Previous tax regulations of cryptocurrencies in Austria

According to the legal situation prior to the Eco-Social Tax Reform Act 2022, income from the sale of cryptocurrencies was taxable pursuant to Section 31 of the Austrian Income Tax Act. This provision concerns speculative transactions, where profits are only taxed if the period between the acquisition and sale is less than one year (speculative period). If cryptocurrencies in Austria were acquired free of charge (e.g. by gift or inheritance), then the date of acquisition by the legal predecessor had to be taken into account.

If speculative losses were incurred, they could only be offset against speculative gains in the same assessment year. Furthermore, income from speculative transactions was tax exempt if it did not exceed EUR 440. However, if this exemption threshold was exceeded, the entire income from speculative transactions was subject to the progressive income tax rate and therefore taxable.

Exchanging a cryptocurrency for another cryptocurrency could also lead to taxation under Section 31 of the Austrian Income Tax Act. In the case of an exchange, the difference between the fair market value of the cryptocurrency given and the acquisition cost was calculated. If there was less than one year between the acquisition of the cryptocurrency and the time of its exchange, it was again a speculative transaction.

However, if cryptocurrencies were interest-bearing, the tax authorities considered them to be capital assets, which were taxable at the special rate of 27.5% according to the Austrian Income Tax Act (both the interest and the gains from the sale).

New tax regulations of cryptocurrencies in Austria

As a result of the Eco-Social Tax Reform Act 2022, the taxation of cryptocurrencies in Austria will now be included in the regime of capital assets pursuant to Section 27 of the Austrian Income Tax Act.

There is now a legal definition of the term cryptocurrency in Section 27b (4) of the Austrian Income Tax Act, which was taken from the Financial Market Money Laundering Act. According to this law, a cryptocurrency is “a digital representation of value that has not been issued or guaranteed by any central bank or public body and is not necessarily linked to a legally established currency and does not have the legal status of a currency or money, but is accepted by natural or legal persons as a medium of exchange and can be transferred, stored and traded electronically.”

This includes publicly offered cryptocurrencies enjoying acceptance as a medium of exchange. It also includes “stablecoins”, whose value depends on the value of an underlying legal currency or other assets through a mechanism. The definition of cryptocurrency does not include “non-fungible tokens” and “asset tokens”, which are based on real assets (e.g. securities, real estate).

Recognised income and determination of income

Extending the basic definition of income from capital assets means income from cryptocurrencies in Austria now includes both current income from cryptocurrencies as well as income from realised gains.

The current income from cryptocurrencies covers:

• fees for the transfer of cryptocurrencies (“lending” – cryptocurrencies are transferred to other market participants and a fee is paid for this),
• acquisition of cryptocurrencies by means of a technical process, in particular, income from “mining”.

Gains and losses from sales (e.g. cryptocurrencies against the euro) and from exchanges against other assets and services, including legally recognised means of payment (e.g. cryptocurrencies against the U.S. dollar) qualify as income from realised gains. The gain or loss from income from such realisation is the difference between the proceeds from the sale and the acquisition costs, whereby incidental acquisition costs (e.g. consulting costs or transaction fees) may also be taken into account.

It is important to note that income from capital assets only exists insofar as the activity does not go beyond pure asset management in terms of type and scope. Otherwise, such income is considered income from business operations.

The acquisition of cryptocurrencies received in the course of staking, airdrops, bounties or hardforks was explicitly excluded from current income. These are only taxable in the course of the actual sale or an exchange for other assets and services, including legally recognised means of payment, whereby one assumes that cryptocurrencies received in this way have an acquisition cost of zero. The income is therefore not already taxable upon receipt of the new cryptocurrency.

The exchange of one cryptocurrency for another cryptocurrency does not constitute a taxable realisation. The acquisition costs of the exchanged cryptocurrency are carried over to the received cryptocurrency units in the absence of a realisation transaction.

Apart from the new definitions and the changes in the determination of income, the new regulations introduce a special tax rate for income from cryptocurrencies in Austria and other far-reaching changes in practice. If you are also interested in reading about these changes, please click here and read the full article on the homepage of WTS Austria, partner firm of WTS Global in Austria.

