26.3- United States Tax Treaty with Austria

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This United States tax Treaty with Austria in summary as hereunder outlines the Taxation Convention between the United States and Austria, signed on May 31, 1996, and effective from January 1, 1999. Its purpose is to avoid double taxation and prevent fiscal evasion regarding income taxes. Below is a simplified summary of the key points:

Key Highlights:

1. Purpose: Prevent double taxation and fiscal evasion for individuals and businesses operating in both countries.

2. Taxes Covered:

   • United States: Federal income taxes (excluding social security taxes).

   • Austria: Income tax and corporation tax.

3. Taxation Rules:

   • Dividends: Taxed at a maximum of 5% for direct investments (10% ownership or more) and 15% for other cases.

   • Interest: Taxed only in the resident's country.

   • Royalties: Generally taxed only in the resident's country, except for certain cases (e.g., films or broadcasting rights), where the source country may tax up to 10%.

   • Capital Gains: Taxed in the country where the property is located or where the permanent establishment exists.

   • Business Profits: Taxed in the country where the permanent establishment is located.

   • Personal Services: Taxed in the country where services are performed, unless certain conditions are met (e.g., short-term employment).

   • Pensions and Social Security Payments: Taxed in the resident's country, with some exceptions for government pensions.

   • Students and Trainees: Payments for maintenance, education, or training are exempt from tax in the host country for up to 3 years.

4. Anti-Abuse Rules:

   • Prevents "treaty shopping" (using the treaty to avoid taxes unfairly).

   • Benefits are limited to residents actively conducting business in their country or meeting specific ownership and income criteria.

5. Exchange of Information:

   • Both countries agree to share tax-related information to prevent fiscal evasion.

   • Includes access to bank information for penal investigations.

   • Information can be shared with oversight bodies like the U.S. Congress and Austria's Accounting Court.

6. Relief from Double Taxation:

   • Both countries will provide tax credits for taxes paid in the other country to avoid double taxation.

   • Special rules apply for U.S. citizens residing in Austria and U.S. corporations with Austrian subsidiaries.

7. Non-Discrimination:

   • Nationals of one country will not face more burdensome taxation in the other country than local residents in similar circumstances.

8. Mutual Agreement Procedure:

   • Provides a process for resolving disputes or clarifying treaty provisions between the two countries.

9. Diplomatic Privileges:

   • Diplomatic agents and consular officers retain their fiscal privileges under international law.

10. Termination:

    • The Convention can be terminated by either country after 5 years with 6 months' notice.

Additional Notes:

• A Memorandum of Understanding clarifies specific provisions, such as the treatment of pass-through entities, orchestras, social security payments, and anti-abuse rules.

• The Convention aligns with the OECD Model Tax Convention but includes specific provisions for U.S.-Austria relations.

• The Convention replaces the previous 1956 U.S.-Austria tax treaty.

This agreement aims to foster economic cooperation, ensure fair taxation, and prevent tax evasion between the two countries.