Austria: Crediting of taxes paid abroad

The Austrian tax administration has implemented some tax reliefs in order to help Austrian companies operating in certain foreign markets. The reliefs refer to taxes the branches of Austrian companies have to pay abroad regarding profits and the income from interests and royalties.
The double taxation agreements reached with some countries (among which are for example the USA, the United Kingdom and Italy) stipulate that this kind of profits and income is subject to taxation also in Austria. However, taxes paid abroad may be credited in the calculation of the tax due in Austria in order to avoid double taxation.
In any case, the credited amount of foreign taxes cannot exceed the amount to be paid in Austria. Therefore in the event the whole company is suffering a loss or the profits are too small, there is the risk that not the whole amount of taxes paid abroad may be claimed from the tax administration. At the same time, profits realized abroad might reduce the loss carried forward causing thus practically double taxation.
In spring 2009 the Austrian tax administration reached the conclusion that taxes paid abroad and not credited for must not be claimed immediately. According to some experts, this is a new interpretation of existing laws which eliminates a competitive disadvantage Austrian companies had to face in the past.
Up to now no clear definitions regarding the number of years during which the crediting of taxes paid abroad might take place have been published. However, experts believe that this period should be at least five years. In theory it should also be possible to introduce an unlimited period of time for crediting.
Previously entrepreneurs had tried to bypass this form of double taxation by transferring the headquarters of their company in another country. This move seems not to be necessary any more.


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