I. Overview
The Austrian Ministry of Finance (Bundesministerium für Finanzen) has proposed certain changes regarding the international participation exemption which, if enacted, could lower the attractiveness of Austrian holding companies and adversely affect M & A transactions in Austria.
II. Current Regime
Austrian corporations are subject to corporate income tax (Körperschaftsteuer) at a rate of 34%. However, under the international participation exemption (Befreiung für internationale Schachtelbeteiligungen) set forth in sec. 10(2) of the Austrian Corporate Income Tax Act (Körperschaftsteuergesetz), dividends and capital gains resulting from qualifying participations are tax-exempt. The following conditions must be fulfilled for the international participation exemption to apply:
