In this context, the following has now been included in the income tax guidelines:

• The conversion of an equity instrument into another equity instrument of the same investment quality in the same corporation is not to be assessed economically differently than

  the exchange of shares in the context of the transformation of a corporation. Therefore, in the view of the tax authorities, there is no exchange in the context of the participation of the same taxable quality as equity in one and the same corporation.

  within the meaning of Section 6 Z 14 lit. a EStG.

  
  

• As an example, it is stated that this includes, for example, the conversion of

  The conversion of company value shares into normal company shares in accordance with Section 9 (9) FlexKapGG or the exchange of shares into substance participation rights are affected.

Significance for startup practice

The new positive statement from the tax administration is important for several areas:

• To incentivize selected startup employees, they are often offered certain participation programs, whereby both virtual shares and real shares are possible. Within the framework of a "real" participation program, employees are granted, for example, profit participation rights or company value shares. Subsequently, it can

  It may happen that these profit participation rights or company value shares are to be converted into "normal" company shares (e.g., GmbH/FlexCo shares). The preferential conversion of capital shares under the Reorganization Tax Act generally requires certain conditions (e.g., a minimum 25% shareholding), which are not achievable, especially in the case of employee shareholdings. Due to the new statements by the tax authorities, the conversion of profit participation rights into GmbH/FlexCo shares is, for example,

  or the conversion of company value shares into FlexCo shares is possible in any case in a tax-neutral manner.

  
  

• Apart from that, the new statements from the tax authorities may also be of interest to startup investors. In securing startup financing, the US-based "SAFE" instruments (SAFE = Simple Agreement for Future Equity) are used, among others. SAFE involves the provision of an investment amount defined between the startup and the investor. The investment amount is provided by the investor upon conclusion of the SAFE agreement and represents an advance payment for a future

  This represents a capital share that is later granted in the amount of the investment upon contractually defined "trigger events." If a SAFE agreement can be classified as an equity instrument from a tax perspective (this aspect must be examined in detail beforehand), we believe there are good reasons to apply the new tax authorities' guidance to the conversion of a SAFE into genuine company shares (e.g., GmbH/FlexCo shares) and to process this conversion in a tax-neutral manner.

For the sake of completeness, we would also like to briefly mention

Debt instruments should be noted. Caution should still be exercised with convertible loans (debt instruments), as current tax practice assumes an exchange of assets during the conversion process (however, there are some good arguments against this view and in favor of a tax-neutral transaction).

Conclusion

The new statements from the tax authorities with the 2025 income tax maintenance decree are certainly very encouraging. Nevertheless, when restructuring equity instruments, it is important to ensure that the framework conditions are appropriate (e.g., classification of a SAFE as an equity instrument, classification of profit participation rights as capital participation rights) in advance to avoid a subsequent "tax disaster."

This article was written by David Gloser (Partner, Tax Advisor and Auditor) and Christoph Puchner (Partner and Tax Advisor) of ECOVIS Austria. ECOVIS Austria is one of Austria's leading tax consulting firms in the startup sector . www.ecovis.at