News – 26.03.2020
With the aim of protecting the national economy, the Austrian government has put together a EUR 38 billion aid package, which shall mitigate negative consequences arising from the Corona-crisis. The package contains legal as well tax-related measures.
1 Labour and other legal actions
In order to reduce labour costs, the employer may temporarily apply a short-time working scheme for his employees. The scheme is aimed at reduction of the normal working hours instead of terminating the employment agreement. During this period, the employee is working and remunerated part-time by the employer. In addition, the employee is entitled to state subsidy, which is equivalent to unemployment benefits payable pro-rata for the number of reduced hours. The subsidy amount depends on the remuneration payable to the employee and ranges between 80 % and 90 % of the net salary as payable prior to the Corona-crisis. The subsidy shall be initially grated for a period of three months; it can be, however, extended for another three months.
The working hours can be eventually reduced to 10 % to 90 % of the normal working time and may, in certain times during the calculation period, amount to 0 %. The short-time working model excludes the possibility of the termination of the employment. In fact, the employment agreement must be maintained for the period of applying the short-time work scheme and for one additional month after its end. In addition, legal deadlines for legal actions related to the termination of the employment agreement or (premature) dismissal of employees have been suspended until 30 April 2020. The suspension equally applies in the context of discrimination-based termination or dismissal of the employment agreement.
Part-time employment agreements for older employees can be interrupted for the period between 15 March and 30 April 2020 provided, however, that the employment continues thereafter.
Civil law aspects
In general, there is no direct impact of the Corona-crisis on contractual agreements. In other words, rights and obligations must still be observed by the parties. In case of delay in conduction, the legal consequences depend on the contractual agreement and if part of the contract, general terms and conditions. For the 2005 SARS crisis, the Supreme Court of Justice, however, ruled that an epidemic or a pandemic shall constitute force majeure. If a contract, however, fails to provide for a force majeure clause the legal consequences for delay of conduction must be derived from the general rules, which would be applicable in the underlying case.
Commercial and company law
For management of corporations, partnerships, cooperative societies and associations as well as private foundations, the legislative package provides for the possibility to move shareholder meetings and board meetings to virtual platforms. In substance, virtual meetings shall have the same legal effect as physical meetings. In addition, the package extended the deadline for the shareholders’ meeting from 8 to 12 months; accordingly, the corporation can call and held the meeting until 31 December 2020. The extension applies even if the articles of association provide otherwise.
For statements submitted to the court in legal proceedings, the expiration of most deadlines has been stopped or extended such as e.g. the nine-month disclosure period for financial statements and the corresponding two-month deadline for the imposition of repeated penalties. The extension applies to deadlines, which have either existed on 22 March 2020 or been, subject to an extension, fixed between 22 March and 1 May 2020. In other words, the period of disclosure of financial statements to the Commercial Court has been prolonged for 40 days, i.e. until 9 November 2020 for financial years ending 31 December 2019.
Companies (regularly) distributing their profits to shareholders might face further changes resulting from the Corona-crisis. In fact, shareholders are obliged to refrain from the dividend and vote in favor of retaining profits if the company would not be, otherwise, in the position to meet its ongoing liquidity needs and would, thus, run a risk of credit rating downgrade.
In general, legal consequences related to an official closing of business premises depend on the rental agreement. Where no explicit provision exists, the rent payable to the landlord is considered as capable of being reduced if the premises cannot be used due to a force majeure event, e.g. Corona-crisis. Such a situation is understood to exist if the business has been locked down according to a statutory order. By contrast, no reduction is, in general, eligible if the clients e.g. cancel their meetings or the use of business premises is limited in time and as consequence, the company faces loss in revenues.
Restructuring and optimization in the context of Corona-crisis
Restructuring measures can prevent negative legal consequences arising from the current situation. In particular, potentially high-risk business units can be spun off helping to limit the business liability or the liability of the shareholders.
2 Tax-related actions
(Corporate) income tax
The Austrian Ministry of Finance has issued number of decrees dealing with tax-related support actions. The latter shall help to bridge the time of liquidity shortage and to avoid insolvency cases. Among others, advance payments on corporate income tax and income tax for 2020 can be reduced in part or in total if the taxpayer is in the position to prove negative income consequences arising from COVID-19.
In addition, the payment of taxes can be, upon request, deferred or made in instalments until 30 September 2020. In this regard, the tax authority will refrain from interest assessment provided however that the taxpayer can substantiate that he has faced (acute) liquidity shortage.
In the end, the deadline for submission of the annual tax returns for 2018 for (corporate) income tax and the VAT hast been extended until 31 August 2020.
The list of current tax optimization measures, which might become recommendable, among others include profit and loss shifting or tax restructuring measures. Potential tax advantages might result from the implementation of the group tax regime or consolidation (e.g. merger) of profitable and loss-making units.
Value added tax
There are, however, no changes with respect to the obligation of the taxpayer to submitting monthly or quarterly VAT returns such that legal obligations must be met in time. Subject to acute liquidity shortage, the payment of outstanding VAT amounts can be, however, deferred without interest or the taxpayer can apply for payment in instalments. Either measure is limited in time, i.e. until 30 September 2020.
In case of overdue receivables, which cannot be settled by reasons of (acute) liquidity problems or can be settled in part only, the taxpayer is not considered as eligible for a refund of the corresponding VAT amounts declared and paid to tax authorities. Accordingly, there is no necessity for the recipient of goods or services to correct the input VAT deduction claimed from his tax office in charge. Either correction requires that the claim of the supplier of goods or services become permanently, in part or in total, unrecoverable. In such a case, the supplier may declare a reduction of the VAT base and claim the corresponding VAT amounts back from tax authorities. In mirroring this right, the recipient of goods or services must correct and repay the input VAT deduction claimed on purchase of goods or consumption of services.
If customs deadlines cannot be, due to the Corona-crisis, observed, such deadlines can be, under certain conditions, considered as being complied with or the customs office can agree to deadline extension. The processing in of pandemic caused delays shall not entitle the customs office to any administrative charges.
In case of pandemic related reduction of reference amounts, the government package provides for the possibility of corresponding adjustments upon request.
Social security contributions
In case of lock down of business ordered by the authority and closing or limitation of business activities, the payment of social security contributions for February, March and April 2020 can be delayed automatically and without interest. Other businesses are eligible for payment deferral upon request only and must, in this context, prove that their liquidity has been (negatively) affected by the Corona-crisis.
Tax procedural issues
Just as for commercial law, the legislative package provides for an extension of certain deadlines as consequence of the extra-ordinary situation caused by the Corona pandemic. The extension applies to appeal and submission deadlines, which are in existence on 16 March 2020 or commence thereafter. Such deadlines have been stopped and shall start again on 1 May 2020.
The extension can be further applicable to administrative cases pending before the court and to tax criminal proceedings. With respect to the latter, the appeal and the objection periods have been stopped. For tax administrative proceedings, the period of limitation has been as well stopped.
Visits to the tax authorities have been limited to exceptional circumstances, which cannot be avoided by reasons of proper administration of justice. The same applies to court hearings and hearings at tax authorities, unless carried out via communication means.
Relief measures further apply in the context of tax audits and tax monitoring. In fact, tax audits and similar activities of the tax authorities have been stopped or postponed. The taxpayer may, however, contact the tax auditor or his tax office in order for the tax audit to be continued and finalized if necessary or requested.