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NewsalertEU Direct Tax GroupAG Kokott opines that Austrian goodwillamortisation scheme is not in line withfreedom of establishment and does notconstitute illegal State aid
For more detailed information,
please do not hesitate to contact:
Richard JerabekPwC Austria+43 1 501 88 [email protected]
Rudolf KricklPwC Austria+43 1 501 88 [email protected]
Nikolaus NeubauerPwC Austria+43 1 501 88 [email protected]
Or your usual PwC contact
On 16 April 2015, Advocate GeneralKokott (“AG”) advised the CJEU to rulethat the exclusion of foreign EU groupmembers of an Austrian tax group fromthe goodwill amortisation scheme is notin line with the freedom ofestablishment. The AG furthermoreargued that the scheme does notconstitute illegal State aid.
Facts and circumstances
For share acquisitions before March2014 the Austrian Corporate IncomeTax Code offered tax groups theopportunity to amortise the goodwillresulting from the purchase of Austriangroup members with an active business.Also in 2014, the AustrianAdministrative High Court referred twoquestions with regard to the goodwillamortisation scheme for preliminaryruling to the CJEU. The Court raised thequestion whether the exclusion offoreign EU group members from thescheme was in line with the freedom ofestablishment and whether the schemeconstitutes illegal State aid for thebeneficiaries of the scheme.
Opinion of the AG
According to AG Kokott the exclusion offoreign EU group members from theamortisation scheme restricts thefreedom of establishment. Since the AGfound the domestic and the cross-bordercase comparable, she examined whetherthere was any justification for therestriction. The AG rejected a
justification on the grounds of thecoherence of the Austrian tax systemand came to the conclusion that thegoodwill amortization scheme infringesthe freedom of establishment.
With regard to the State aid assessmentthe AG modified the traditionalselectivity examination scheme, whereone has to first identify the “normal”taxation approach. Rather, according toher, it is important whethercomparable legal and factual situationsare treated differently and whether thisdifferent treatment leads to a selectiveadvantage for certain industries orundertakings.
The AG states that the goodwillamortisation scheme, by excludingforeign EU group members, treatstaxpayers in comparable legal andfactual situations differently. However,as the scheme covers all sorts ofdomestic companies, it does not favorcertain industries or undertakings andtherefore it is not qualified as beingselective. Consequently, the AG cameto the conclusion that the goodwillamortisation scheme does notconstitute illegal State aid.
Way forward
The opinion of the AG provides animportant indication on how the CJEUcould qualify the Austrian goodwillamortisation scheme.
Austrian tax groups with foreign EUgroup members should, if not alreadydone, examine their tax positions andassess whether they could benefit fromthe goodwill amortisation scheme.
21 April 2015
