Suggestions and measures before the end of the year

Exemptions from inheritance tax in the Inheritance Tax Act

Temporary exemption for savings book gifts made during one's lifetime

The exemption in this regard, which has already been extended twice, is now likely to definitively end on 31 December 2003 to expire. It applies without limit for individuals in tax classes I to IV; for tax class V, there is an allowance of €100,000. Further explanations can be found in the Client Info May 2003. Anyone intending to reserve the right to revoke a gift should explicitly agree to this in the gift agreement, as otherwise a taxable gift made in return could be assumed. However, if a right of revocation exists, the element of intent to enrich is absent and therefore no gift has been made.

New indefinite exemptions for inheritances
- Capital assets, in so far as the income Special tax rate of 25 % fall. This involves foreign capital assets.
- Claims for pensions
The exemption is extended to individuals who have lived in a common-law partnership.
The exemptions listed above were reintroduced by the Budgetary Accompanying Law 2003.

New regulation of partial retirement

As a result of the deterioration of this regulation, contracts should be concluded with effect before 1 January 2004. In this case, men can go on partial retirement at 55 and women at 50, with the maximum duration of partial retirement being 6½ years.
From 1 January 2004 The maximum duration of partial retirement is reduced to 5 years; the starting age increases by half a year each year until 2012, reaching 59.5 and 54.5 years respectively; and full funding from the AMS is only available if a replacement worker who was previously unemployed is taken on. Without a new recruitment, the subsidy is reduced to 50 %. The block-time model no longer applies, unless an unemployed worker is recruited.

Investment reliefs up to 31 December 2003

:: Early repayment
Of the acquisition and production costs of Buildings Those eligible for a 3%ige depreciation allowance may claim up to €3.5 million 7%ige early depreciation can be claimed. For disaster-related replacements without a cap, buildings can be 12%ige for other economic assets 20%ige pre-existing depreciation may be claimed.

:: Special bonus
Instead of premature write-off in the case of disaster-related replacement acquisitions, for buildings, a 5%ige, in the case of other assets 10%ige Premium to be claimed.

Investment Growth Premium
For unused, depreciable tangible assets, excluding buildings, low-value assets and cars/estate cars, an 10%ige A premium may be claimed on the increase in investment over the last three years (2000 to 2002). The premium is tax-free and does not reduce the acquisition costs as a basis for depreciation. There is no minimum holding period, so the premium is definitively granted. Assets that are not used in a domestic permanent establishment and those that do not serve to generate business income (e.g. rental and leasing) are excluded. It can be claimed for light commercial vehicles and minibuses.

Securities cover as at 31 December 2003

:: For settlement provisions
From 2003 onwards, the funding requirement will be reduced by one-fifth each year until it is phased out completely in 2007. Consequently, at the end of 2003, the funding obligation will be reduced from 50 % to 40 % of the severance pay entitlements as at 31 December 2002.

Pension provisions
The cover obligation remains in full effect.

Retention obligations for books and records

:: Principle:
The 7-year retention period for books, records, receipts, and business documents generally ends on 31 December 2003 for these documents from 1996.

Exceptions:

• The documents relevant to pending tax appeal proceedings must be retained.
• Records and documents relating to properties are subject to a 12-year retention period due to potential input tax reversals. The planned extension of the period from 2004 to 22 years is now unlikely.
• If the documents relate to a pending legal or official proceeding, they must also be retained.

Tax burden shift for income and expenditure calculators

By using the inflow-outflow principle, a temporary relocation of the tax liability can usually be achieved. However, the following circumstances must be taken into account:

- Advance payments In accordance with § 19 (3) of the Income Tax Act (EStG) (e.g. consulting and intermediary costs, rent, etc.), these are to be allocated to the period of advance payment, provided they do not only relate to the current and following calendar year. Otherwise, they are to be allocated to the relevant period.

- Regularly recurring revenues or expenses that fall due at the turn of the year are to be allocated to the calendar year to which they economically relate, if they fall within 15 days is to be achieved. With regard to the distinction between the reference year and the year of maturity, please refer to the examples given in point 4632 of the EStR 2000.

- Outstanding claim
The Supreme Administrative Court (VwGH) ruled on 24 September 2002, 2000/14/0132, as follows: If the payment of a due claim is deferred at the creditor's request, even though the debtor is willing and able to pay, the amount is considered to have been received. This breaks the principle of pure monetary movement in the accrual principle.

Tax-efficient payments for 2003

The following expenses must still be incurred in the year 2003 in order to be tax-deductible.

