Measures before the end of 2022 - For entrepreneurs

Despite or precisely because of the currently turbulent times, this upcoming year-end should once again be taken as an opportunity to conduct a tax check. After all, there are regular ways to legally save taxes through targeted measures or to create the prerequisites for doing so. It should also be taken into account that the corporate tax rate will % drop to 24 in 2023 and that the income tax in the 3rd stage (from €32,075 to €62,080, taking into account the abolition of the cold progression for 2023) will also % see a reduction to 40 (% currently 42) in July 2023.

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 record date 31.12.), the group application must be submitted by no later than 31.12.2022. The same applies to being included in an existing tax group (e.g., because a new shareholding was acquired on 1.1.2022).

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 expenses, financing costs, and investments directly related to research and development (including the purchase of land). The research grant is not capped for in-house research (which must be conducted domestically). The submission of a positive FFG evaluation (via FinanzOnline) is required to claim the research grant. In contrast, the assessment basis for commissioned research – which again requires that it is an in-house contractor – is limited to €1,000,000 for the contracting party. The submission of an FFG evaluation is not required for commissioned research. What is new is that, as part of the assessment basis for self-employed research, a fictitious entrepreneur salary can now be set (applicable for applications submitted after June 30, 2022). This amounts to €45 per hour of activity spent on research and development, up to a maximum of €77,400 per person.

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 15% of the profit since 2022. For a profit of up to €30,000, a basic exemption of 15% is % available to every taxpayer without proof; corresponding investments are required to claim a higher exemption amount. Beneficiary investments generally include depreciable 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 expiry 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 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 contribution burden. The profit exemption is reduced by 13% for profits from €30,000 to €175,000, and is between €175,000 and €350,000 €7 %, between €350,000 and €580,000 only €4.5 %, and for the remaining part of the profits the exemption amount is completely waived. Therefore, the maximum exemption amount is €45,950.

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

For investments made after June 30, 2022, half of the annual AfA can be deducted regardless of the purchase date in the second half of the year. Therefore, deferring investments to no later than December 2022 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 obligation by utilizing the inflow-drain principle. For investments made since July 1, 2020, a degressive AfA in the amount of 30 % can be claimed in addition to the linear AfA. This percentage must be applied to the respective book value (residual value). However, investments in buildings, motor vehicles, company assets, intangible or used business assets, as well as assets related to fossil energy sources are excluded from this, which is usually a faster depreciation process.

From 2023, the limit for low-value economic goods will be raised to €1,000, and a new investment exemption of 10 % or even 15 for ecological investments % will be introduced. Therefore, it may even make sense to carry out such investments only in 2023.

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

An accelerated depreciation rate applies to buildings acquired or constructed after 30 June 2020. In the first year, the depreciation on the acquisition or construction costs is three times the percentage rate that would "normally" apply (7.5 % for business use and 4.5 % for non-business use), and in the following year, it is twice that rate (5 % and 3 % respectively). From the second year onwards, the depreciation rate is 2.5 % for business use and 1.5 % for letting and leasing.

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).

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 1, 2017, certain tax-exempt 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 operating domestically. Entrepreneurs who risk exceeding this limit in 2022 should – if possible – postpone the completion of the service provision to 2023. A mere postponement of the payment date is not sufficient to comply with the small business threshold.

GSVG exemption

Small entrepreneurs (annual turnover under 35,000 €, income under 5,830.20 €) can apply for a GSVG exemption for 2022 until December 31, 2022. Eligible are young entrepreneurs (maximum 12 months GSVG obligation in the last 5 years), people aged 60 years (legal retirement 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 taking out partial insurance during child rearing. A monthly limit of 485.85 € applies in this regard, or a monthly turnover of 2,916.67 € (both 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.

Network cards for the self-employed

Since 2022, self-employed people have been able to claim a flat-rate deduction of 50 % of the cost of public transport travel cards (which are non-transferable) as business expenses, provided that these are also used for business travel.

Retention obligations

As of 31 December 2022, the seven-year retention requirement for business documents from the year 2015 generally ends. Documents that are relevant to a pending tax or other regulatory/judicial procedure must also be retained. Documents for properties when tax is refunded are required to be retained for 12 years. If properties are not used exclusively for entrepreneurial purposes and a tax deduction was claimed for the non-entrepreneurial portion, the retention period is extended to 22 years under certain conditions. The retention period for documents related to properties also extends to 22 years if rental for residential purposes or entrepreneurial use began on or after 01 April 2012. Documents that are not to be destroyed should not be destroyed, for example for the purpose of proving liability, such as product liability, property, inventory and employment contracts.

Deductibility of donations

Donations from the operating assets to specific research institutions and educational institutions serving adult education, as well as universities, may be up to a maximum of 10 of % the profit generated by the business. In addition, and without a limit on the amount, monetary and in-kind donations related to disaster relief (e.g., donations for the people in Ukraine) may also be claimed as business expenses provided they serve the purpose of advertising. Donations for charitable purposes, animal welfare, and to voluntary fire departments are also eligible for deduction as business 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 2022. It is not possible to double-count a specific donation as business expenses and as a special expense. It should also be noted that business and private donations combined must not exceed a maximum of 10 % of the total income.

Securities cover for pension provisions

To avoid tax penalties, securities with a nominal value of at least 50 % of the tax pension provision amount reported at the end of the previous financial year must be held within the business assets at the end of the financial year. It is therefore advisable to check that sufficient cover is in place before the end of the year.

Energy levy refund

Applications for the 2017 calendar year must be submitted by no later than December 31, 2022.

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