Under Austrian domestic law, there is generally a 25% WHT for corporations and 27.5% WHT for other recipients on dividends (profit distributions) paid to a foreign parent company. The WHT has to be deducted and forwarded by the Austrian subsidiary to the tax office.
To end up with the reduced WHT rate as defined under the DTT applicable, Austrian tax law provides for the following alternative methods of WHT relief: refund method or exemption at source method.
The Austrian subsidiary generally has to withhold 25% WHT (for corporations) or 27.5% WHT (for other recipients) on profit distributions to the foreign parent company, and the parent company has to apply for a refund (of the difference between 25% or 27.5% WHT and the lower DTT rate). In the course of the refund process, the Austrian tax administration analyses whether the foreign shareholder can be qualified as beneficial owner of the dividends paid. If the refund is approved by the Austrian tax authority, dividend distributions within the following three years can be done without deduction of WHT (for distributions of a comparable size and provided the foreign holding structure did not change in the meantime).
Exemption at source method
Relief at the source is available only if the direct parent company issues a written declaration confirming that it is an ‘active’ company carrying out an active business that goes beyond the level of pure asset management (holding activities, group financing, etc.) and has its own employees and office space at its disposal (substance requirements).
WHT on dividends paid to EU companies
With regard to dividends paid to EU resident corporate shareholders, Austria has implemented the EU Parent/Subsidiary Directive according to which domestic WHT is reduced to zero. The requirements for the reduction are that the EU resident parent company, which also has to meet the substance requirements mentioned above (see Exemption at source method) at the moment of the dividend distribution, must directly own at least 10% of the share capital of the Austrian subsidiary for a period of at least one year. In case of foreign EU shareholders being qualified as pure holding companies, the Austrian tax administration does not allow an exemption at source but claims the application of the refund method.
Provided the requirements according to the EU Parent/Subsidiary Directive are not met, Austrian WHT has to be deducted. If an EU parent company cannot credit the Austrian WHT deducted against the CIT of its resident state (e.g. because the foreign dividend income is exempted from the CIT or due to a loss position of the shareholder), it is entitled to apply for a refund of the Austrian WHT. This application has to include a confirmation/documentation that the Austrian WHT could (fully or partly) not be credited at the level of the parent company.
Repayment of equity
The tax-wise equity of a company has to be annually reported to the Austrian tax authority as part of the CIT return (equity account, so-called ‘Evidenzkonto’). This equity can be repaid to the domestic or foreign shareholders without triggering Austrian WHT. However, the tax-wise classification of a dividend as ‘capital repayment’ has to be shown in the company’s equity account and be reported in a separate tax return.
For repayments and dividend distributions that are decided after 31 December 2015, the taxpayer has the possibility to opt whether a dividend for tax purposes should be treated either as dividend distribution or as repayment of equity. The execution of the option for treating dividends as dividend distribution requires a sufficient level of retained earnings while a classification as equity payment requires a positive level of tax-wise 'disposable' equity (in addition to the formal requirements outlined above).
Interest payments to non-resident companies are currently not subject to WHT (provided no Austrian real estate property is used as security).
Interest on Austrian bank deposits received by individuals resident in the European Union is not subject to WHT. The background of this law is that Austria agreed on the automatic exchange of information (according to directive 2014/107/EU).
Interest (accrued) on Austrian bank deposits or Austrian bonds received by non-resident individuals, where the paying/depositary agent is located in Austria, is subject to 25% WHT (27.5% WHT for Austrian bonds). A tax exemption applies if an automatic system regarding the exchange of information is available and WHT has to be withheld.
On royalties paid to a non-resident company, Austrian WHT at a rate of 20% has to be deducted. This tax rate can be reduced under an applicable DTT or under the application of the EU Interest Royalty Directive, which was implemented in Austrian Tax Law.
The following table lists the countries with which Austria has signed a DTT and provides details of the amount of Austrian WHT.
|Dividends (1, 2)||Interest (3)||Royalties, licences (4)|
|Resident corporations||0/25 (5)||0/25||0|
|Resident individuals||27.5 (6)||0/25/27.5 (43)||0|
|Corporations and business enterprises||25/27.5 (44)||0||20|
|Argentina (7) (DTT was recalled by Argentina in 2009)|
|Azerbaijan||5/10/15 (8)||0||5/10 (9)|
|Belarus (White Russia)||5*/15||0||5|
|Bosnia and Herzegovina||5*/10||0||5|
|Czech Republic||0+/10||0||5 (12)|
|Liechtenstein||0+/15 (37)||0||5/10 (20)|
|Montenegro (38)||5 (39)/10||0||5/10 (40)|
|Russia (48)||5*/15 (26)||0||0|
|United Arab Emirates||0||0||0|
|United Kingdom (49)||0+/10/15||0||0**|
|United States (36)||5+/15||0||0/10 (33)|
- Dividend distributions attributable to a prior release of paid-in surplus or other shareholder contributions (classified as capital reserves) are deemed to be a repayment of capital, i.e. no WHT is incurred. At the shareholder’s level, dividends received and those classified as contribution refund will reduce the tax basis assessment for investments. To the extent to which the tax basis would become negative, such dividends are treated as taxable income (unless taxation is eliminated by a tax treaty).