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The case regarding the withholding tax refund

The appellant was a Delaware-based trust made up of seven “series” (sub-funds), each of which was treated as a taxable entity under US law. This US trust could claim distributions as a business expense under US tax law, provided that at least 90% of taxable income (excluding realised appreciation) was distributed to investors, effectively reducing US federal tax to zero. Hence, foreign withholding tax could not be credited in the US. In 2013 and 2014, the US trust received dividends from two listed Austrian stock corporations. While the tax office reduced the Austrian withholding tax to 15% (in accordance with the double taxation agreement between the US and Austria), the appellant applied for a full refund of the withholding tax. This request was based on a provision in Austrian corporate tax law that allows EU and EEA resident entities a full refund when the withholding tax cannot be credited in the country of residence. According to a former decision of the Austrian Supreme Administrative Court (Ra 2020/13/006) this provision can be applied by applicants from third countries due to the free movement of capital.

The Austrian Fiscal Court (BFG, lower court) dismissed the appeal against the tax office’s rejection notice because the US trust has to be qualified as a foreign investment fund within the meaning of sec. 188 investment fund law and therefore the dividends are attributable to the shareholders, even if the US trust or the “series” are considered a taxpayer in the US. Thus, according to the Fiscal Court, the US trust could not apply for a refund.

Tests required by the Supreme Administrative Court

According to the Austrian Supreme Administrative Court, three steps must be taken to determine whether a foreign entity is entitled to file a withholding tax refund request:

• Comparability test – the first step is the assessment of whether the US trust is comparable to an Austrian corporation. If it is not comparable, the owners of the US trust would be the recipient of the respective income and hence would have to file respective withholding tax refund requests.
• Attribution of income – in case the US trust is comparable to an Austrian corporation, the question is whether the relevant income is attributable to the US trust or the natural persons (investors) owning the trust. In case the US trust is not comparable, and the income is also not attributable to the natural persons owning the US trust, the US trust might qualify as special purpose asset (Zweckvermögen).
• Applicability of special provisions of the Austrian investment funds law (sec. 188 investment fund law) – if the US trust is comparable and the income can generally be attributed to it or if the trust is a special purpose asset, it must be assessed whether sec. 188 investment fund law would apply. This would still lead to the transparency of the US trust according to sec. 186 investment fund law; hence the owners of the trust would have to file a withholding tax refund in Austria.

The Supreme Administrative Court has referred the case back to the Fiscal Court to perform those tests. This decision is still pending.

According to the Austrian Supreme Administrative Court, the regulation in sec .188 investment fund law has been compliant with the free movement of capital since it was amended in 2014. For 2013, it is up to the Fiscal Court to assess the compliance with the free movement of capital.

If you would like to know more about withholding tax refund or any other taxation issues in Austria, please visit the homepage of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!

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Central elements of the amendment are the adaption of the Anti-Wage and Social Dumping Act to the EU Posted Worker Directive, the revision of the administrative penalties, the extension of the catalogue of exceptions, as well as the restructuring of the security performance.

Through the amendment, Austria implemented the changed regulations of the EU Posted Worker Directive and the regulations of the European Court of Justice concerning the posting of workers.

Amendment of the concept of posting to the Anti-Wage and Social Dumping Act 

The Austrian Anti-Wage and Social Dumping Act previously provided for a very far-reaching concept of posting, whereby the EU Posted Worker Directive only includes postings carried out based on a service agreement, cross-border hiring outs (personnel leasing), postings within the concern.

The law now reflects the same regulations as the EU Directive, thus posting in the employer´s interest without any service agreement no longer fall under the scope of the Anti-Wage and Social Dumping Act.

Extension of the exception catalogue 

For some short-term activities such as attending on a business meeting, a seminar, a lecture or participating on a congress, on a cultural event or on a trade fair, (except for delivery, construction, and dismantling) the Anti-Wage and Social Dumping Act is, as before, not applicable, if no services are provided during these activities.

