VwGH: No half tax rate for marginal employment

Sept 1, 2021 Benn-Ibler Rechtsanwälte

In the case at hand, the Supreme Administrative Court of Austria (Verwaltungsgerichtshof, VwGH) ruled on whether the taking up of gainful employment after the sale of a business precluded the applicability of a preferential tax rate.

In September 2016, the appellant sold his shares in a company. From January 2017, he was again marginally employed by this company. In his income tax return for 2016, he applied for half the tax rate for the income from the sale of the business in accordance with Sec. 37(5)(3) of the Income Tax Act (Einkommensteuergesetz, EStG).

The tax office (Finanzamt, FA) refused to apply the preferential tax rate, as did the Federal Fiscal Court (Bundesfinanzgericht, BFG). According to the BFG, there are two prerequisites for the requested old-age relief, namely the completion of the 60th year of age - which was not in dispute in the present case - and the cessation of gainful employment. Although the law does not give any concrete details as to how long the gainful employment is to be suspended, the Income Tax Guidelines 2000, for example - which, however, are not legally binding for the BFG - stipulate that it must be a period of at least one year after the sale. Accordingly, the appellant had not ceased his gainful employment because of the subsequent marginal employment.

The extraordinary appeal of the appellant was directed against this. The VwGH held that the applicability of the preferential tax rate requires the actual cessation of gainful employment in the context of the sale of the business. In addition, the cessation had to be of a long-term nature and a resumption of gainful employment must not have been planned in advance.

Since the appellant was again marginally employed by the company just three months after the sale of the business, the VwGH followed the reasoning of the BFG, according to which it could not be assumed that the appellant had ceased to be actively employed. Accordingly, the appeal was to be dismissed as unfounded.

VwGH Ra 2019/15/0156 (21.04.2021)