- Under certain treaties, the amount of the WHT is dependent on the extent of the proportion of issued share capital held by the recipient. Where this is the case, all rates are given. Those marked with + refer to an investment of 10%, ++ to 15%, +++ to 20%, * to 25%, ** to 50%, and *** to 70%.
- Interest on cash deposits in euro or foreign currency in bank accounts, on fixed interest bearing securities in foreign currency (issued after 31 December 1988), and on fixed interest bearing securities denominated in Austrian schillings or euro (issued after 31 December 1983) are subject to a 25%/27.5% WHT. If the recipient is an individual, this WHT is final (no further income taxation and inheritance taxation). Companies receiving interest payments may obtain an exemption from WHT if they provide the bank or other custodial agent with a written confirmation from the recipient that such interest payments constitute a part of the recipient’s operating revenues (exemption statement). Interest payments to non-residents without a PE in Austria are generally not subject to WHT (provided the loan is not secured via Austrian land property). At interest payments between affiliated companies, the regulations stipulated by the EU Interest Directive have to be taken into consideration.
- In case of payments to countries marked with **, the rate is 0% unless more than 50% of the issued share capital of the company paying the royalties is held by the recipient, in which case the rate given applies. At royalty payments between affiliated companies, the regulations stipulated by the EU Interest Directive have to be taken into consideration.
- If the recipient holds a participation of less than 10% in the distributing company, the dividends are subject to a 25% WHT. Since dividends distributed by an Austrian corporation to another Austrian corporation are generally not subject to taxation, the WHT is credited against CIT upon assessment of the recipient corporation for the respective tax year.
- WHT on dividends from Austrian companies is final, i.e. no further income tax is collected from the recipient (provided it is an individual).
- The treaty was recalled by Argentina in 2009. Austrian tax citizens are protected by section (§) 48 BAO (Bundesabgabenordnung [Austrian Fiscal Federal Code]) against double taxation.
- 5% for shares of at least 25% and worth at a minimum of 250,000 United States dollars (USD); 10% for shares of at least 25% and worth at least USD 100,000; 15% in all other cases.
- 5% for industrial licences and know-how not more than three years old; 10% in all other cases.
- 10% for copyright licence fees in connection with literature, science, and art; 25% for trademarks licence fees; 15% in all other cases.
- 6% for industrial, commercial, or scientific equipment; 10% in all other cases.
- 5% for licence income from copyrights, brands, plans, secret formulas or procedures, computer software, industrial, commercial or scientific use of equipment, and information.
- 0% for copyright royalties in connection with the production of literary, dramatic, musical, or artistic work; 5% in all other cases.
- 20% for films.
- 5% for leasing of mobile goods, and 10% for other licences.
- 0% for shares of at least 50% and worth at a minimum of EUR 2 million; 5% for shares of at least 10% and worth at least EUR 100,000; 10% for shares in all other cases. The treaty was updated on 4 June 2012. An announcement was published in the Austrian Federal Law Gazette on 14 May 2018, that the protocol to 2005 DTT with Georgia entered into force on 1 March 2013 and that the protocol signed on 4 June 2012 replaces Article 10 and 26 (0% if a company directly holds at least 10% of the capital of the company paying the dividends, 10% for shares in all other cases). The provisions of the protocol generally apply from 1 January 2014.
- 2% for licence income from industrial, commercial, or scientific use, and 10% for other licences.
- 5% for the use of commercial or scientific equipment; 10% in all other cases.
- The treaty was signed on 16 September 2010. It has not yet been decided when it will enter into force.
- 5% in case of direct (or indirect over a patent-realisation-company) payments of royalties by companies of the other member state (with an industrial establishment in the other member state), and 10% for other licences.
- 5% in case of licence income from industrial, commercial, or scientific use, and 10% for other licences.
- 15% for films.
- 0% for copyright licence fees in connection with literature, art, and scientific use, and 10% for other licences.
- 10% for the right of use of copyrights to artistic, scientific, or literary as well as cinematographic works, and 5% for other licences.