Newly added significant exceptions to the Anti-Wage and Social Dumping Act are in Austria insured high earners as well as seconded employees who provably receive (at least two months before and during posting) a monthly salary of at least EUR 6,660 gross (for 2021), regardless of the duration of the posting.

Activities that are essential for the commissioning of the delivered goods or the delivery and collection of products are also exempt from the regulations of the amended law.

A further exception clause was added in § 7, whereby employees who are posted for training purposes are excluded from the scope of the law, provided that the training is part of a training program of the employer or the Austrian company, the employee does not owe any work performance and the employees are only trained as long as it is necessary to acquire the knowledge.

Differentiation between short-term and long-term assignments

With a very few exceptions there has been no differentiation in term of how long a posting takes in Austria according to the Anti-Wage and Social Dumping Act so far.

The amending directive also contains separate regulations for long-term postings, which have now been transposed into national law. It now stipulates, that in the case of postings and assignments for a longer period than 12 months (or 18 months) the Austrian terms and conditions of employment applies (both law, ordinance and collective agreement), insofar as these standards are more favourable than the corresponding standards of the posting country.

Changes in the penalty system 

Another key point of the amendment to the Anti-Wage and Social Dumping Act was the adaption of the penalty range, since according to the European Court of Justice the previous regulations were disproportionate and illegal. In its decision the European Court of Justice called for a penalty limit without a minimum level penalty, as well as the omission of penalty accumulation. The new regulation led to the abolishment of the accumulated (per employee) penalties, whereby it applies for any offense with minimum wage and notification requirements.

The following penalty fees are applicable regardless of how many employees are affected:

• Violation in connection with the reporting and maintenance obligation when posting or cross- border hiring out: fine up to EUR 20,000.
• Fraudulent activity during authority control (documents delayed submission, denied access to documents or information): fine up to EUR 40,000.
• Failing to provide wage related documents: fine up to EUR 20,000, in the event of second offence: fine up to EUR 40,000.
• Underpayment based on Austrian law and collective agreements: depend on the amount of withheld remuneration: fine up to EUR 400,000. The number of employees affected is irrelevant. A full cooperation of the employer is penalty-reducing.

Posting documents simplification

Important simplification is the use of English language in all wage-related documents, as well as social security insurance evidence, because previously only the employment contract in English language were accepted.

The following list of documents must be kept available in Austria, where the posted worker is employed:

• A1 social security document (or comparable documents if the A1 form is still not available)
• Copy of the notification document (ZKO3 or ZKO4)
• Employment contract
• Payslip / Wage records
• Proof of the monthly payment
• Working time records
• Documents relating to pay categorisation (if this information cannot be found in the employment contract)

In addition, there are simplifications in the reporting obligations. Now it is possible to make a single notification for a period of six months (before the maximum period was three months called “Rahmenmeldung”) if there are repeated cases of posting of workers to the same client / the same project.  In the case of service contracts of the same type concluded with several clients, the notifications may be combined within one collective report in the case of continuous performance within one week in Austria (“Sammelmeldung”).

Overview of the amendment in the catalogue of exceptions

If you would like to know more about the details of the changes to the Austrian Anti-Wage and Social Dumping Act, please visit the homepage of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!

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VAT rules on management of special investment funds

According to Art. 6 (1) 8 (i) of the Austrian VAT law, the revenue from the “management of special investment funds”, the “management of holdings in the context of the business of providing capital … by undertakings holding a concession for this purpose”, as well as from the “management of special investment funds as defined by the other Member States” is exempt from VAT. This legal regulation corresponds to Art. 135 (1) (g) of the European VAT Directive with the aim of fiscal neutrality which does not allow economic operators who carry out similar transactions to be treated differently for tax purposes. According to the principle of fiscal neutrality, it has to be ensured that economic operators are able to choose the form of investment which best suits them – not facing the risk that their operations could be excluded from the tax exemption. Therefore, this regulation intends to protect small investors who would otherwise have a disadvantage compared to large investors who invest directly without being burdened with administration fees.

