Details of the Austria-United Kingdom Income Tax Treaty (2018), signed on 23 October 2018, have become available. The treaty was concluded in the English and German languages, each text having equal authenticity. The treaty generally follows the OECD Model (2017).
The maximum rates of withholding tax are:
- 10% on dividends in general, 15% were the dividends are paid by a relevant investment vehicle (as defined in Art. 10(6)), and 0% if the beneficial owner of the dividends is a company (other than a partnership) which controls, directly or indirectly, at least 10% of the voting power in the company paying the dividends or a pension scheme;
- 0% on interest; and
- 0% on royalties.
Deviations from the OECD Model include that:
- article 4(2) provides that the term "resident of a Contracting State" includes a pension scheme established in that State and an organization that is established and is operated exclusively for religious, charitable, scientific, cultural, or educational purposes (or for more than one of those purposes) and that is a resident of that State according to its laws, notwithstanding that all or part of its income or gains may be exempt from tax under the domestic law of that State;
- article 4(4) provides that where by reason of the provisions of article 4(1) a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated. However, in cases of doubt, the competent authorities of the Contracting States shall endeavour to determine by mutual agreement the State in which the person’s place of effective management is exercised, and in doing so shall take into account all relevant factors. In the absence of such agreement, that person shall not be entitled to claim any benefits provided by the Convention except those provided by article 21 (Elimination of Double Taxation), article 22 (Non-discrimination) and article 23 (Mutual Agreement Procedure).
- article 5 on permanent establishments follows the OECD Model (2014);
- article 7 on business profits is based on the OECD Model (2008); and
- article 27 on limitation of relief provides for a principle purpose test.
Both states generally provide for the credit method to avoid double taxation. The treaty also clarifies that the United Kingdom exempts the dividends paid by a company resident in Austria to a company resident in the United Kingdom if the conditions for the exemption are met under the laws of the United Kingdom. Likewise, the profits of a permanent establishment in Austria of a company resident in the United Kingdom are exempt in the United Kingdom if the conditions for the exemption are met.