- For Portugal, the rate of WHT is 5%, but 10% if more than 50% of the issued share capital is owned by the recipient.
- 5% if capital share amounts to at least 10% and worth at least USD 100,000; 15% in all other cases.
- The treaty was signed on 12 March 2015 and entered into force on 1 February 2016. It is applicable as of the beginning of FY 2017.
- 5% for copyright licence fees; 10% for other licences.
- Until a new treaty will be established, the treaty with Czechoslovakia remains applicable.
- For dividend distributions retroactive as of 1 January 2000.
- The treaty was signed on 3 March 2009. It has not yet been decided when it will enter into force.
- 15% for films.
- 10% for films.
- 7.5% for fees for technical services; 10% for royalties.
- 5% for the use of, or the right to use, any industrial, commercial, or scientific equipment; 10% in all other cases.
- Austria and the United States created a draft for an amendment protocol to the existing DTT, but it has not yet been decided when it will be signed.
- 0% for a direct participation of at least 10% and a holding period of at least 12 months; 15% in all other cases.
- The treaty was signed on 16 June 2014 and entered into force on 21 April 2015. It is applicable as of the beginning of FY 2016.
- 5% if the recipient holds a qualifying participation of at least 5%; 10% in all other cases.
- 5% for licence fees for the use of any copyright of literary, artistic, or scientific work; 10% for licence fees for the use of patents, trademarks, and information concerning industrial, commercial, or scientific experience.
- The treaty entered into force on 1 January 2015 and is applicable in respect of taxes withheld at source for amounts paid on or after 1 January 2016 and in the case of other taxes for periods beginning on or after 1 January 2016.
- Interest on Austrian bank deposits received by individuals resident in the European Union is subject to 35% EU WHT on the basis of the Austrian EU Withholding Tax Act. However, the EU Withholding Tax Act will be abolished as of 1 January 2017 (for new bank accounts as of 1 October 2016). Subsequently, interest on Austrian bank deposits received by individuals resident in the European Union are no longer subject to WHT. The background of this law amendment is that Austria agreed on the automatic exchange of information (according to directive 2014/107/EU).
Interest (accrued) on Austrian bank deposits or Austrian bonds received by non-resident individuals, where the paying/depositary agent is located in Austria, is subject to 25% WHT (27.5% WHT for Austrian bonds).
- Interest on Austrian bank deposits (or Austrian bonds), where the paying/depositary agent is located in Austria, is subject to 25% WHT (27.5% WHT on Austrian bonds).
- 25% WHT for corporations and 27.5% WHT for other recipients.
- The treaty was signed on 30 June 2016 and entered into force on 1 March 2017. It is applicable as of the beginning of FY 2017.
- In January 2017, Austria concluded a new DTT with Japan that includes some base erosion and profit shifting (BEPS) compliant regulations. The DTT entered into force on 27 October 2018 and is applicable for tax years as of 1 January 2019.
- The treaty was signed on 28 November 2016 and entered into force on 1 March 2018. It is applicable as of the beginning of FY 2019.
- On 5 June 2018, a protocol was signed that amends the existing DTT between Austria and Russia. The amendments entered into force in June 2019 and are applicable as of 2020.
- On 23 September 2018, a new DTT with the United Kingdom was signed. From an Austrian perspective, it is applicable for tax years beginning on or after 1 January 2020 (please note that different dates of entry into force apply in the United Kingdom).
- The treaty was signed on 8 June 2018 and entered into force on 28 December 2018. It is applicable as of 1 January 2019.
Currently, new DTTs or revisions with Argentina, Australia, Bahrain, Brazil, China, Egypt, Indonesia, Iran, Ireland, Italy, Korea, Kuwait, Libya, Malaysia, New Zealand, Netherlands, Norway, Oman, Philippines, Qatar, Russia, San Marino, Saudi Arabia, Sri Lanka, Syria, Tajikistan, Thailand, Tunisia, Ukraine, United Arab Emirates, the United States, Uzbekistan, and Vietnam are under negotiation.
On 10 October 2017, the Council of the European Union adopted new rules on tax dispute resolution (Directive [EU] 2017/1852). This Directive lays down the rules for a mechanism to resolve disputes between member states when those disputes arise from the interpretation and application of agreements on the elimination of double taxation. The Directive applies to complaints submitted after 30 June 2019 on questions relating to tax years from 2018 onwards. The EU Tax Dispute Resolution Act (‘EU-Besteuerungsstreitbeilegungsgesetz’ or EU-BStbG), implementing the EU directive locally, came into force on 1 September 2019.