Actions before the end of 2021 - For entrepreneurs

The approaching end of the year should once again be used as an opportunity to conduct a tax review. There are regular ways to legally save taxes or create the conditions for doing so through targeted measures. The announced eco-social tax reform plays a certain role in some areas, but most of the measures are effective regardless of this.

Apply for group taxation

In the case of capital companies, the formation of a corporate group can create the opportunity to offset the profits and losses of the companies involved. The prerequisites are financial connection (capital contribution of more than 50% % and majority of voting rights) since the beginning of the fiscal year, as well as a group application submitted and carefully signed with the tax authorities. For all capital companies that have a calendar year as a fiscal year (i.e., balance sheet date 31.12.), the group application must be submitted by no later than 31.12.2021. The same applies to inclusion in an existing tax group (e.g., because a new share was acquired on 1.1.2021).

Research funding - research premium

The research grant of 14 % is designed as a tax credit and therefore applies both in years of profit and loss. Furthermore, research expenses are tax-deductible regardless of whether the research grant is used. The research expenses relevant to the grant can include personnel and material costs for R&D activities, general costs, financing costs, and investments directly related to research and development (including the purchase of land). The research grant is not capped for the self-research (this must be carried out domestically). In order to claim the research grant, a positive FFG evaluation report (required via FinanzOnline) must be submitted. In contrast, the basis for calculating the award amount for commissioned research – again, a prerequisite is that it is an in-house contractor – is limited to 1,000,000 € for the client. The submission of an FFG evaluation report is not required for commissioned research.

Tax-free allowance

The profit exemption is available to all natural persons regardless of the method of determining the profit and amounts to up to 13 % % of the profit. For any taxpayer with a profit of up to €30,000, a basic exemption of 13% is % available without proof; corresponding investments are required to claim a higher exemption amount. Beneficiary investments generally include expendable physical assets, housing loans, or other securities such as federal bonds, bank and industrial debt securities, or certain investment and real estate funds (provided that they are also suitable for covering pension reserves). The period of use or retention is 4 years in each case. If securities dedicated to the operation are sold before the expiration of 4 years, replacement can be obtained through real investments, or in the case of early redemption, a securities replacement purchase is possible within 2 months. When claiming a business expenses allowance, only the basic exemption amount is available (this also applies to the new allowance for small entrepreneurs). The profit exemption also reduces the GSVG assessment base and thus, in addition to the tax burden, also the social security burden. The profit exemption is reduced for profits above €175,000 and amounts between €175,000 and €350,000 to €7 %, between €350,000 and €580,000 to only €4.5 %, and for the remaining part of the profits exceeding this amount, the exemption amount is entirely deducted. The exemption amount therefore amounts to a maximum of €45,350. The ecological and social tax reform aims to % increase the tax allowance for profit to 15 in the future.

Advance payments (half-year depreciation) and timing of payment/receipt for income and expenditure calculation software

For investments made after June 30, 2021, half of the annual AfA can be deducted regardless of the time of purchase in the second half of the year. Therefore, deferring investments until December 2021 at the latest can provide tax benefits. Low-value goods (max. 800 €) can be fully deducted immediately. E-A-calculators can, in principle, achieve a temporary shift in the tax liability by utilizing the inflow-drain principle. For investments made since July 1, 2020, a degressive AfA of 30 % can be claimed in addition to the linear AfA. This percentage is to be applied to the respective book value (residual value). However, investments in buildings, motor vehicles, company assets, intangible or used business assets, and assets related to fossil fuels are excluded from this, as a rule, accelerated depreciation. The tax reform aims to increase the threshold for low-value business assets to €1,000 and introduce a new investment allowance for ecological investments. Therefore, the development of the tax reform should be monitored in the coming weeks, as it may even be possible to shift ecological investments to the next year in a tax-wise manner.

However, for expenses listed in § 19(3) of the EStG (e.g., consulting, rental, sales, administrative, and interest costs etc.), only a one-year advance payment is tax-deductible! Regularly recurring income or expenses that are due at the end of the year are to be attributed to the calendar year to which they economically belong if they are paid within 15 days before or after 31 December. So-called "outstanding receivables" which are paid later only at the creditor's request are, however, considered to have already been received (in the old year).

Accelerated depreciation on buildings

For buildings acquired or manufactured after June 30, 2020, an accelerated AfA applies. In the first year, the AfA from the acquisition or production costs is three times the percentage normally applied (7.5 % in the operational area and 4.5 in % the non-operational area); in the following year, it is twice that (5 or % 3). % Starting from the second year, the calculation of the AfA amounts to 2.5 in the % operational area or 1.5 % for rental and leasing. The half-year depreciation rule does not apply, so even when purchasing, manufacturing, or investing in the second half of the year (2021), the full annual depreciation amount becomes expense-effective.

