In Austria, as in many other countries, there are no explicit rules in the Income Tax Act or Value Added Tax Act which specifically deal with cryptocurrencies. The Austrian Ministry of Finance released some guidance last year which, although helpful in most respects, is definitely not comprehensive.

Recently, however, the Ministry of Finance has clarified the treatment of cloud mining activities (EAS 3401 of 30 April 2018). Cloud mining refers to the mining of cryptocurrencies via a remote datacentre; users can thus mine bitcoins or altcoins without themselves having to own and manage the necessary hardware. In its statement, the Ministry of Finance deals with the interesting question whether cloud mining activities may constitute a permanent establishment. In the case analysed, a Swiss company had participated in an Austrian cloud mining project relating to cryptocurrencies. Obviously, should there have been a permanent establishment in Austria, then Austria could – under domestic and treaty law – have taxed the profits of the Swiss company.

At the outset, the Ministry of Finance noted that the official commentary on article 5 of the OECD Model Convention does not deal with cloud mining. Under article 5(1) of the double taxation treaty concluded between Austria and Switzerland, an enterprise has a permanent establishment if it has a fixed place of business in the other state at its disposal in which the business of the enterprise is wholly or partly carried out. In this respect, past case law on servers has held that a permanent establishment can be assumed to exist even though no personnel were physically required at these premises.

In summary, the Austrian Ministry of Finance distinguishes between two cases: In the first case a taxpayer owns or rents computer equipment to carry out mining activities and has such equipment at its disposal (either in its own premises or in a datacentre); here the equipment may indeed be considered as constituting a permanent establishment. In the second case a taxpayer merely rents computer capacity from a company engaged in cryptocurrency mining activities, without the taxpayer having the computer equipment at its disposal; here the taxpayer cannot be considered as having a permanent establishment (as is the case with other types of cloud services).