On 18 July 2022, the Austrian Federal Ministry of Finance published an information on the income tax effects of the suspension of the exchange of information with Russia and Belarus.
Status quo: Administrative Assistance and Exchange of Information with Russia and Belarus
On 25 May 2022, the Austrian Federal Ministry of Finance updated the list of states and territories with which comprehensive administrative assistance exists. Russia and Belarus are still listed, but it is pointed out that the exchange of information with these two states is currently suspended.
This means, among other things, that there is currently no exchange of information on financial accounts under the Common Reporting Standard.
What are the tax effects?
Administrative Assistance – No current effects
For certain cross-border issues and tax effects, Austrian tax law requires the existence of comprehensive administrative assistance:
- Foreign corporations, for example, can only be included in a group if they are resident in an EU country or in a third country with which comprehensive administrative assistance exists (section 9 para. 2 subpara. 2 of the Corporate Income Tax Act).
- Further cases that require the existence of comprehensive administrative assistance are the assertion of foreign losses (section 2 para. 8 of the Income Tax Act) and the exemption of investment income within the meaning of section 10 para. 1 subpara. 6 of the Corporate Income Tax Act.
The information published on 18 July 2022 by the Austrian Federal Ministry of Finance on the income tax effects of the suspension of the exchange of information with Russia and Belarus clarifies that the above-mentioned tax benefits may still be claimed. The Austrian Federal Ministry of Finance continues to have double taxation agreements with both Russia and Belarus that enable Austria to request relevant information for the purposes of these income tax provisions from the tax authorities of these two countries by means of administrative assistance.
Exchange of Information – Effects in the case of limited tax liability on investment income
According to Austrian tax law, accrued interest earned by persons resident in a country with which there is an automatic exchange of information is exempt from limited tax liability pursuant to section 98 para. 1 subpara. 5 of the Income Tax Act.
Wth the suspension of the exchange of information with Russia and Belarus, the “automatic” exchange of information no longer exists.
As of January 1, 2023, credit institutions will therefore have to withhold taxes on bank interest paid to Russian and Belarusian citizens who are subject to limited tax liability.
Exchange of Information – Other Effects
The information published by the Austrian Federal Ministry of Finance does not address a possible impact on the reporting obligation under the EU-Meldepflichtgesetz (with this federal law Austria has implemented the DAC 6 directive), as this also interrupts the exchange of information under the Common Reporting Standard. In any case, this should be examined in detail in all transactions with Russia and Belarus.
Furthermore, the Austrian Federal Ministry of Finance does not mention how the suspension affects the exchange of country-by-country reports with Russia and Belarus. Since the country-by-country reporting is also part of the Automatic Information Exchange, it can be assumed that this exchange is also interrupted.
