Tax Disputes Guide in Austria

Tax audits take place relatively regularly (every few years) for many taxpayers. Taxpayers are often selected at random. If there are significant discrepancies between tax returns for individual years, there is a greater likelihood of an audit. Finally, investigations are often initiated because there are grounds for suspicion. For a few years now, certain taxpayers (mainly large companies) have been able to apply for accompanying checks by the tax authorities instead of tax audits every few years.

The general statute of limitations for assessing the most important taxes (such as income tax, corporate income tax and VAT) is 5 years, unless taxes have been evaded intentionally. In such cases, the time limit is extended to 10 years.

The Austrian tax authorities have relatively broad powers during “regular” tax investigations. They are authorised to enter the taxpayer’s premises, verify identities, question third parties who can provide information (such as banks, employers, employees, business partners) and carry out seizures. The authorities’ powers are even more extensive when they conduct criminal proceedings relating to tax offences.

Taxpayers have fundamental procedural rights, such as the right to inspect files, the right to representation, the right to be heard and the right to submit applications.

During a ‘regular’ tax audit, taxpayers are required to cooperate with the tax authorities (e.g. by disclosing requested documents). If they do not cooperate, the authorities are entitled to impose compulsory penalties.

However, during a tax audit under fiscal criminal law, the taxpayer (the accused person) is not obliged to cooperate with the authorities.

If a taxpayer commits a fiscal criminal offence, they may face fines and, in very severe cases, imprisonment.

Maximum fines are up to 200% of the amount of tax evaded in cases of intentional evasion, and up to 100% in cases of gross negligence.

In addition to fiscal criminal penalties, taxpayers may face surcharges for late payments or late filings, as well as interest on tax arrears.

These penalties can be challenged through an appeals procedure. It is not possible to negotiate the penalties.

The first step is for the tax office to issue a tax assessment. The taxpayer then has 1 month to appeal the tax assessment. Following the submission of the appeal, the tax office will reconsider the case by way of a preliminary decision. According to the law, the tax office should issue the preliminary decision within 6 months.

This preliminary decision can be appealed within 1 month to the Federal Tax Court. Proceedings before the Federal Tax Court take at least 1 year (often significantly longer).

The taxpayer may then file an appeal against the Federal Tax Court’s decision with the Constitutional Court and/or the Supreme Administrative Court within 6 weeks.

It is possible to apply for a tax deferral while a tax dispute is pending. Tax deferrals are often granted while disputes are pending before the tax office and the Federal Tax Court. However, it is almost impossible to obtain a tax deferral when the dispute is pending before the Constitutional Court or the Supreme Administrative Court.

The Court of First Instance (Federal Tax Court) specialises in tax matters. The Supreme Courts (the Constitutional Court and the Supreme Administrative Court) do not specialise in this area.

There are three instances:

• the tax office decides on the appeal in the first instance (6-12 months)
• the Federal Tax Court can then decide on the case (1-3 years)
• the Constitutional Court and/or the Supreme Administrative Court decides in the final instance (1-3 years). 

In recent years, there has been an increase in proceedings against managing directors and board members following the insolvency of companies. In these proceedings, the tax authorities demand payment of the company’s unpaid taxes from these individuals.

Seek the advice of your tax lawyer as early as possible during tax proceedings.