AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler and Mohamed Hemdan, Schindler Attorneys
on a form provided by the Austrian Federal Ministry of Finance. A certificate of residence of the EU recipient corporation must also be obtained from the compe - tent EU tax office promptly after the profit distribution. If proof of substance cannot be provided by the EU recipient corporation (which will often be the case with a holding company or an acquisition vehicle), relief at source is generally not possible and the Austrian corporation would have to withhold WHT on the dis - tribution and pay it to the Austrian tax office. The EU recipient corporation would then still have the option to apply to the Austrian tax office for a refund of the WHT from the following year. In such a refund pro - cedure, the Austrian tax office would check whether there actually is abuse or whether the conditions for an exemption from WHT are met and therefore the WHT should be refunded to the EU recipient corpora - tion. As soon as a refund is granted, relief at source can subsequently be granted for three years under certain conditions (ie, for distributions of a similar size and provided that the foreign holding structure remained unchanged). The dividend WHT can also be reduced at source under the applicable DTTs in accordance with the formal requirements laid down in the DTT Relief Reg - ulation ( Doppelbesteuerungsabkommen-Entlastungs- verordnung , or DBAEV). A recipient seeking to reduce the dividend WHT will have to provide a certificate of residence issued on Austrian forms “ZS-QU1” (for individuals) or “ZS-QU2” (for legal entities). Legal enti - ties must also satisfy the relevant substance require - ments, as previously mentioned. The DTT Relief Regulation limits the dividend WHT exemption at source in certain cases – for example, foreign foundations, trusts and investment funds do not qualify for dividend WHT exemption at source. Austrian corporate income tax law further includes a special provision that allows a foreign entity to apply for a refund of the total Austrian WHT – including the share of WHT that Austria is entitled to tax under the relevant DTTs – if the foreign entity is unable to cred - it the Austrian WHT in its country of residence (eg, because the dividend income is exempt).
At the EU level, further provisions and limitations regarding WHT are expected under the FASTER Direc - tive (effective from 1 January 2030), which should con - tribute to streamlining refunds for listed dividends. Royalties Royalties paid to non-residents are generally subject to a 20% WHT. A reduction or full exemption may be available under a DTT or the EU Interest and Royal - ties Directive. The procedures for claiming relief or a refund follow the same process as for dividends. Interest No WHT applies to interest paid to non-resident cor - porations. 4.2 Key Treaty Jurisdictions for Inbound Investment The most common tax treaty countries are Germany, Austrian tax authorities will examine whether the trea - ty country entity qualifies as the beneficial owner of the income and whether it carries out genuine eco - nomic activities; for example, where an entity resident in a treaty state is used by a non-treaty state resident solely as an interposed holding or conduit company, the tax authorities may deny treaty benefits. In this respect, Austrian tax law contains several anti-treaty shopping provisions to prevent the abuse of DTTs. Furthermore, several Austrian DTTs include subject- to-tax, switch-over and remittance clauses to prevent certain income from not being taxed in either of the two treaty countries. 4.4 Transfer Pricing Issues for Inbound Investors Luxembourg, Switzerland and the UK. 4.3 Tax Authority Scrutiny of “Treaty Shopping” Practices For inbound investors, the main transfer pricing issue is ensuring compliance with the arm’s length principle (for inbound services, financing, and IP royalties from foreign parents/sisters. etc). Other issues may include the examination of the transfer pricing methodologies chosen, the assessment of the attribution of beneficial ownership in the companies’ assets as declared, and
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