AUSTRIA Law and Practice Contributed by: Farid Sigari-Majd and Mathias Lehner, Freshfields
2.2 Lease Terms 2.2.1 Mandatory Terms for Leases Governed by English or New York Law The authors are not aware of any mandatory terms under Austrian law that must be included in a lease and which are not typically already included in an Eng - lish or New York law-governed lease agreement. Parties may wish to reflect on the specifics of Austrian law in respect of: • the perfection of security; • administrative requirements (eg, registration, insur - ance, licensing, regulation and continuing airwor - thiness); • stamp duty; • release from duties of confidentiality and banking secrecy (if applicable); and • include sanctions language where appropriate. 2.2.2 Tax and Withholding Gross-Up Provisions Gross-up provisions with regard to any withholding tax levied on payments by a party to a lease agree - ment are permissible and enforceable under Austrian law. 2.2.3 Parts Installed or Replaced After a Lease’s Execution A lease agreement may cover parts installed or replaced on an aircraft (and the parties may agree on whether the lessor or the lessee is obliged to replace components). As regards the property right in such components, the rules on the transfer of title of the law applicable in accordance with the conflict of laws rules (see 1.2.2 Sales Governed by English or New York Law ) would have to be observed. 2.2.4 Risk of Title Annexation Without a title agreement, the title to an engine would not automatically pass to the owner of the airframe merely because the engine is installed on the airframe. 2.2.5 Recognition of the Concepts of Trust/Trustee Austrian law would test the validity and enforceability of a trust against the law of the state of registration (if an aircraft is registered) or the lex rei sitae in the case of any other tangible asset.
handled by an Austrian bank, it would usually take care of the reporting. 2.1.5 Taxes/Duties Payable for Physical Execution of a Lease The execution of a lease agreement in Austria is sub - ject to 1% Austrian stamp duty on the basis of the total amount of rent paid under the lease agreement (capped at a maximum of 18 times the annual rent) or, if the lease is for an indefinite period, on the aggregate value of three-year rentals. Stamp duties are, however, only triggered if a document is physically or electroni - cally signed in Austria or – in certain circumstances – if executed abroad and subsequently (as an original or certified copy) brought into Austria, or if written ref - erences to such lease agreements are produced or sent in, to or from Austria. There are several common methods to mitigate Austrian stamp duty, relying on the Austrian Stamp Duty Act’s “form over substance” approach. 2.1.6 Licensing/Qualification of Lessors Austrian leasing providers would usually require a business licence ( Gewerbeberechtigung ) for which no specific qualification is required. Leasing providers from the EU may instead be able to rely on a relevant business licence in their home country. Providers from outside the EU would normally be required to estab - lish an Austrian branch office and obtain a licence. Austrian leasing providers are subject to several supervisory laws, including with respect to AML com - pliance, controlling, confidentiality and reporting. Cer - tain qualifying providers from the EU (“CRR-financial institutions”) may be exempted from most Austrian supervisory laws under the EU-passporting regime. Aircraft rental services ( Luftfahrzeug-Vermietungsun- ternehmen ) are required to obtain permission from the relevant regional governor ( Landeshauptmann ) in accordance with the Austrian Aviation Act ( Luftfahrt- gesetz ). The distinction between an operating lease and a rental is not entirely clear; the latter term argu - ably refers to short-term operating leases (with many lessees during the lifetime of the asset and where each lessee bears no risk in relation to and does not benefit from the economic value of the asset and assumes no obligation in respect of its maintenance).
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