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Austria Adds Income Tax Cut to €50 Billion Stimulus Package

Posted on June 18, 2020

The Austrian government has approved a €50 billion coronavirus-related stimulus package that includes income tax cuts, VAT reductions for the food and culture sector, and tax measures to support investment.

Austrian Finance Minister Gernot Blümel announced the stimulus measures at a June 16 press conference, saying they focus on rescue, relief, and investments for the economy, according to a government release.

According to a June 16 Reuters report, the new tax relief measures amount to €5.2 billion and the new investment package amounts to €6.3 billion, while the €7.5 billion in aid for firms and the restaurant and tourism sector comes from a €38 billion package announced in March.

The latest measures extend the fixed-cost subsidy approved May 23 by the European Commission, which allows businesses that experienced at least a 40 percent decline in sales from 2019 because of the pandemic to recoup up to 75 percent of fixed costs in 2020. They also provide a loss carryback option for businesses to offset losses against profits in 2019 and 2018.

The stimulus package will reduce the individual income tax rate for the lowest bracket from 25 percent to 20 percent.

“Bringing forward income tax reform, which we also negotiated as part of the government program, is an important part of the relief package, so that people have more money in their pockets,” Blümel said in the release. “In our view, lowering taxes is always the right approach. In a situation like this, where it’s also about stimulating demand, it is especially relevant.”

The government will temporarily cut the VAT rates on goods and services in the culture, tourism, and gastronomy sectors from 10 or 13 percent to 5 percent from July 1 to December 31, according to a June 12 government release. The measure is expected to affect restaurants, museums, movie theaters, concerts, and newspapers and other periodicals.

Tax return deadlines that were originally delayed to August 31 have been extended until January 15, 2021, the June 12 release says. Austria has incorporated the deferral into law by changing the Austrian Federal Tax Code. On May 3 the Ministry of Finance reported that €4.6 billion in tax had been deferred, with small businesses representing 75 percent of tax deferral applicants.

To encourage businesses to buy capital goods, the stimulus package also includes an investment premium that will run from the beginning of September through next year and an unlimited declining balance depreciation option, according to the June 16 release. Up to 30 percent of capital assets will be depreciable in the first year of the option.

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