If domestic tax authorities discover that a taxpayer has undeclared investment income and no voluntary disclosure has been submitted, criminal tax proceedings are initiated with punishments including fines and up to imprisonment. Tax fraud of more than EUR 500,000.00 may lead to imprisonment for up to ten years.
A successful voluntary disclosure guarantees full immunity from prosecution for tax evasion. In order to be successful, the domestic taxpayer has to declare all undeclared taxable income for the last ten years. He also has to pay the evaded taxes together with interest on arrears. If the voluntary disclosure is submitted on the occasion of a secondary review or a tax audit a penalty surcharge of 5% to 30% applies, depending on the amount of tax evaded.
It must be mentioned that, at present, there is no inheritance or gift tax in Austria. However, gifts and donations of more than EUR 15,000.00 (EUR 50,000.00 between close relatives) have to be notified (this includes cash, capital claims, shares in corporations and partnerships, establishments and operational units that generate operating income, movable physical assets, etc.). The reporting obligations apply to both donor and recipient, if one of the parties, either donor or recipient, has their primary residence or habitual residence in Austria at the time of donation. The obligation also applies to individuals with an established secondary residence in Austria. If a report was wilfully not filed, this breach of financial regulations is punishable by a fine of up to 10% of the donation’s fair value.
The publication of the Panama papers resulted in a 2% increase in voluntary tax disclosures in Austria in 2016 compared to the year before. According to the OECD, Panama is the 105th jurisdiction to participate in the Exchange of Information Convention. The Convention provides for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. The first exchange of information with Panama is scheduled to begin in 2018 for data filed after January 1st, 2017. In Panama’s case, the identities of the beneficial owners of offshore companies will be part of the data set to be exchanged between participating countries. In order to reach full immunity from prosecution for tax evasion, an Austrian shareholder/beneficial owner of a profitable Panamanian offshore company must submit a voluntary disclosure since, when assessing taxes due, Austrian tax authorities “look through” such companies as though they did not exist.
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