Background: The EU Mobility Directive
The EU Mobility Directive, RL (EU) 2019/2121, which entered into force in January 2020, provides for a uniform legal framework for cross-border reorganisations.
To this end, the directive provides for an amendment of the already existing rules on cross-border mergers as well as additional rules on cross-border conversion (cross-border transfer of the registered office) and on cross-border division.
The deadline for transposing the directive into national law was 31.01.2023.
Expected implementation under corporate law through the EU Reorganisation Act (EU-UmgrG)
The requirements of the EU Mobility Directive are to be implemented in Austria with the so-called EU Reorganisation Act (EU-UmgrG) as part of the Company Law Mobility Act (Gesellschaftsrechtliches Mobilitätsgesetz). According to the current status, the law is available as a government bill, a decision by the National Council and entry into force of the provisions is expected in the first half of 2023.
The previous EU Merger Act (EU-VerschG), which provides for regulations on cross-border mergers based on the provisions on domestic mergers, is to be replaced by the new EU UmgrG.
In brief, the EU-UmgrGprovides a set of rules for the following types of transformation in implementation of the EU Mobility Directive:
In addition to the implementation of the EU-UmgrG, the legislative package also provides for amendments to the Company Register Act (Firmenbuchgesetz), the Court Clerk Act (Rechtspflegergesetz), the Takeover Act (Übernahmegesetz) and the Court Fees Act (Gerichtsgebührengesetz).
Expected tax provisions in the Reorganisation Tax Act (UmgrStG)
Cross-border reorganisations are usually associated with a number of tax law issues. Against the background of the implementation of the EU Mobility Directive in Austria, the tax provisions of the Austrian Reorganisation Tax Act (UmgrStG) are also to be amended. Corresponding regulations are provided for in the Tax Amendment Act 2023 (Abgabenänderungsgesetz 2023), which is currently available as a ministerial draft.
In this context, the UmgrStG shall be extended to include provisions which, in line with the existing provisions for cross-border mergers, are intended to take account of any restriction or creation of Austria's right to taxation as a result of the division. Furthermore, divisions within the meaning of the EU-UmgrG (which constitute a division under corporate law) shall be deemed to be a contribution within the meaning of Art III UmgrStG if the requirements are met.
Cross-border conversions (transfer of the registered office), on the other hand, do not constitute a reorganisation within the meaning of the UmgrStG. These are to be assessed under general tax law as cases of departure or relocation and are not to be confused with conversions under Art II UmgrStG.
On the occasion of the adaptations due to the EU-UmgrG, the existing de-taxation provisions of the UmgrStG at the shareholder level are also to be amended. The UmgrStG is to be extended for mergers and divisions to include a provision that applies in the event of a restriction of the right of taxation at the shareholder level if this occurs within the scope of a side-stream transaction. In accordance with the share exchange regime (Sec 16 Para 1a UmgrStG), taxation is to apply if the shares in the acquiring corporation are sold by the foreign shareholders or otherwise cease to be business assets.
In addition to the above-mentioned amendments, the ministerial draft provides for further amendments to the UmgrStG that are detached from the EU-UmgrG.
The granting of shares is to be waived in the future through the extension of Sec 19 Para 2 UmgrStG even if all participants in the acquiring corporation contribute beneficiary assets in which they have the same shareholding in relation to each other as in the acquiring corporation.
In the future, the notification obligation pursuant to Sec 43 Para 1 UmgrStG shall be fulfilled electronically by means of a standardised form. In the case of reorganisations for which the tax office is responsible and which require a notification under Sec 13 UmgrStG, the reorganisation form shall be mandatory in addition to the notification. However, the Federal Minister of Finance will be authorized to regulate in an ordinance that the filing pursuant to § 13 UmgrStG shall also be submitted electronically. In that case, a notification obligation pursuant to section Sec 43 Para 1 UmgrStG may be waived.
The (planned) EU-UmgrG not only brings innovations with regard to cross-border reorganisations from the point of view of corporate law, but also raises new questions from the point of view of tax law due to the planned adaptation of the UmgrStG.
Even though the implementation of the EU Mobility Directive in the EU member states shall create a uniform company law framework for cross-border reorganisations, which should lead to overall simplifications and more legal certainty, cross-border reorganisations remain a highly complex issue from a tax law perspective.
In practice, it is advisable to plan cross-border reorganisations carefully from both a corporate law and a tax law perspective in order to ensure the best possible implementation. As experts in both fields, we can provide you with interdisciplinary advice on your plans in both areas and will be happy to support you.
Please do not hesitate to contact us if you have any questions.