Private foundation interim-tax credit: applying historical balances by assessment year

The first condition is that corporate tax on income within section 13(3) and (4) KStG has been assessed and paid in an assessment. A bookkeeping entry or an outstanding tax return is not enough. The relevant fact is corporate tax assessed and actually discharged for the relevant process.

The second condition concerns the later distribution. The private foundation must make a distribution within section 27(5)(7) of the Austrian Income Tax Act, EStG, for which withholding tax has been remitted. The credit under section 24(5) KStG therefore connects paid corporate tax with a distribution carrying the required withholding-tax burden.

The credit is a statutory adjustment within the corporate-tax assessment. It does not replace correct withholding on the distribution or the separate review of whether the payment is permissible under foundation law. The resolution, economic receipt, tax remittance and assessment records must describe the same transaction.

The article on private foundation distributions examines preparation of an individual payment. The article on annual accounts of the private foundation addresses the accounting file and board records.

Section 24(5)(3)(a) KStG compares the sum of income separately taxed under section 13(3) KStG with the sum of distributions under section 27(5)(7) EStG. The relevant amount is the part of the distributions that exceeds that income total. This distribution excess must not be confused with the foundation’s entire assets or with every tax payment made in an earlier year.

The calculation therefore needs an assessment-year allocation. First identify the years from which the paid corporate tax originates. Then establish the statutory credit base from the relevant distribution. Only after that can the percentage for each year layer be applied.

A current tax assessment cannot answer all of these questions by itself. It normally shows tax for one assessment year. A credit spanning several years also requires distributions, withholding remittances, earlier credits and the remaining evidence-account balance to be carried forward.

Section 24(5)(4) KStG links the credit to the percentage for the relevant year. It provides 12.5 per cent for years before 2011, 25 per cent for 2011 to 2022, 24 per cent for 2023, 23 per cent for 2024 and 2025, and 27.5 per cent from 2026 onwards of the relevant credit base.

These percentages are assessment-year layers. They cannot be replaced by one current percentage. A historical balance covering several periods must allocate each amount to the correct year and show the calculations separately.

The statute also gives priority to corporate tax from the oldest years. The working file therefore needs a sequence: the oldest open year first, followed by the next open year. A remaining amount stays connected to its year and does not become an unexplained total balance.

Under section 24(5)(5) KStG, the private foundation must keep an evidence account. It records corporate tax paid each year, amounts credited and the remaining amount eligible for a credit. The account tracks the development of the credit over several assessments.

For every year layer, the file should show the amount originally established, the part already credited and the balance still open. A single running total makes the statutory priority rule difficult to apply and leaves later calculations vulnerable to error.

The evidence account is separate from the foundation’s bookkeeping and general asset position. Bookkeeping records transactions. The asset position shows the economic situation. The evidence account answers the tax question which amount of paid interim tax remains available for a credit.

The board and its advisers should reconcile the account with tax assessments, withholding filings, distribution resolutions and annual accounts. Differences should be recorded with the year in which they arose, the distribution concerned and the correction made. The foundation board and liability topic addresses care in asset and tax decisions.

Where a distribution receives relief from withholding tax under a double-tax treaty, the distribution total must be reduced for the credit base to the extent that the distribution is not finally burdened with withholding tax. Treaty relief therefore affects the calculation under section 24(5)(3)(a) KStG.

The file must separate the amount initially withheld from the final tax burden. A distribution may first be treated as subject to withholding tax and later receive treaty relief. The original full distribution amount does not automatically remain decisive for the credit.

Where relief occurs after withholding tax was remitted, section 24(5)(3)(b) KStG treats the later relief as a retroactive event within section 295a of the Austrian Federal Fiscal Code, BAO. Relief records must therefore be connected with the original distribution and the affected assessment.

Treaty analysis depends on the applicable treaty, residence and the form of relief. This article explains the impact on the interim-tax credit. It does not replace review of the treaty or the recipient’s evidence.

When the private foundation is dissolved, the credit must still be calculated under the credit base and year layers in section 24(5)(3) and (4) KStG. The closing assessment does not remove the assessment-year allocation.

For the calculation, the balance in the evidence account is treated like a distribution within section 27(5)(7) EStG. The open balance therefore enters the closing calculation. The records must show which year layers have already been used and which balances remain.

There is a special rule for possible later treaty relief in a dissolution case. Despite withholding tax already having been remitted, the distribution amount is reduced accordingly. The credit is issued with the final assessment.

Dissolution and the tax closing calculation must be reconciled with foundation-law winding-up steps. The article on dissolution of a private foundation explains the legal process. A tax group is relevant only where the facts raise that separate issue.