:: Tax and contribution-free benefits to employees per year

Employee share ownership trust

• Donations from the founder to the foundation do not constitute taxable employment income for the purposes of Section 26, point 7 of the Income Tax Act (EStG).
• Grants from the foundation to employees are exempt from income tax up to €1,460 per annum, but are subject to 25 % in social security contributions. Any amounts in excess of this are subject to income tax.
• Option to participate €36,400
• Interest relief on loans and advances 4.5 % up to an allowance of €7,300

Special editions

In unlimited height
Purchases of pension insurance months, voluntary continuation of pension insurance, and tax advisory costs, provided they do not constitute business expenses. Due to the amendment decree of 22 July 2003, Rz 4283 EStR 2000 was amended to the effect that tax advisory costs for taxpayers on a flat-rate basis are not covered by the lump sum (business expenses or income-related expenses), but represent special expenses.

To a limited extent (special budget items)
Up to €2,920 or €5,840 for single earners or single parents, and an increase of €1,460 each per year from 3 children, these expenses will only reduce tax by one quarter. From an annual income of €36,400, the Bypass rule a reduction of the tax credit until it is completely eliminated from an income of €50,900. This includes, in particular, contributions to personal insurance and expenses for housing creation.

Maximum amounts without tapering
In addition to the church contribution to a maximum of €75 per year, there is a new maximum amount for connection fees of up to €50, and a monthly basic fee for broadband internet connections (e.g. ADSL or Chello) of up to €40. This applies for a limited period from 30 April 2003 until 31 December 2004.

Exceptional burden

Without excess
Expenses relating to disaster-related damage and additional expenses for persons in respect of whom an increased family allowance is granted, insofar as these exceed the care-related cash benefit (care allowance, etc.). A similar provision applies to additional expenses arising from disability, which is deemed to exist where the level of gainful employment is at least 25 %. In this case, however, there is no reduction by the amount of care-related cash benefits or by the allowances under Section 35(3) of the Income Tax Act (EStG).

With excess
This includes, for example, costs of illness, whereby flat rates of €42 to €70 per month are set for certain medically prescribed diets without proof of actual costs.

Running costs
These are covered by family allowance, the sole earner's, child's or maintenance allowance. These costs are only deductible to the extent that they would represent an extraordinary burden for the recipient of the maintenance.

Vocational training for children
These are covered by the flat-rate amount of €110 per month if there are no suitable training opportunities in the catchment area of the place of residence. The flat-rate amount is also payable without a deductible during school and university holidays.

:: Premium-linked pension plan
The subsidised private pension plan, first applicable for 2003, with a premium-subsidised amount of €1,851 per year, leads to a Premium from £176 per year.
As a result of the reduction in the building society bonus from 4 % to 3.5 %, the interest rate will fall by the same amount, from the previous 9.5 to 9 %, with effect from 2004. Due to the increase in the amount eligible for the subsidy from €1,851 to €1,900, the subsidy for 2004 is expected to amount to €171.

:: Donations to specific institutions
Research, science, private museums and umbrella organisations of disability sports organisations (according to a list published by the BMF)
As Business expense up to 10 % of the previous year’s profit,
also Special edition up to 10 % of the previous year’s income.
The tax relief must be noted on the receipt.

:: Monetary and in-kind donations in disaster cases
Provided they are not counted towards the 10 % profit limit, such donations are deductible as business expenses if they have a promotional effect.

Sponsorship payments
According to Tz 1643 EStR 2000, business expenses are recognised when they are based almost exclusively on economic grounds and can be considered as adequate consideration for advertising services, provided that a broad public advertising effect is achieved. Typically, this includes sponsored athletes, artists, cultural events, etc. Sponsorship payments to political parties are not tax-deductible, even if an advertising effect is associated with them. Sponsorship can take the form of money, goods, services, or expertise.

Training, further education and retraining measures
For the first time in 2003, retraining measures are also deductible as business expenses or income-related expenses.

Tax-advantaged retained earnings from 2004
Looking ahead, anyone intending to claim this benefit next year should take the following measures this year:
To keep withdrawals as low as possible in 2004, in the year 2003 one Maximum withdrawal This is to be done to create reserves in private assets. However, the withdrawal should not exceed the 2003 profit.
Those who manage not to withdraw from their current profit up to €100,000 in the year 2004 will benefit from half the tax rate, provided they are not freelancers, because this benefit is only for natural persons and Partnerships with income from Agriculture and forestry as well Commercial enterprise Gold.

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