AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler and Mohamed Hemdan, Schindler Attorneys
Capital Gains Derived by Corporations Capital gains (and losses) realised on assets of an Austrian corporation are taxable at the statutory cor - porate income tax rate of 23%, unless it concerns a capital gain on a shareholding that meets the require - ments for the participation exemption to be applied. Under the international participation exemption, capi - tal gains and dividend income from qualified share - holdings are fully exempt from the Austrian corporate income tax base (a participation amount of at least 10% and an uninterrupted holding period of at least one year are required). Under the domestic participation exemption, profit distributions of domestic corporations are exempt from taxation, and this exemption applies without any minimum holding requirements and holding periods. However, capital gains realised on the alienation of shares in domestic corporations are subject to regular taxation. For the taxation of capital gains derived from the sale of immovable property, please see 3.1 Income From Immovable Property . 3.5 Employment Income Income from employment is generally taxed at the standard progressive income tax rates. Certain bonus payments may, however, be taxed at reduced rates under specific conditions (eg, holiday and Christmas bonus salary payments). The taxation of employment income from assignments or cross-border employment generally depends on the duration of the assignment and the applicable DTT. Inbound cross-border employees (ie, individuals who work in Austria but are tax-resident in another state) are generally subject to limited tax liability in Austria under the rules described in 2.4 Taxation of Non-Resident Individuals . In practice, this means that Austrian income tax is levied only on the income earned from work performed in Austria, while earnings from employment performed in other states are not taken into account. As employee assignments regu - larly involve cross-border tax obligations, Austria has also enacted a regulation that sets out the rules for WHT relief for the assignment of personnel ( Verord-
nung zur Abzugsteuerentlastung bei Arbeitskräfteges- tellung ). As most Austrian DTTs follow the OECD Model Tax Convention, employment income will be taxable in Austria for non-resident employees if either: • the work is performed in Austria for more than 183 days in a 12-month period; or • the remuneration is paid by or borne by an Austrian employer or an Austrian PE. It should be noted that, for these purposes, Austria disregards whether the income is paid by the foreign civil law employer to the employee, and instead con - siders whether, from an economic perspective, the Austrian employer ultimately bears such remunera - tion. Austria has concluded special regulations for cross- border workers in certain DTTs (Germany, Liechten - stein and Italy). In these cases, the special provisions of the respective DTTs must be taken into account. Typically, this results in individuals qualifying as cross- border workers under the relevant DTTs being taxed in their country of residence, regardless of the general rules under which Austria may have had the right to tax income from work performed on its territory. Austria has not adopted specific legislation address - ing the tax consequences of remote work. That said, the consequences and risks of remote working are essentially covered by existing Austrian tax law, which generally provides that, when interpreting tax law, the true economic substance of the facts is decisive. Furthermore, the implications of remote working are often addressed in administrative guidelines, rather than through new legislation. For instance, the Aus - trian transfer pricing guidelines include provisions for home office PE arrangements. Recently, the Austrian MoF confirmed in a written notice the full applicability of the updated OECD Commentary regarding remote work and home office arrangements. 3.6 Other Income The Austrian Income Tax Act differentiates between seven types of income sources:
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