Cash-Box Import Mergers - Fictitious Distributions

Inbound dividends from low-tax jurisdictions may not be exempt from Austrian corporate income tax under the Austrian international participation exemption but may be subject to a switch-over to the credit method. In the past, such profits could be repatriated by way of a tax neutral import merger instead. However, a recent amendment to the Austrian Reorganisation Tax Act may lead to a fictitious distribution in such cases.

Switch-over for inbound dividends

Under the (Austrian) international participation exemption (at least 10% shareholding held for at least one year), foreign source dividends received by the Austrian parent corporation are generally exempt from Austrian corporate income tax. However, under a statutory assumption of misuse the exemption does not apply if (simplified) the predominant business purpose of the foreign corporation is the generation of passive income (passive-income test) and the income of the foreign corporation is subject to taxation