Austria: Horizontal monitoring

The Annual Tax Act of 2018 introduced monitoring in Austria as of 1 January 2019, as an alternative to the traditional external audit. In this process, companies and the fiscal authorities are in constant contact to ensure that levies are paid in due time and in the correct amount. Horizontal monitoring encompasses corporate taxes but not the Joint Audit of All Wage-Dependent Levies.

Companies must implement an Internal Control System (ICS) and accept extended disclosure requirements. Thus, even before declarations are submitted, circumstances that may entail a serious risk of discrepancies with the fiscal authorities and have substantial potential impact on the tax balance must be disclosed. At least four times a year, meetings must be held between companies and the fiscal authorities. The tax monitoring system must be reviewed by a tax adviser before implementation and then at intervals of max. three years (expert opinion).

The possibility of submitting an application (via finanzonline) for monitoring is subject to a number of conditions:

• Company accounting according to the Austrian Commercial Code,
• No intentional or grossly negligent financial offences in the last five years,
• Revenues of at least EUR 40 million in the last two financial years,
• Confirmation from a tax consultant or auditor that the company has introduced a functioning tax monitoring system.

Another condition is that its management, registered office or domicile is in Austria, or that the company has a permanent establishment in Austria.

If the conditions are met, an external audit must be carried out if no such audit has taken place over the last five years. The Ministry of Finance has issued regulations concretising the requirements for the tax monitoring system (view link in German language):

Ongoing monitoring by the tax authorities eliminates the need for ex-post audits, which has the following advantages:

• There is only a short period of time between the time of audit and the period under review.
• The ICS eliminates the need to examine routine processes and everyday business transactions.
• Accumulated back payments for periods long in the past are avoided.
• Timely and ongoing coordination with the fiscal authorities gives companies a high degree of planning security.

However, it should be noted that considerable one-off and recurring costs must be borne by companies that choose to undergo ongoing monitoring. Its implementation in practice will reveal if the benefits outweigh these costs.

In any case, the monitoring will be evaluated on an ongoing basis over the next few years, and an evaluation report will be presented on 31 December 2024.