Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft

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Capital gains realized in respect of structured Notes (such as Equity Linked Notes, Index Linked Notes, or
Credit Linked Notes) may, to a certain extent, also be treated as investment income and, therefore, taxed
like interest income.
In case equity is delivered in kind upon a redemption of Notes, the basis (i.e. the acquisition costs) of such
equity is, according to the fiscal authorities, determined based on the fair market value of the Notes upon
redemption. The holding period in respect of equity that is delivered to the investor upon redemption starts
on the date the Notes are redeemed and the Issuer is obliged to deliver equity. The difference of the fair
market value of the Notes and the basis of the Notes is a taxable capital gain that may also qualify as
investment income and, therefore, be taxed like interest income. If a loss is incurred upon delivery of
equity, it is treated as a capital loss in the manner described under caption b. above.
Income or gain relating to Notes that are issued in respect of underlying assets (e.g., equity or an index) is
not taxed as investment income if the amount capital invested does not exceed 20% of the value of the
underlying assets.
d. Inheritance and gift tax
In 2007 the Austrian Constitutional Court repealed the provisions regarding inheritance and gift taxation
effective as of 1 August 2008. A Gift Notification Act 2008 (Schenkungsmeldegesetz 2008) was passed by
the Parliament accepting the repeal and requiring the notification of gifts to the tax authorities within a
three-month notification period. The changes of the Gift Notification Act 2008 become effective as of
1 August 2008. Certain exceptions from the notification obligation are provided for, e.g., in respect of gifts
among relatives that do not exceed EUR 50,000 per year or in respect of gifts among unrelated persons
that do not exceed EUR 15,000 in five years.
Inheritance and gift tax is levied on the gratuitous transfer of property upon death or inter vivos. The
taxation is generally triggered, if in case of such transfer of Notes either the beneficiary, or the donor, or
both, are Austrian residents at the time of the transfer.
The tax rate ranges from 2 % to 60 % depending on the market value of Notes transferred at the time of
transfer and on the relationship of the beneficiary and the donor.
In case of Final Taxation the transfer upon death (not inter vivos) of Notes is exempt from inheritance tax.
e. Stamp Tax (Rechtsgeschäftsgebühr)
Under certain circumstances the transfer of Registered Notes or Pfandbriefe in registered form may trigger
a stamp tax in the Republic of Austria at the rate of 0.8 % of the consideration. Therefore investors should
consult their own tax advisors before executing transfer documents for such Notes or bringing or sending
into the Republic of Austria such documents or any certified copy thereof or any written confirmation or
written reference.
(ii) Investors subject to limited tax liability ("non-residents") – see also "EU Savings Tax
Directive" below
a. Interest payments
Interest payments in respect of Notes to investors that are not residents as described above (in the
following non-residents), in accordance with the terms and conditions of the Notes will be exempt from any
Austrian income tax, including any Austrian withholding tax on investment income, as long as interest
payments are made by paying agents domiciled outside of the Republic of Austria.
If interest payments are made by an Austrian agent or the Issuer directly, a non-resident of the Republic of
Austria will, however, be obliged to disclose his/her identity and foreign address and supply corroborating
evidence thereof to prevent Austrian withholding tax on investment income of presently 25%.
If Notes that are held by non-residents are assets of a permanent establishment, interest payments in
respect of such Notes will qualify as business income. In this case, withholding tax on investment income
may generally be avoided by filing a declaration of exemption. If the investor discloses his identity and
foreign address and supplies corroborating evidence thereof, no withholding tax on investment income will
be levied, even if no declaration of exemption has been filed. However, the interest payments will be
subject to limited tax liability as business income.
The holding of Notes in a clearing system has no influence on the tax treatment of the owner.