Judgement of the Austrian Administrative Supreme Court on leasing personnel

Limitations on the refund of withholding tax on leasing of personnel remunerations

Leasing personnel to Austria by foreign companies is subject to a withholding tax (WHT) of 20% in Austria. The payer must deduct this WHT at source and transfer it to the competent tax authority. An exemption of this WHT is only possible if the foreign company can provide an exemption certificate (Befreiungsbescheid) issued by the Austrian tax authorities. To obtain this certificate, it must be proven, that a payroll for the respective leasing personnel working in Austria has been set up. In this regard it is important to note that Austria interprets the term “employer” in Article 15 (2) c OECD-MTC in an economic way, hence the right to tax the income of foreign leasing personnel working in Austria lies with Austria from the very first day on.

Facts of the case concerning leasing personnel 

A UK provider of personnel had leased personnel to an Austrian company. The Austrian company had deducted 20% WHT of the providers’ remuneration including the charged costs for the accommodation of the leasing personnel. The UK provider then applied for a refund of the WHT insofar it did not concern the wages of the personnel, hence the WHT on his profit, overheads and the accommodation costs.

The competent tax authority denied the refund of WHT as the total WHT was lower than the wage tax calculated by the tax authority. The Austrian Fiscal Court rejected the argumentation of the tax authority and agreed to the refund request of the UK provider. The Fiscal Court clarified that Austria does not have a taxing right for the profit of the provider and for the accommodation costs. As the tax authorities appealed against the decision of the Fiscal Court, the Austrian Supreme Administrative Court (VwGH) was engaged with the case at hand.

Decision of the Austrian Supreme Administrative Court

The Austrian Supreme Court based its decision (23. 4. 2021, Ra 2020/13/0089) on the purpose of the WHT, which is to indemnify the underlying tax claim of Austria. In regard to the leasing of personnel the purpose of the WHT is not only to indemnify the tax in regard to the (first) receiver of the income (the UK provider), but also to the employees who receive their wages from the (first) receiver of the income.

According to the Supreme Administrative Court the refund of the WHT therefore requires that no reason for an indemnity of the tax regarding the income of the leasing personnel exists. This would only apply if the tax had been paid otherwise, e.g. via a voluntary payroll or by the leasing personnel filing individual income tax returns. Otherwise, the WHT can only be refunded if the deducted WHT exceeds the income tax that would arise if all employees would file an income tax return in Austria.


This decision of the Austrian Supreme Administrative Court shows once more the complexity of the Austrian WHT rules regarding the leasing of personnel. To receive the WHT on the part of the remuneration Austria does not have a taxing right on, the provider of personnel must go to great lengths. Proofing that the WHT exceeded the income tax due of the leasing personnel will be costly and the provider might not have all relevant information (e.g. deductible income-related expenses of his personnel). One will have to wait and see how the tax authorities will apply this ruling in practice. Nevertheless, in order to avoid the Austrian WHT on personnel leasing remunerations for personnel working in Austria, implementing a payroll and applying for an exemption certificate beforehand currently seems to be the most efficient and safest option.

If you would like to know more about the rules on leasing personnel working in Austria, please contact the experts of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!

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