Share buyback as a business transaction

If the buyback of own shares by the AG is at least partially in its own operational interest, then the subsequent reissue of these shares by sale is a taxable transaction. The AG treated the capital gain as tax-free on the ground that the buyback was a deposit repayment within the meaning of § 4 (12) EStG and a mere investment in the case of resale. But the VwGH followed in its decision the view of the tax authority and the UFS: Since the share repurchase program aims to avoid damage to the company it is also in the operational interest of the company and is therefore subject to income tax. [VwGH (Highest Austrian Administrative Court) 21.09.2016, 2013/13/0120]

• [„AG” is an Austrian public limited company; “VwGH” is the Austrian Supreme Administrative Court; “UFS” is an Austrian Independent Tax Tribunal; “EStG” is the Austrian Income Tax Act.]