The Austrian Tax Code Amendment Act of 2014 expanded the limited tax liability with regard to interest payments (withholding tax for non-residents) pursuant to the EU Withholding Tax Act, if the interest income is subject to taxation at source. Since 1 January 2015, domestic interest payments have been subject to this expanded tax liability in the amount of 25%, and since 1 January 2016, interest payments arising out of the issuance of securities by Austrian issuers are subject to a tax liability in the amount of 27.5%.
Subject to limited tax liability to interest payments (withholding tax for non-residents) are:
- Natural persons from third countries
- Natural persons from third countries and the EU who participate in foreign entities that are transparent from a tax standpoint (particularly partnerships)
- Ambassadors, diplomats from the third-country area, and employees of international organisations (from the third-country area and the EU)
Not subject to withholding tax for non-residents:
- Interest earned by legal persons
- Partnerships in which only foreign legal persons participate
- Ambassadors, diplomats from the EU (they are subject to EU withholding tax and therefore do not fall within the scope of applicability)
If domestic natural persons participate in a partnership, they are subject to general domestic withholding tax deduction.
Payments subject to taxation:
- Interest income from deposits with credit institutions (savings accounts, current accounts, fixed-term deposits, …)
- Interest payments from issues of Austrian issuers, regardless of the actual country of issue
- Funds: to the extent of a certain amount of investment in domestic issues of Austrian issuers
- Funds: flat rate taxation in accordance with sec. 7 para. 6 EU Withholding Tax Act, insofar as this involves foreign funds in the absence of a report to the competent registration office
- Basically only interest payments in accordance with the EU Withholding Tax Act. Therefore products not subject to EU withholding tax are also not subject to limited tax liability
- Interest income that is subject to the EU Withholding Tax Act received by (natural) persons
- Interest payments whose debtor is neither resident nor has their registered office in the country, nor is the debtor a domestic branch office of a foreign credit institution
- Private loans and private placements are not subject to the duty to deduct, since they basically are also not subject to any withholding tax deduction
- Mortgage bonds are exempt from taxation up to 4% of income under the same conditions as resident taxpayers
Interest income subject to limited tax liability in Austria is normally also subject to taxation in the recipient’s country of residence. Thus, in the future, there will normally be a conflict in the respective taxation claims. The taxpayer can have the withholding tax that exceeds the withholding tax rate pursuant to the applicable double taxation agreement (if there is one) reimbursed in Austria. Deducted withholding taxes are generally capable of being offset in the country of residence to the extent provided for in the double taxation agreement.
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This is a marketing publication. Our communication languages are German and English. This document is intended as source of additional information for our investors and is based on the knowledge of the persons involved in its preparation at the time of going to press. Our analyses and conclusions are of general nature and do not take into account the requirements of our investors with regard to return, tax situation, or risk profile. Please bear in mind that an investment in securities contains both opportunities, as illustrated, and risks. The full information (base prospectus, final terms, client information pursuant to the Securities Supervision Act 2007) for all the products of Erste Group Bank AG is available for free at the registered office of the issuer, Am Belvedere 1, 1100 Vienna, Austria, during regular business hours. Errors & omissions excepted.
Updated: Jänner 2016