Avoidance of double taxation by countries without a DTA

If a trader undertakes activities in a country with which Austria has no double taxation agreement (DTA), this can lead to genuine double taxation, since each of the two countries has the right to taxation (Austria as country of residence of the trader, the foreign country as a result of the activities undertaken there).

To relieve the trader of the burden of such double taxation, Austrian tax law provides for the possibility of unilateral relief from Austrian taxation. From the point of view of the Austrian state, this means unilaterally waiving the right to taxation, whereas with a DTA, the other country would be obliged to forgo taxation if the situation were precisely reversed.

Order on Avoidance of Double Taxation

The Order of the Federal Minister of Finance on the Avoidance of Double Taxation provides that in the case of a permanent establishment in a non-DTA country, where income has actually been taxed then tax relief will be given when the tax assessment in Austria is made.

If the mean tax load in the foreign country is more than 15 percent, such income will be exempt from tax in Austria, although subject to the progression proviso. If the mean tax load in the foreign country is lower, then the foreign tax actually paid will be offset against Austrian income tax. Both are claimed directly in the tax return and taken into account in the income tax assessment.

The same applies to foreign income from self-employed work through a permanent establishment, from construction or installation work for contractual or training purposes, and from an entertainment performance.

Ruling to remedy double taxation

If neither a double taxation agreement (DTA) nor the above Order can prevent double taxation, then it is possible to submit to the Federal Minister of Finance an application for the double taxation to be remedied by means of a Ruling.

Legal bases

• Verordnung des Bundesministers für Finanzen betreffend die Vermeidung von Doppelbesteuerungen (Bundesgesetzblatt II Nr. 474/2002)
• Section 48 paragraph 5 of the Bundesabgabenordnung