Category: Austria

The General Court (GC) of the European Union ruled in favour of Apple in the state aid case regarding Apple’s Irish tax structure, annulling the 2016 decision of the European Commission (EC). As a result, Ireland is at present not obliged to reclaim the amount of EUR 13 billion from Apple. The decision is not yet final due to the EC’s right to appeal.

Background

In 1991 and 2007 the Irish tax authorities issued two tax rulings (being essentially advance rulings on the application of tax regulations in an individual case) in favour of two Apple companies which were incorporated but not tax resident in Ireland. The contested tax rulings endorsed the methods used by these companies to determine their taxable profits in Ireland relating to the trading activity of their respective branches. As a result, the annual profits of one of these Irish companies was taxed in Ireland at an effective tax rate as low as 0.005 % in 2014.

In 2016, the EC decided that the contested tax rulings constitute illegal state aid under EU state aid rules artificially reducing Apple’s tax burden. The EC requested that Ireland recover unpaid taxes from Apple for the years 2003 to 2014 in the amount of up to EUR 13 bln (plus interest). Apple and Ireland filed an action for annulment of the EC’s decision with the GC.

The decision of the GC

The GC acknowledges that tax benefits granted by a state to a taxpayer may be considered as state aid. Still, the GC annulled the EC’s 2016 decision stating that the EC failed to comprehensively show an advantage for EU state aid purposes, thereby confirming Ireland’s historic tax treatment of Apple. Particularly, the court stated that the EC incorrectly concluded that Apple was granted an economic advantage by the Irish tax authorities. According to the GC, the EC should have shown that the trading income of Apple’s two entities represented the value of the activities actually performed by the Irish branches themselves. The GC also denied the EC’s view that Apple had been granted a selective advantage.

The EC now has the option to lodge an appeal against the GC’s decision before the Court of Justice of the European Union within two months.

General tax considerations

In the public discussion, it is often argued that large corporates would shift their profits to low tax jurisdictions. From a structural point of view, one should bear in mind though that Ireland’s right to tax is limited to income taxable in Ireland (tax base). The rulings challenged by the EC only related to Irish taxes. Also, one state may not limit another state’s right of taxation. Where a double taxation treaty applies, the right of taxation is precisely allocated among the contracting states. Within a group of companies and between related companies under common ownership or control, transfer pricing rules continue to apply. Therefore, tax optimisation of a company in one EU member state does not necessarily lead to other (EU member) states missing out on taxes on this group’s income (as often claimed by media reports).

By Peter Feyl, Partner, and Clemens Grassinger, Associate, Schoenherr

In Austria, like in many other countries, the current restrictions due to the COVID-19 situation are causing extensive and opaque changes in social life and related legal issues. Although home office has become well established, it is still associated with limited opportunities for personal interaction. The situation raises many legal questions, one of which is how people can pragmatically conclude or sign a legally effective contract.

Questions which increasingly arise include whether and how contracts under private law, annual financial statements, and other official documents may be signed “electronically” and what evidentiary value an electronic signature has. In any case, it should be noted that in Austria the following different electronic signatures have different legal effects.

Simple Electronic Signatures

Simple electronic signatures are probably the most commonly used form of electronic signature at present. With a simple electronic signature, data in electronic form is merged with other electronic data. The signatory thus uses this data to sign documents. In practice, documents are transmitted to the other party, who loads the data into the software of an external provider, and only then can the document be digitally signed. Documents that are simply digitally signed are admitted as evidence in official proceedings.

The simple electronic signature is sufficient in cases where there are no special or strict formal requirements (e.g., internal corporate processes, travel expense reports, and private-law contracts). A simple electronic signature basically only has the purpose of identifying the author of a message. It can be created with various programs and applications on smartphones, tablets, and computers.

Qualified Electronic Signature

However, only a so-called “qualified electronic signature” is equivalent to a “handwritten signature.” Qualified electronic signatures meet the legal requirement of “written form” within the meaning of Austria’s General Civil Code. Additional legal formal requirements, such as provisions requiring the addition of a notary or lawyer (i.e., certification or notarial deed) or legal family and inheritance law transactions that require a written form are not affected by this, as in these cases a qualified electronic signature does not have the same legal effect as the written form. Otherwise, however, electronic contracts signed with a qualified electronic signature are just as legally binding as if the contract had been signed “by hand.”

A qualified electronic signature with legal effect can be used where a “written form” within the meaning of the Austrian Civil Code is required, such as when concluding and terminating a fixed-term rental agreement or shareholder resolutions of limited liability companies, which can be made in writing by circulation and no notarization or submission to the commercial register is required.

