Austria MOF Clarifies Taxation of Severance Payments

The Austrian Federal Ministry of Finance April 1 posted online Federal Finance Court Decision No. RV/7103642/2023, clarifying the taxation of severance payments. The taxpayer, a company, terminated an employee’s long-standing employment by mutual agreement, paid statutory and voluntary severance taxed at a 6 percent preferential rate, and rehired the employee under a new employment contract. The Tax Authority denied the preferential taxation, arguing that the employment had effectively continued, and that severance was paid solely to obtain a tax benefit. On appeal, the Federal Finance Court found that: 1) the original employment was formally and substantively terminated with all termination ...