Please give us an overview of the current legal market in Austria and how any recent developments have impacted your practice?
Whereas tax lawyers are increasingly receiving mandates to represent clients before the tax courts, the general landscape of tax advice in M&A is equally shared between tax lawyers and tax advisers. The Big Four still play an important role in advising on tax structurings whereby tax structures are also provided by tax lawyers. In this connection it is possible for tax attorneys to cooperate with tax advisers both in the form of requesting second opinions from them and through drafting second opinions regarding their structuring proposals.
What significant trends exist in the tax market presently? Are you seeing these just domestically or internationally as well?
Tax compliance has become more important than tax-saving structuring. Tax compliance has become increasingly difficult, not only due to the array of changes in national and international tax law, but also as a result of international developments, which are connected with a higher level of uncertainty.
In every tax audit in which groups of companies are involved, the transactions between group companies and the shareholders are thoroughly examined. As regards transactions between related companies, a high degree of written documentation is necessary, which is often found to be neglected in practice.
What are the three biggest challenges to practising tax in Austria at the moment?
The anti-base erosion and profit shifting (BEPS) Directive (EU) 2016/1164 of 12 July 2016 (providing for controlled foreign company (CFC) legislation) will enter into force as of 2019 in Austria. Multinational enterprises with Austrian holding companies are currently trying to mitigate the effects of the upcoming CFC legislation and accordingly have an increased need for advice.
In cases of tax inspection, tax authorities are looking more thoroughly at international tax issues. Additionally, the criminal tax law position has to be borne in mind, in order to mitigate criminal tax law risks. Sometimes very restrictive positions are taken by the tax office, which can only be corrected in the appeal procedure.
Finally, the initiative regarding aggressive tax planning from the EU Parliament will have a significant impact on the future of tax practice, as international tax structurings will have to be examined with regard to their aggressive character, in order to assess reportability, which will increase the internal expenses for each structuring.
How does tax fit into the firm as a whole? Is it easy to collaborate with other teams?
In order to successfully implement a tax practice within a law firm, it is important that the practise works on a stand-alone basis, meaning that it has its own tax clients who contact the tax team directly. On the other hand, collaboration with other teams is very important. The tax practice is one of the areas in a law firm that can benefit greatly from cross-selling.
What advice would you give to the next generation of tax lawyers?
On the one hand, it is very important to consider that timing is of the essence in a lot of tax audit procedures, as timely information can make a difference to whether the tax office is willing to change its point of view. On the other hand, it is very important to concentrate on the details of a tax case in the appeal procedure. Details – which are often not sufficiently examined in
a tax audit procedure of the first instance – can easily change the nature of a case and lead to a successful remedy from the appellate court.
What are your predictions for tax in Austria over the next five years?
A government programme is planned for the next five years which involves – among other measures – a new Income Tax Law, which will foster neutrality of legal form. There are also plans for the taxation of partnerships to be amended. Additionally, the reduction and simplification of ancillary labour costs (to be withheld by the employer on wage income) is one of the goals of the Austrian government. The tax level will be reduced, especially for small and medium-sized enterprises.