Introduction: why the new KESt rules matter to you
Shareholder clearing accounts are widely used in Austrian corporations. They provide a simple way of handling withdrawals, private expenses and ongoing transactions between the company and its shareholders. From the 2027 financial year, however, new tax rules will apply that may have significant financial consequences.
The Budget Accompanying Act 2027–2028 introduces a new deemed distribution rule in § 8 para 2a of the Corporate Income Tax Act (KStG). If open clearing account balances are not settled in time or converted into an arm’s-length loan, withholding tax on capital income (KESt) of 27.5 per cent is triggered automatically, even though no profits have actually been distributed. In this article, you will find out exactly what is changing, who is affected and how you can prepare.
What is the new deemed distribution rule under § 8 para 2a KStG?
Under the new deemed distribution rule, receivables of a corporation from a shareholder who is a natural person, or from a person closely related to that shareholder, must either be settled in full or converted into an arm’s-length loan by the relevant balance sheet date. If this does not happen, the open balance is treated for tax purposes as if it had been distributed to the shareholder.
In practical terms, KESt of 27.5 per cent becomes payable on the open clearing account balance, even without an actual distribution of profits.
What counts as an arm’s-length loan under this rule?
To be recognised, an arm’s-length loan must meet certain criteria. The requirements are:
- Written form: The loan agreement must be concluded in writing.
- Market-rate interest: The interest rate must withstand an arm’s-length comparison.
- Appropriate term: The agreed term must correspond to what would be customary between unrelated third parties.
- Security: Appropriate security must be agreed
Whether these requirements are met is assessed on the basis of an overall assessment. Blanket solutions or purely formal agreements that are not actually implemented are not sufficient.
Who is affected by the new KESt rule for clearing accounts?
The deemed distribution rule covers not only direct shareholders but also indirect shareholdings. The size of the shareholding is irrelevant: even minority shareholders are affected.
How does taxation work for indirect shareholdings?
For indirect shareholdings, taxation takes place step by step along the chain of ownership. For example, if natural person A holds an interest in B-GmbH, which in turn holds shares in C-GmbH, and A has a clearing account with C-GmbH, a step-by-step distribution is deemed to take place: from C-GmbH to B-GmbH and from B-GmbH to A.
What tax consequences arise in the event of non-compliance?
If the clearing account is neither settled nor converted into an arm’s-length loan, the deemed distribution rule applies automatically. The open receivable is then deemed to have been distributed to and received by the shareholder on the day after the annual financial statements are adopted, and at the latest five months after the balance sheet date.
In that case, the corporation must:
- file a KESt return within seven days, and
- pay KESt of 27.5 per cent on the open balance.
Important: This tax liability arises automatically, regardless of whether a distribution of profits has actually been resolved or made.
Is there a de minimis threshold for shareholder clearing accounts?
Yes, the law provides for a de minimis threshold of EUR 50,000.00. The deemed distribution rule only applies if the total balance of the clearing account exceeds this amount at the balance sheet date. In that case, only the portion exceeding EUR 50,000.00 is taxed.
Smaller clearing account balances are therefore unaffected for the time being. Nevertheless, these should also be reviewed regularly and properly documented, so that you are prepared for any future reduction of the de minimis threshold or for a tax audit.
When does the new rule come into force?
The new provisions apply for the first time to financial years ending in the 2027 calendar year. Where the financial year coincides with the calendar year, the relevant date is therefore 31 December 2027.
There is still some time until then, but it should be used to review existing clearing accounts and, where necessary, to settle them in time or convert them into proper loan agreements.
What should shareholders do now?
Shareholders who regularly transact with the company through their clearing account in particular should analyse their current situation promptly. The following steps help to avoid unintended tax consequences:
- Take stock: Check the current balance of your shareholder clearing account as at the next balance sheet date.
- Review arm’s-length terms: Have existing agreements reviewed for arm’s-length compliance. Written form, interest, term and security are decisive.
- Plan the settlement: Consider whether open balances can be settled by the balance sheet date.
- Seek professional advice: The overall assessment required by law calls for an individual tax and legal analysis.
Conclusion: act in time and avoid a KESt charge
The new deemed distribution rule under § 8 para 2a KStG brings significant changes for many Austrian corporations and their shareholders. Anyone who does not settle open clearing account balances in time or convert them into an arm’s-length loan risks a KESt charge of 27.5 per cent, even though no profits have actually been distributed.
The sooner you act, the easier it is to avoid unintended tax consequences. Our team of tax advisers, court-certified experts and forensic analysts will be happy to help you analyse your existing clearing accounts, structure arm’s-length loan agreements and optimise your shareholder structure from a tax perspective.
Contact
Would you like to know how the new rules apply to your situation? Contact us – we will be happy to advise you!
Your contacts from our KINDL.Advisory practice area:
Marlis Wenninger
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