In the joined cases C-58/20 and C-59/20 the CJEU dealt with the question whether fund management services are covered by the tax exemption according to Art. 135 (1) of the European VAT Directive if the services are (partly) outsourced to a third party.

In the consistent case law, the CJEU has already dealt with the criteria for tax exemption as well as the tax treatment of such services which are outsourced to a third party. For example, in its decision of 2 July 2020, Blackrock Investment Management (UK), C-231/19 the CJEU stated that the services of an external service provider can also be exempt from VAT if they form a distinct whole which is intended to fulfil the specific and essential functions of managing special funds.

Further specification of the criteria for VAT exemption

In the current case law, the CJEU specified further the respective criteria. According to the CJEU, the following criteria must be met to qualify for the VAT exemption:

• Distinct or autonomous character: First of all, it has to be determined whether the services provided by a third party are forming a distinct whole. However, as the CJEU states, it is not required that the services which are specific to and essential for the management of special investment funds must be completely outsourced to the service provider to be covered by the tax exemption which is a fundamental and trend-setting statement in the current legal case. If the application of the tax exemption required the entire outsourcing of the services, management companies which themselves supply those services and economic operators who invest directly, would be favoured from a tax point of view.

• Specific and essential character of the service: In a second step, it has to be assessed whether the services provided by a third party are specific to and essential for the management of special investment funds. It is crucial that the services provided are closely linked to the activities of the management company. Regarding services provided by a third party to a management company, it has to be examined “whether the service provided … is intrinsically connected to the activity characteristic of a management company, so that it has the effect of performing the specific and essential functions of management of a special investment fund.” Instead, services which arise regarding any type of investment are not specific and not covered by the term management of special investment funds.

If you would like to know the conclusion of the judgement and our detailed analysis, you can read the full article in the WTS Global Financial Services Newsletter #3/2021. Click here and scroll to page 4!

If you need more information about the aforementioned Austrian cases or the judgement concerning the VAT exemption for the management of special investment funds, please contact the experts of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!

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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.

Conclusion 

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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Tax and social security implications of permanent remote work in Austria

In the first scenario Mr A and the company agree that, from now on, Mr A can work 100% remotely from his home office in Austria, independently of the COVID-19 pandemic.

The Austrian tax administration takes a “facts and circumstances-approach” to assess whether remote work in Austria creates a permanent establishment (PE) for the foreign employer. The main criteria are the extent of home office work, the nature of work carried out in the home office and whether it was initiated by the employer or by the employee. In the case in question, it is very likely that the tax administration assumes that a PE is created. In addition, home office work would trigger municipality tax (3% from employee’s gross wage).

Mr A is subject to Austrian income taxation. The foreign employer will not have to deduct and pay monthly Austrian wage tax, but will have to file a so-called wage-statement by March of the following year. The employee will have to file an income tax declaration by June of the following year.

As Mr A spends 100% of his working time in Austria, he is also subject to Austrian social security regulations. The foreign company will have to register with the competent Austrian social security authorities and deduct and pay monthly Austrian social security contributions (employee and employer part). If the company is located in another EU country, Mr A and his employer could agree that these compliance duties are fulfilled by Mr A. However, in practice, this is rarely carried out, as all non-compliance risks would remain with the foreign employer. In addition, the foreign employer will have to pay a contribution to the Austrian family support fund (3.9%).

Tax and social security implications of remote work in Austria only during the COVID-19 pandemic

In the second scenario Mr A and the company agree that, only during the COVID-19 pandemic, Mr A can work 100% remotely from his home office in Austria. The Austrian tax administration takes the position that, if home office work is performed only temporarily during the COVID-19 pandemic, the home office will not create a PE for the foreign employer.

As regards Austrian income taxation, there is no difference to the first scenario. Only in case the company is a German resident company, Austrian income tax could be avoided.

This is due to the fact that, according to a mutual agreement on the tax-implications of COVID-19 concluded between the German and Austrian tax administration, the employee could opt (no obligation) to remain subject to German income taxation.

