On 23 October 2018, an amended double taxation treaty between Austria and the United Kingdom was concluded. In addition, on 8 June 2018, a new double taxation treaty between Austria and Kosovo was signed. Neither treaty has entered into force yet.
The existing double taxation treaty with the UK dates back to 1969, is obsolete and no longer complies with the latest OECD standard. The amendment of the treaty shall reflect the latest developments in international tax law, and, since the exit of the UK from the EU could lead to a non-applicability of EU directives, shall also prevent any impairment of capital flows. In essence, the following amendments have been introduced:
- The term resident of a contracting state shall include pension schemes and organizations that are established and operated exclusively for religious, charitable, scientific, cultural, or educational purposes.
- In case of doubt regarding the residency of a legal person, the competent authorities shall endeavour to determine by mutual agreement the state in which the place of effective management is exercised; in the absence of such agreement, that person shall not be entitled to claim any benefits provided by the double taxation treaty.
- The withholding tax rate on dividends shall generally be 10%. In case dividends are paid by a relevant investment vehicle (e.g., in Austria, a real estate investment fund which meets the conditions of the Austrian Act on Real Estate Investment Funds [Immobilien-Investmentfondsgesetz]), the withholding tax rate shall be 15%. Further, dividends shall be exempt from withholding tax if the beneficial owner of the dividends is (i) a company that controls directly or indirectly at least 10% of the voting power of the company paying the dividends; or (ii) a pension scheme.
- There shall be no withholding tax on royalties anymore.
- Gains emanating from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property may be taxed in the state where such property is situated.
- Where the competent authorities are unable to reach an agreement to resolve a case on taxation deemed to be not in accordance with the provisions of the double taxation treaty, any unresolved issues shall be submitted to arbitration if the person so requests.
- There shall be a provision on assistance in the collection of taxes.
- A principal purpose test shall apply, pursuant to which, generally, a benefit shall not be granted in respect of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit.
Finally, the conclusion of the new double taxation treaty with Kosovo (the first of its kind between the two countries) aims at strengthening economic relations with Kosovo by eliminating double taxation; also, currently no legal basis for an exchange of information between the two countries exists which complies with the international standard. Content-wise, the double taxation treaty already takes into account the work at the level of the OECD on the reduction of base erosion and profit shifting (BEPS).