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TAX & BUSINESS
Tax‑free fixed‑cost subsidy excludes business expenses
Companies received various support measures during the COVID‑19 pandemic, such as fixed‑cost subsidies. As these are exempt from income tax, the related business expenses are not deductible for tax purposes.
In principle, expenses may not be deducted or taken into account for tax purposes where they are in a direct economic relationship with non‑taxable income. In the present case it was disputed to what extent business expenses must be reduced when tax‑free fixed‑cost subsidies have been received.
Administrative Court confirms
The Administrative Court (Verwaltungsgerichtshof, VwGH) confirmed the general tax principle that a lack of tax liability on the one hand is matched by a prohibition on deducting expenses on the other hand. Tax‑free grants (income) that are intended to cover specific outlays (here the "fixed costs") are in a clearly delineable, objective relationship with those specific outlays.
This also reflects the legislature's intention, that only the non‑replaced business expenses (in the result) can be claimed tax‑wise. Accordingly, the claimed business expenses (excluding entrepreneurial wages) must be reduced in proportion to the subsidies received.
Administrative Court confirms
The Administrative Court (Verwaltungsgerichtshof, VwGH) confirmed the general tax principle that a lack of tax liability on the one hand is matched by a prohibition on deducting expenses on the other hand. Tax‑free grants (income) that are intended to cover specific outlays (here the "fixed costs") are in a clearly delineable, objective relationship with those specific outlays.
This also reflects the legislature's intention, that only the non‑replaced business expenses (in the result) can be claimed tax‑wise. Accordingly, the claimed business expenses (excluding entrepreneurial wages) must be reduced in proportion to the subsidies received.