As regards social security, the competent Austrian ministry takes the view that temporary restrictions on cross-border employment imposed by COVID-19 do not constitute relevant changes as regards the applicable social security legislation. This means that, in the case of COVID-19 related temporary remote work in Austria, the employee will remain within the applicable foreign social security legislation of its country.

If you would like to know more about the tax and social security consequences of remote work in Austria, please visit the homepage of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!

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Broader scope for reduction of VAT to 5%

Following the tax measures related to investments, degressive depreciation, loss carry-backs and others, on 30 June the Austrian National Council decided to amend the law that provides for a reduction of VAT to 5% for certain supplies and services for the period from 1 July 2020 to 31 December 2020. Compared to the draft, the Austrian National Council has extended the scope of the measures.

The affected industrial sectors are gastronomy, the lodging industry, the cultural sector and the publishing sector. These sectors are particularly affected by the consequences of the COVID-19 crisis.

Gastronomy

In the field of gastronomy – in the period from 1 July 2020 to 31 December 2020 – the reduced tax rate of 5% is applicable for the serving of food and (alcoholic and non-alcoholic) beverages under § 111 para 1 GewO. This means that entrepreneurs serving food and beverages generally need a business licence for gastronomy. However, it is also possible that they have another business licence (e.g. baker), which covers the serving of food or beverages for consumption on the spot. The reduced tax rate is also applicable for serving food and (alcoholic and non-alcoholic) beverages if the activity is excluded from the trade regulations (e.g. “Buschenschänken” according to § 2 para 9 GeWO). The only relevant point is that the activity has to involve the serving of food and beverages under § 111 para 1 GewO. The regulation also covers the delivery or collection of open drinks (e.g. coffee from the baker), hot meals or served cold meals.

Lodging industry 

The reduction of VAT to 5% also applies to accommodation services and the provision of land for camping purposes. The tax rate of 5% is for accommodation in hotels, etc. and for the rental of private rooms or holiday apartements (if the conditions of accommodation are fulfilled).

Publishing sector 

The reduction of VAT to 5% applies for books, brochures, magazines, newspapers and other periodicals, and also for electronic publications such as e-books, etc.

Cultural sector

Examples for the application of the reduced VAT rate in the cultural industry include tickets for theatre, music and singing performances, museums, zoos, botanical and zoological gardens, nature parks and cinemas. This reduction shall also apply to transactions relating to the activities of artists and the supply of art objects (if the copyright owner or his successor in title is the supplier) and it will be valid for imports and intra-community acquisitions in these industries.

The Austrian government has announced an extension until the end of 2021 for the reduction of VAT for the affected sectors. However, this extension was only an announcement; it still has to be put into law.

If you would like to know more about the reduction of VAT or other tax measures in Austria related to the COVID-19 crisis, please visit the website of WTS Austria. Their experts will be pleased to advise you in your individual situation.

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COVID-19 investment subsidy

 One of the most important recent measures in Austria is the new COVID-19 investment subsidy, which should encourage companies to invest. Companies that commit to investing in specified assets can get up to 14% of the investment sum back as a subsidy. The basic subsidy is 7% of the invested sum. If the investment is in specific areas like digitalisation, life science/health or sustainability, the percentage of the subsidy is increased by a further 7%. The subsidy may be requested from 1 September 2020 until 28 February 2021 for new investments (first steps taken between 1 August 2020 and 28 February 2021). Climate-unfriendly investments and further specific investments such as undeveloped property, financial assets and others are excluded from the investment subsidy.

Degressive depreciation

 Another important element is the implementation of a new accelerated depreciation regime for investments in new fixed assets. The new degressive depreciation is optional and allows companies to depreciate fixed assets by up to 30% of the residual book value per year. However, the new regime is only applicable for fixed assets purchased or constructed after 30 June 2020. Certain assets are excluded from the new depreciation: e.g. used and intangible assets, buildings (see below), passenger cars (except for e-cars, driving schools and commercial transport use), facilities used for the production, transport or storage of fossil fuels and facilities directly using fossil fuels and airplanes.

