May 2018 / Switzerland

May 14 2018

Treaty between Austria and Switzerland – Austrian Ministry of Finance clarifies treatment of cloud mining activities

The Austrian Ministry of Finance recently published its opinion on the question whether cloud mining activities may constitute a permanent establishment (PE). In EAS 3401 of 30 April 2018, the Ministry of Finance considered the question whether a stock company with legal seat and place of management in Switzerland would be subject to limited tax liability in Austria through the participation in a cloud mining project relating to cryptocurrencies. In its answer, the Ministry of Finance noted that the current OECD Commentary on Article 5 of the OECD Model does not include any references relating to cloud mining projects. The Ministry therefore referred to the relevant part of the current OECD Commentary and article 5(1) of the Austria-Switzerland Income and Capital Tax Treaty (1974). Accordingly, an enterprise has a PE if it has a fixed place of business in the other state at its disposal in which the business of the enterprise is wholly or partly carried on. Where an enterprise operates computer equipment at a particular location, a PE may exist even though no personnel of that enterprise is required at that location for the operation of the equipment. The Ministry observed that if the Swiss stock company operates computer equipment in order to carry on mining activities related to cryptocurrencies, such activities must be considered significant business activities. Furthermore, if the stock company owns or rents computer equipment to carry on such activities and has the equipment at its disposal, the equipment may be considered a PE. However, if the Swiss stock company only rents computer capacity from a company engaged in cryptocurrency mining activities without having any computer equipment at its disposal, it cannot be considered to have a PE. Finally, the Ministry noted that the users of other cloud services also generally do not have the related computer equipment at their disposal.