Replacement acquisitions on capital gains from assets

Natural persons can defer immediate taxation of capital gains on business assets held in fixed assets for at least seven years by (partially) transferring them to the acquisition or production costs of new investments (tax deferral effect).

Extension of the grant scheme (COVID-19 funding)

All companies that have suffered sales losses of at least 30 % as a result of the Corona crisis between 16 September 2020 and 30 June 2021 are eligible. Depending on the size of the company, 70 % to 90 of % the losses will be covered. Applications can be submitted for a maximum of ten consecutive periods of observation and must be submitted by no later than 31 December 2021 (application under the second tranche).

Extension of the deductible for uncovered fixed costs (COVID-19 funding)

In effect, there is more time available for applications for the loss-sharing adjustment for uncovered fixed costs. Eligible companies are those that have experienced a loss of sales of at least 50 % between 1 July 2021 and 31 December 2021. Applications for the first tranche (for a payment of 70 % of the requested loss-sharing adjustment) can still be submitted by 31 December 2021. The application deadline for the second tranche (starting in January 2022) is 30 June 2022. Under this second tranche, the entire loss-sharing adjustment can also be applied for.

Compliance with the turnover threshold for small businesses

This sales tax exemption (without VAT deduction) is only possible for an annual net turnover of up to €35,000. Since January 1st, 2017, certain tax-free revenues (e.g., from medical activities or as a supervisory board member) are no longer to be taken into account for the small business threshold. The determining factor for the small business exemption is that the company is operated domestically. Entrepreneurs who risk exceeding this limit in 2021 should – if possible – postpone the conclusion of the service provision to 2022. Simply postponing the payment of the invoice is not sufficient to comply with the small business threshold.

GSVG exemption

Small businesses (annual turnover under 35,000 €, income under 5,710.32 €) can apply for a GSVG exemption for 2021 until December 31, 2021. Eligible are young entrepreneurs (max. 12 months GSVG obligation in the last 5 years), persons over 60 (regular pension age) or over 57 years if the aforementioned limits have not been exceeded in the last 5 years. The exemption can also be applied for while receiving childcare allowance or when participating in partial insurance during child rearing. A monthly limit of 475.86 € applies in this regard, or a monthly turnover of 2,916.67 € (on average).

Prepayment of GSVG contributions

In income and expenditure calculators, a prepayment of GSVG contributions is recognised if its amount corresponds to the estimated back payment for the relevant year. If you expect a back payment, you can reduce or smooth your profit by making a voluntary prepayment, thereby potentially avoiding disadvantageous progression leaps.

Retention obligations

As of December 31, 2014, the seven-year retention period for business documents for the year 2014 will generally end. Documents that are relevant to an ongoing tax or other regulatory/judicial procedure must also be retained. Documents for real estate in the case of withholding tax are required to be retained for 12 years. If real estate is not used exclusively for business purposes and a withholding tax has been deducted from the non-business portion, the retention period is extended to 22 years under certain conditions. The retention period for documents related to real estate also extends to 22 years if rental for residential purposes or entrepreneurial use began after April 1, 2012. Under no circumstances should documents that serve as evidence, e.g. in product liability, property, inventory, and employment contract law, be destroyed.

Deductibility of donations

Donations from the operating assets to certain research institutions and educational institutions serving adult education, as well as universities, may be up to a maximum amount of 10 of % the profit generated by the business. In addition, and without any limit in terms of amount, monetary and in-kind donations related to disaster relief can also be claimed as operating expenses, provided that they serve the purpose of promoting the cause. Donations to charitable causes, animal welfare, and voluntary fire departments are also eligible for deduction as operating expenses. It is sometimes essential that the organization receiving the donations or the donation collecting association appears on the BMF list, and that the donation was made in 2021. It is not possible to double-count a specific donation as business expenses and as a special expense. It is also important to note that business and private donations combined must not exceed a maximum of 10 % of the total amount of income.

Securities cover for pension provisions

To avoid tax penalties, securities with a nominal value of at least 50 % of the tax pension savings amount declared at the end of the previous fiscal year must be present in the assets by the end of the fiscal year. Therefore, it should be checked whether there is sufficient coverage before the end of the year.

Energy levy refund

Applications for the 2016 calendar year must be submitted by no later than December 31, 2021.

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