Accelerated depreciation for buildings

Buildings acquired or constructed after 30 June 2020 can be depreciated with an accelerated depreciation rate. For the first year, the rate is three times the statutory rate applicable for buildings (7.5% or 4.5%). In the second year the rate can be up to two times the statutory rate (5% or 3%), before falling to the statutory rate in the third year (2.5% or 1.5%).

The statutory half-year rule for assets in use for six months or less will not be applicable in the context of the depreciation regime for buildings. Therefore, the full-year depreciation can be charged in this case.

Loss carry-back

In contrast to other tax regimes Austria has not had a loss carry-back regime so far. To support companies in smoothening the losses due to effects of the COVID-19-crisis, Austria is implementing a temporary loss carry-back system. According to the new regime, it is possible to offset losses of the year 2020 with gains from the past two years. Companies which have a financial year that differs from the calendar year can choose between the year 2020 or the year 2021 as the base year for the loss carry-back.

The loss carry-back is capped at EUR 5 million. It will also be possible to carry back the loss even before the tax return for 2020 has been assessed. The Minister of Finance will be providing more details on the carry-back requirements in a specific regulation.

Other tax measures in Austria

 The Austrian government has reduced the starting tax rate from 25% to 20% applicable for income exceeding EUR 11,000 but not exceeding EUR 18,000. The reduction will become effective for the entire year 2020. Employees with taxable income of EUR 11,000 or less will benefit from an increased commuter deduction of up to EUR 400.

At the other end, the top income rate of 55% for income of EUR 1 million or more will be extended until the year 2025.

Conclusion

 With the tax measures in Austria detailed above the aim of the country’s government is clearly to support the economy during the COVID-19 crisis. The new depreciation regimes and the loss carry-back can help you counter the COVID-19 crisis. However, keep in mind that the new depreciation regimes ultimately only bring the depreciation potential forward. If you are planning investments you should consider the new COVID-19 subsidy, which can lead to subsidies of up to 14%.

If you would like to know more about the latest tax measures in Austria related to the pandemic, please visit the homepage of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!

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Austria levies withholding tax (WHT) on certain capital income (eg dividends), income of artists, sportsmen, lecturers, architects, technical and commercial consultants, leasing of personnel and certain other items. The procedure for refund of Austrian WHT has been changed in 2019, and at the beginning of the year the Austrian Ministry of Finance (MoF) issued a decree which details the changes for foreign applicants. These are also relevant for foreign companies leasing personnel to Austria when applying for a relief of Austrian WHT and for the refund of Austrian payroll taxes by foreign tax residents as well.

Introduction of the two-step procedure for refund of Austrian WHT 

According to the new regulation in sec 240a General Fiscal Law (BAO) foreign applicants have to file a pre-application using the provided online forms before applying for a refund of Austrian WHT. The following steps have to be taken in order:

• Go to the website of the Austrian MoF and search for “ZS-RD” and you will receive a list of all available forms – all of them are available in English. In case different items of income have been obtained by the applicant, different applications and forms might have to be used.
• Use the respective online form and file it electronically (pre-application).
• The pre-application and the respective delivery confirmation have to be printed out and signed by the applicant. Then the certificate / confirmation of residence has to be obtained from the foreign tax authorities on the printed and signed form.
• The signed and confirmed documents including any supporting documents have to be sent via post to the Austrian Tax Office Bruck, Eisenstadt, Oberwart.

In case the applicant files his first refund request, he will receive an identification number (ABZ-number). This identification number must be used on all future refund requests.

Changes in the deadlines

Until 31. December 2018 foreign applicants were able to file their application during the same year, in which the Austrian WHT was deducted. Now the pre-application and consequently also the actual application can only be filed after the end of the year the WHT has been deducted, leading to respective liquidity costs for the foreign receiver of the income.