Of course, in everyday business, not every person will be able (or will want) to rely on software or trust service to digitally sign a declaration of intent, especially when it has to be done “quickly.” A practical way of fulfilling the criterion of written form even without external providers or the use of special software is to print out the document at home, sign it, and send it back to the contractual partner. Although not everyone has a scanner at home, even a photograph of the signed contract document, which can be taken via mobile phone, is sufficient to meet the criterion of written form, although a previously scanned-in signature copied onto the contract document is insufficient. Unless more restrictive legal formal requirements are applicable, contracts may provide that digital signatures are excluded.

Cases in which a qualified electronic signature does not have the legal effect of a signature in written form and in which an “original” handwritten signature is still required include, among others, matters relating to declarations of surety or legal transactions under family and inheritance law that are bound by form. Declarations of intent in family and inheritance law and declarations of surety can only be electronically signed if a notary or a lawyer was involved in the conclusion of the declaration in an advisory capacity and a corresponding declaration was also documented with the professional signature of this notary or lawyer. The making of testamentary dispositions in electronic form are also prohibited, as are legal acts which are bound by other legal formal requirements and which require the involvement of a notary or a lawyer.

In crisis situations that require home office, the use of digital signatures can make legally effective declarations of intent. However, an e-mail without a secure digital signature is no more equivalent to a written contract document with a handwritten signature than a signature that has only been scanned, a fax, or a copy.

By Andreas Schutz, Partner, and Christopher Bakier, Associate, Taylor Wessing

This Article was originally published in Issue 7.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Fellner Wratzfeld & Partner has advised a consortium of UniCredit Bank Austria, BAWAG P.S.K, Commerzbank, Raiffeisenlandesbank Oberoesterreich, and HYPO Vorarlberg on the reorganization proceedings of the Huber Group, an Austrian lingerie manufacturer.

According to Fellner Wratzfeld & Partner, “at the end of May 2020, reorganization proceedings with debtor-in-possession were opened by the Regional Court Feldkirch over the assets of Huber Holding AG, Huber-Shop GmbH, Huber Tricot Gesellschaft mbH, and ARULA GmbH, respectively …. With the hearings on the reorganization schedule set for August 27, 2020, the reorganization efforts will enter a decisive stage.”

Fellner Wratzfeld & Partner’s team included Partners Markus Fellner and Florian Kranebitter and Associate Felix Kirkovits.

Brandl & Talos has advised BTOV’s Industrial Technologies Fund on its participation in ToolSense’s three million euro financing round that also included AWS Grunderfonds, Segnalita Ventures, Martin Global AG, and Dr. Georg Hoblik GmbH.

By networking sensor data from machines, analyzing, and evaluating them, ToolSense — which was founded in 2017 — supports the digitization and automation of the mechanical engineering industry. According to Brandl & Talos, “a specially developed sensor hardware is attached to each machine, and the associated software reads out the data. By analyzing and evaluating the data, for example, necessary repairs can be identified in advance, even before damage occurs — depending on the individual maintenance requirements. The location and condition of the machines can be called up at any time. Process costs for service cases can thus be reduced by up to 90 percent. All data is bundled on an after-sales platform.”

The Brandl & Talos transaction team consisted of Roman Rericha , Markus Arzt and Sonam Schima.

Several years ago, Brandl & Talos advised AWS Grunderfonds on its initial investment in ToolSense (as reported by CEE Legal Matters on December 10, 2018 https://ceelegalmatters.com/austria/9766-brandl-talos-advises-grunderfonds-on-toolsense-financing).

Brandl & Talos has advised BTOV’s Industrial Technologies Fund on its participation in ToolSense’s three million euro financing round that also included AWS Grunderfonds, Segnalita Ventures, Martin Global AG, and Dr. Georg Hoblik GmbH.

By networking sensor data from machines, analyzing, and evaluating them, ToolSense — which was founded in 2017 — supports the digitization and automation of the mechanical engineering industry. According to Brandl & Talos, “a specially developed sensor hardware is attached to each machine, and the associated software reads out the data. By analyzing and evaluating the data, for example, necessary repairs can be identified in advance, even before damage occurs — depending on the individual maintenance requirements. The location and condition of the machines can be called up at any time. Process costs for service cases can thus be reduced by up to 90 percent. All data is bundled on an after-sales platform.”

The Brandl & Talos transaction team consisted of Partner Roman Rericha, Attorney Markus Arzt, and Associate Sonam Schima.

Several years ago, Brandl & Talos advised AWS Grunderfonds on its initial investment in ToolSense (as reported by CEE Legal Matters on December 10, 2018).

