Contribution to the Energy Crisis aka Windfall Profit Tax: Overview of Austrian Legislative Proposals
The taxation of windfall profits, i.e. the portion of profits exceeding what is regarded as ”regular profits” was recently controversially discussed. Other European jurisdictions, including Greece, Italy, Romania and Hungary, have already introduced a unilateral solution in terms of windfall profits taxation. The EU Commission has now set out a uniform framework for all 27 member states. Implementing the EU Council Regulation (EU) 2022/1854 on an emergency intervention to address high energy prices, the Austrian governmental parties introduced a legislative proposal to the parliament on 18 November 2022.
In particular, it is planned to temporarily introduce (1) an energy crisis contribution for electricity (“Electricity Contribution”), which essentially is a cap on certain revenues for electricity producers and (2) an energy crisis contribution for fossil fuels (“Fossil Contribution”), which is a profit levy for oil and gas companies and thus essentially an additional (corporate) income tax for such companies.
1. Energy Crisis Contribution for Electricity
The Electricity Contribution aims at electricity producers and the electricity they generate domestically. 90% of the revenue per megawatt hour exceeding the cap on market revenues of 140 euro, i.e., the surplus revenues, will be skimmed off. By taking into account a deduction for investments in the transition to renewable energy resources, the cap on market revenues will be raised to up to 180 euro upon appropriate proof.
Operators of power plants (except of pumped storage power plants) and power plant parks with a respective installed capacity of more than one megawatt are subject to the Electricity Contribution.
The law introducing the energy crisis contribution for electricity should enter into force on 1 December 2022 and should apply to surplus revenues up to 31 December 2023.
The draft bill does not contain any special provision regarding the tax deductibility of the Electricity Contribution for tax purposes. Contrary to the Fossil Contribution (see below 2.), the Electricity Contribution should therefore be a tax-deductible expense.
2. Energy Crisis Contribution for Fossil Fuels
Profits of companies in the oil and gas sector in 2022 and 2023 exceeding the average of the taxable profits of the reference period 2018-2021 of more than 20% are subject to the Fossil Contribution levied at 40%. If evidence regarding qualifying investments concerning the transition to renewable energy resources is provided, the rate might be reduced to 33%.
The Fossil Contribution applies to Austrian and EU companies with activities in the crude petroleum, natural gas, coal and refinery sectors which, in Austria, respectively via permanent establishments in Austria, generate at least 75% of their turnover from economic activities in the field of the extraction, mining, refining of petroleum or manufacture of coke oven products, without turnover from storage activities. In determining the 75%-threshold, revenues from the service station business are not taken into account.
The draft bill explicitly provides for the qualification of the Fossil Contribution as a non-deductible expense for tax purposes. While the law introducing the Fossil Contribution should enter into force on 31 December
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