % for buildings; 20 % for other assets
2.3. Limited-time special bonuses § 108 d Instead of the amortisation in advance with a fixed term as per point 2.2.
5 % of buildings
10 % relating to other assets
2.4. Temporary Investment Growth Premium § 108 e
10 % for increased capital expenditure (excluding buildings, motor vehicles and assets not used domestically) for the years 2002 and 2003. The average acquisition costs for the last three years must be compared with those for 2002 and 2003. This is not possible if points 2.2 or 2.3 are invoked.
2.5. Transfer of hidden reserves No change has occurred in this regard.

3.) Research

3.1. Allowances
3.1.1. General tax-free allowance § 4 (4) Z 4 Since the year 2000:
– 25 % for average research expenditure
– 35 % for increased research expenditure
3.1.2. Allowable deduction for experimental development § 4 (4) Z 4 a
– 10 % for 2002
– 15 % from 2003 onwards
3.2. Premium § 108 c (2) Z 1
– 3 % for 2002
– 5 % from 2003 onwards. The allowance may be claimed in lieu of the exemptions listed above.
3.3. Inventor's bonus for employees § 67 (7)
The tax-privileged annual sixth under this heading (6 % Payroll Tax) will increase by 15 % from 2003 onwards.

4. Education

4.1. Allowance § 4 (4) Z 8
9 % for off-the-job Training and further education from 2000 20 % from 2002
4.2. Premium § 108c(2)(2) 6 % for expenses in lieu of the allowance referred to in point 4.1.
4.3. Allowance § 4 (4) Z 10
20 % for internal Training and further education from 2003 onwards, subject to a limit of €2,000,– per calendar day.
4.4. Reskilling programmes From 2003 onwards, training and further education costs for activities in a new professional field are deductible as business expenses or income-related expenses, respectively, under § 4 (4) Z 7 and § 16 (1) Z 10.
4.5. Apprenticeship training
– Allowance § 124 b Z 31
€1,460,– (maximum of 3 times) from 2000
– Premium § 108 f
From 2002 onwards, in place of the tax-free allowance, €1,000,– per calendar year of the valid apprenticeship contract.
– Subsidy of social security contributions for apprentices
From 1 October 2002, in accordance with § 57a ASVG, the general contributions payable by the employer will now be paid by health insurance for a period of 2 years (previously 3 years).
With effect from 1 January 2003, the supplementary contribution to the employer's share of unemployment insurance will be abolished.

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