Accounting obligations and the requirement to keep records

In the first instance, the legal obligation to keep records for tax purposes may arise on the basis of the Unternehmensgesetzbuch (UGB), and specifically Sections 189 et seqq. This is because the requirement for companies to maintain accounts brings with it a requirement to keep accounts for tax purposes, in the form of the determination of profits through a balance sheet comparison and double accounting (see Section 124 of the Bundesabgabenordnung – BAO). The accounting thresholds set out in Section 125 BAO are only applicable to agricultural/forestry businesses or commercial enterprises (see Section 31 BAO).

Enterprises required to keep accounts ("accounting enterprises") pursuant to UGB

Section 189 paragraph 1 (2) UGB sets out revenue thresholds applicable to individual companies and partnerships (where individuals/natural persons assume unlimited liability) beyond which they are required to keep records. These thresholds do not apply to professional services or to agricultural and forestry businesses.

• For an enterprise to be subject to the accounting obligations, its revenue must exceed the (lower) threshold on a sustained basis, defined as two consecutive years. Once a business crosses the threshold for the second consecutive time, it is granted a "grace year", and the requirement to keep records applies from the next business year but one. Hence, if revenues exceeded the threshold in 2021 and 2022, the business will be subject to the requirement from 2024 onwards.
• If revenues exceed the "qualified" (i.e., upper) threshold, the requirement to keep records applies from the first time this threshold is exceeded, and with no grace period. This means that if revenues exceeded the upper threshold in 2023, the business will be subject to the relevant obligations from 2024 onwards.

Similarly, and as a rule, an existing accounting obligation will lapse in the event that revenues fall below the threshold twice. However, the obligation lapses immediately with effect from the next business year, and there is no "grace year." Hence, if revenues fell below the threshold in both 2022 and 2023, the company concerned would be exempted from the requirement from 2024 onwards.

The thresholds apply in the first instance to traders. The accounting requirements triggered by exceeding these thresholds automatically also trigger accounting obligations pursuant to Section 5 of the Einkommenssteuergesetz – EStG).

Whether a company is registered in the companies register is not significant in relation to the accounting obligations or the way profits are determined.

For partnerships, defined as general partnerships under Austrian law or limited partnerships under Austrian law with at least one individual functioning as a partner with unlimited liability and for corporations under civil law, known in German as a Gesellschaft bürgerlichen Rechts, or GesbR), the same rules apply as to individual entrepreneurs (i.e., the thresholds apply, but there are no accounting obligations for freelance professionals).

A requirement to keep records irrespective of revenues or activities (i.e., including for non-commercial activities) applies to corporations, and specifically to limited liability companies respectively flexible companies and stock corporations) and for organisations set up as GmbH & Co KGs (where no natural person bears unlimited liability). In these cases, a "legal status bookkeeping requirement" applies.

Forms of profit determination for tax purposes

The summary below shows the formal accounting requirements for traders pursuant to Section 23 EStG (legal position correct as of 2021).

¹⁾ See also consolidation into a lump sum. Alternatively, use may be made of general lump-sum deductions or sector-specific consolidation into a lump sum.

²⁾ See also consolidation into a lump sum. Alternatively, use may be made of sector-specific consolidation into a lump sum.

³⁾ Application for continued determination of profits pursuant to Section 5 EStG where accounting obligations lapse as a result of revenues falling below the threshold on two consecutive occasions (Section 5 paragraph 2 EStG).

Generally speaking, for the accounting obligations to lapse, revenues must fall below the threshold of 700,000 Euro. The obligations lapse immediately for the following year, with no "grace year."

Determining profit when a company is first established

A company can only be subject to accounting obligations in the year in which it is first established where this is a requirement by dint of its legal status (and in particular if the company is set up as, or becomes, a limited liability company respectively a flexible company). For all individual companies and partnerships (with the exception of GmbH & Co KGs), the cash-basis accounting procedure applies. Alternatively, use may be made of the various different types of consolidations into a lump sum available, provided the company's revenues do not exceed the relevant thresholds.⁴) Companies can also choose to keep records voluntarily (profit determined according to Section 4 paragraph 1 EStG).

Determining profit when acquiring an existing company

Where an entrepreneur acquires an existing company as a joint or individual legal successor, and if their legal predecessor was subject to accounting requirements, the entrepreneur must continue to comply with the accounting requirements at all times (see Section 189 paragraph 2 (2) UGB). In principle, this requirement does not apply if the turnover of the acquired company has fallen below the revenue threshold of 700,000 Euro in both of the previous business years. However, if the acquiring party is itself subject to accounting requirements for some other reason (for example by dint of its legal status, such as if it is operating the newly-acquired company as a GmbH), the exception from the accounting obligation will not apply.

Unless accounting obligations apply, all individual companies and partnerships (with the exception of GmbH & Co KGs) are subject to the cash-basis procedure. Alternatively, use may be made of the various different types of consolidations into a lump sum available, provided the company's revenues do not exceed the relevant thresholds.⁴) Companies can also choose to keep accounts voluntarily (profit determined according to Section 4 paragraph 1 EStG).

⁴⁾ See also consolidation into a lump sum

Legal bases

• Section 189 Unternehmensgesetzbuch (UGB)
• Sections 124 and 125 Bundesabgabenordnung (BAO)
• Sections 4 and 5 Einkommensteuergesetz (EStG)