A Review of Austria’s Draft Pillar Two Law

Overview

On October 3, 2023, the Austrian Federal Ministry of Finance issued the ‘Federal law enacting the Federal Act to Ensure a Global Minimum Taxation for Groups of Companies’ to implement the Pillar Two GloBE rules/EU Minimum Tax Directive. It is open for consultation until October 20, 2023. As provided in the EU Directive, the draft law includes an income inclusion rule (IIR) and an under-taxed profits rule (UTPR). 

The IIR is to apply to financial years beginning on or after December 31, 2023. The UTPR will generally apply to financial years beginning on or after December 31, 2024.

Section 6 of the draft law provides that Austria will apply a domestic minimum top-up tax (intended to be a QDMTT) for financial years beginning on or after December 31, 2023.

Unlike a number of other jurisdictions, the draft law provides for the application of all OECD Safe Harbours.

This includes the:

– Transitional CbCR Safe Harbour;

– QDMTT Safe Harbour;

– Transitional UTPR Safe Harbour; and the

– Simplified calculation for non-material constituent entities Safe Harbour

It’s worthwhile noting that the design of Austria’s QDMTT provision is unlike most other jurisdictions. Most jurisdictions include all the QDMTT adjustments in a separate QDMTT section. However, Austria includes the QDMTT adjustments when covering the relevant substantive GloBE provisions. As such, the QDMTT adjustments are spread throughout the draft law. 

General