The application can be filed until the end of the fifth year following the deduction of the Austrian WHT. However, a shorter term in a treaty might be relevant. This depends on whether the respective treaty was signed before the five-year term entered into force for the first time. For treaties signed before 1975, the five-year term will be relevant, even if the treaty provides for a shorter term. Nevertheless, where a treaty was signed after that date and provides for a shorter statute of limitation – eg 4 years in article 27 (2) of the Austrian-German treaty –, the shorter term of the treaty will be relevant. As the treaty with Hungary does not contain any statute of limitation in this regard, the five-year term of the Austrian national law will be relevant for Hungarian applicants.

Leasing of personnel to Austria

Remunerations for leasing of personnel to Austria are subject to a 20% WHT if paid to foreigners. In order to obtain a WHT relief in such cases, special requirements have to be fulfilled. Among others there has to be an Austrian payroll for the leasing personnel. The payments can only be exempt from Austrian WHT, if the foreign receiver of the income has obtained and provided a notification of relief (Befreiungsbescheid) from the Austrian tax office Bruck, Eisenstadt, Oberwart. In the past it was possible to obtain this Befreiungsbescheid formless. Since 1. January 2019 the electronic forms provided by the Austrian MoF have to be used for this application. Furthermore, the foreign applicant now also has to file a pre-application for the application of the Befreiungsbescheid.

In case a WHT relief at source was not possible – as no Befreiungsbescheid was provided –, the foreign receiver of income can apply for a refund. This application follows the same procedure as for WHT in general.

If you would like to know more about the Austrian WHT or about other tax issues which could be of high importance to foreigners doing business in Austria, please visit the homepage of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!

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Consideration of trial runs and the 12-month term

In EAS 3407 a German company was commissioned to provide construction and assembly works in Austria. The operational plant was provisionally accepted by the customer, with final acceptance some months later after trial runs and minor improvements were finished. Hence, the question was whether the provisional or the final acceptance of the plant was relevant for the end of the 12-month term of Article 5(3) in the double taxation agreement between Austria and Germany.

Based on paragraph 55 of the commentary to Article 5 OECD Model Tax Convention (concerning the definition of permanent establishment) , trial runs are generally included in the 12-month period during which the construction site exists. However, based on the principle of the OECD commentary that a construction site ceases to exist when the work is completed or permanently abandoned, the Austrian Ministry of Finance is of the opinion that a trial run can be included in this 12-month period only if:

• the unfinished plant is left in an orderly condition, or
• defects have been rectified so as to guarantee the full operability of the plant, or
• the trial run is essential for the operability of the plant.

A trial run performed after the on-site work is finished is therefore not relevant for calculating the 12-month term. This also applies for the removal of minor defects, repair work during the warranty period, and other services provided after on-site work has been completed. The formal act of a final acceptance can be an indicator for the end of the permanent establisment term, but it will only be relevant if it corresponds with the actual end of the works on-site.

Subcontracting of entire projects

In EAS 3405, an Italian company (ITco) subcontracted the execution of an Austrian project to its Italian subsidiary (SUBco). The project lasted well beyond 12 months. The question raised through the Express Answer Service of the Austrian Ministry of Finance was whether a permanent establisment would be triggered for ITco, even though it had subcontracted the project.

According to the Austrian Ministry of Finance, the existence of a permanent establisment of ITco depends on whether ITco is able to dispose of the Austrian construction site. This would, for example, be the case if ITco has legal possession of the site, controls access to and use of the construction site, and has overall responsibility for what happens at the site (see also paragraph 54 of the commentary on Article 5 OECD Model Tax Convention). In such cases employees of ITco would typically be present to perform supervisory activities. We would generally assume that the general contractor (ITco) is in charge of the total project, and hence liable to the customer for the correct delivery of the order placed.

If in fact the total project is delegated to SUBco, and hence ITco cannot dispose of the construction site, the existence of a permanent establisment of ITco would be questionable. However, we would have to question the economic purpose of introducing ITco as a general contractor, if no functions remain with ITco.

If you would like to know more about permanent establishments in Austria or about other opinions of the Austrian Ministry of Finance regarding international tax matters, please visit the homepage of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!

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