Mergers & Acquisitions

Last reviewed 03 Apr 2023

Financing

Financial assistance by the subsidiary

Very strict restrictions and disclosure require- ments exist in Austria with respect to loans or guarantees granted by the subsidiary to the parent company in connection with the planned purchase (“prohibited repayment of contributions and capital”).

Subordinate debt (mezzanine capital)

The use of subordinate debt is allowed.

Interest expenses for acquisition financing

Interest expense on subordinate debt

EU interest barrier

An interest surplus (excess of tax-deductible interest over taxable interest income of a financial year), is only deductible to the extent of 30% of the tax EBITDA. An allowance of EUR 3 Mio. is applicable.

Squeeze-out options

Buy-out of minority shareholders (squeeze-out)

Possible where there is an interest of at least 90% in the share capital (applicable to both joint stock corporations and limited liability companies), even if minority shareholders dissent.

Capital gains – corporations and partnerships

Sale of shares in a joint stock corporation

The gain of legal entities on the sale of shares in a joint stock corporation in general is taxable income. For international holdings different regulations apply.

Sale of shares in a limited liability company

The gain of legal entities on the sale of ownership interest in a limited liability company in general is taxable income. For international holdings different regulations apply.

Sale of interest in a partnership

The gain on the sale of an ownership interest in either a limited or general partnership (OG or KG) is normally taxable income for both limited and general partners.

International participation exemption

Capital gains from an international participation are exempt if the company did not opt for taxation and there is no suspicion of abuse. The minimum holding period is 1 year and the minimum interest 10 % (for details see chapter Corporate income tax).

Sale of business

Definition

Valuation

For the sale of individual assets, the acquisition cost principle is applicable. The total purchase price is allocated to individual assets and liabilities at fair value, the difference constitutes goodwill. Badwill is not allowed for tax purposes.

Goodwill

For tax purposes, goodwill may generally be amortised linearly over 15 years.

Mergers and demergers

Types of mergers described by commercial law

Upstream merger (possibly down-stream), side- stream merger, takeover of the business by the main shareholder (not in case of a corporation), demerger.

Valuation

For financial accounting purposes, as a rule valu- ation of assets and liabilities is always optional.

Valuation in financial accounting

Method 1 – carrying values

Assets and liabilities recognized at carrying values, with difference possibly recognized as surplus on reorganization (under certain circumstances, as goodwill).

Method 2 – revaluation

Assets and liabilities are valued at fair value, the difference is recorded as goodwill.

Provision requirements have to be considered (e.g. deferred taxes)

Goodwill amortization

Where the Austrian Reorganization Tax Act (UmgrStG) is applied, amortisation is generally not permissible.

Tax treatment of revaluation

Revaluation of assets and goodwill amortisation are as a rule not tax deductible – mind distribution blocks!

Contributions (transfer of assets into the capital of a company)

Contributions in kind

In general, the contribution of assets is allowed (services cannot be contributed).

Tax treatment

Goodwill amortisation

For tax purposes, goodwill may generally be amortised linearly over 15 years but not in particular in the case of tax-neutral contributions under the UmgrStg.