Tax reduction for pension compensation of a shareholder director

The sole shareholder and managing director of a limited liability company, which received income from independent work for its activity, entered into a contract with the company in 1995 for a company retirement pension. After his dismissal, he made use of the agreed option instead to receive the present value of the pension as a one-time compensation. The VwGH stated that leaving the company as a director, since there was a operating income, constituted an operating task and the payment thus constituted a task profit, which is to be determined according to § 4 Abs 1 EStG. The retirement arrangement is thus a transitional profit part of the extraordinary income pursuant to § 37 (1) EStG, for which the tax rate is reduced to half the average rate. [VwGH 19.04.2018, Ro 2016/15/0017]

• [“VwGH” is the Austrian Supreme Administrative Court; “EStG” is the Austrian Income Tax Act]