Wolf Theiss and Linklaters have advised Raiffeisen Bank International AG on the issuance of EUR 500 million worth of additional Tier 1 capital. Freshfields Bruckhaus Deringer advised joint lead managers Barclays Bank plc, Goldman Sachs International, J.P. Morgan Securities plc, Raiffeisen Bank International AG, and UBS Europe SE.

According to Wolf Theiss, “following the additional Tier 1 issuances of Raiffeisen Bank International AG from June 2017 and January 2018, RBI again issued AT 1 notes with unlimited maturity. With this AT 1 EUR 500 million issuance RBI further optimizes its capital structure. The coupon of the issuance is 6% per annum until mid-December 2026 and will be reset thereafter. The AT 1 Notes, which are listed on the Luxembourg Stock Exchange, were offered exclusively to institutional investors. With the demand of EUR 1.6 billion, the order book was significantly oversubscribed and met with a high level of interest from investors, primarily from the UK, continental Europe, and Asia.”

Wolf Theiss’s team included Partners Alex Haas and Niklas Schmidt, Counsels Christine Siegl and Eva Stadler, and Associate Sebastian Prakljacic.

The Freshfields Bruckhaus Deringer team included Vienna-based Partner Stephan Pachinger and Associate Christian Joellinger and Frankfurt-based Partner Christoph Gleske and Associates Birgit Schulz and Jasmin Julia Denk.

Linklaters’ Germany-based team included Partner Peter Waltz and Managing Associate Martin Rojahn.

Herbst Kinsky has advised Byrd technologies GmbH on a EUR 5 million Series A financing round.

According to Herbst Kinsky, “in addition to Rider Global as lead investor, VentureFriends and FJ Labs, as well as Speedinvest and Reflex Capital took part in the round.”

Herbst Kinsky’s team was led by Partner Florian Steinhart, and Attorney Felix Kernbichler.

Herbst Kinsky did not reply to our inquiry on the matter.

Eisenberger & Herzog has advised Samsung Catalyst Fund, a venture capital fund of Samsung Electronics Co., Ltd, on an undisclosed investment in the Speedinvest 3 fund, which was advised by Berlin-based Schnittker Mollmann Partners.

According to Eisenberger & Herzog, “despite the Corona-crisis, the Speedinvest 3 fund has raised more than EUR 190 million and has thereby even exceeded its target size. Other disclosed investors include the European Investment Fund, Erste Group, and the US-based investor New Enterprise Associates, one of the largest venture capital firms in the world.”

Eisenberger & Herzog’s team included Partner Philipp Nidal Karaman and Attorney Philipp Schrader.

Schoenherr has assisted Auer-Blaschke GmbH & Co KG with the registration of its new AUER brand design as a model brand at the Austrian Patent Office.

Auer-Blaschke, which is a member of the Spitz group, has been producing wafer specialties and other confectionery since 1920. According to Schoenherr, “for the company’s 100th anniversary, the AUER brand has now been repositioned, the portfolio optimized, and its design revised.”

In addition, Schoenherr reports, “the registration of a design as a sample brand in the Austrian trademark register has only been possible since the beginning of 2019. This new brand form consists of a series of elements that are repeated regularly and used in this form in the brand appearance.”

Schoenherr’s team was led by Partner Michael Woller.

Weber & Co. has advised Central European University on its July 27, 2020 agreement with the Vienna Business Agency to use the Otto Wagner site in Vienna as the university’s new site. Themmer, Toth & Partner advised the Vienna Business Agency.

CEU is a private university accredited in the United States of America and Austria, with bachelor, master, and doctoral students coming from over 120 nations. The principle of the university is to convey the values of an open society according to the principles of free inquiry, free politics and free institutions. Pursuant to the Building Right Contract entered into by CEU and the VBA, CEU will take over the historic Otto Wagner site from the City of Vienna for 100 years.

Under the Building Right Contract, the historical area will be open to the public and all Viennese will have free access to the university site. In the next five years, CEU will renovate the buildings and revitalize them for modern international university operations. All planning will be carried out in close coordination with Austria’s Federal Monuments Office.

Weber & Partners’ Partner Daniela Witt-Dorring, who led the firm’s team on the deal, described the agreement as an “exciting, future-orientated transaction, which is momentous for both CEU and the City of Vienna.” Also working on the deal were Weber & Co. Partner Klaus Pfeiffer and Associates Sonja Karpf and Philipp Prokopp.

The Themmer, Toth & Partner team consisted of Senior Partner Wolfram Themmer and Trainee Lawyer Florian Themmer.