1E9Ct5D

Assistance in collections is also provided to other EU member states in compliance with theEuropean Community (EC) Directive 2001/44/EC amending Directive 76/308/EEC. TheseDirectives have been implemented in Austria and are applicable in addition to any existingbilateral agreements fully subject to taxation.IV Treaty ShoppingiTreaty Shopping DefinedAustrian tax legislation does not provide any definition of treaty shopping. The anti-avoidancerules (see text, below) are designed to prevent treaty shopping. The tests applied by the taxauthorities indicate the approach taken by the Austrian administrative practice. In addition,the tax authorities are able to apply the substance-over-form rule. If the treaty shopping hasno commercial background at all, the tax authorities could challenge the economic value ofthe transaction and deny the relief sought by means of treaty shopping.iiImpact of Treaty Shopping on Tax ReliefIf the tax authorities establish that the transaction carried out in the course of the treatyshopping has no substance, but only form, the tax authorities may disregard the formalaspects and treat the transaction as a domestic transaction.iiiAdministrative and Judicial Response to Treaty ShoppingThe administration attempts to avoid Austria being used for establishing holding companiesfor mere treaty-shopping purposes. However, the Tax Office has failed in the AdministrativeCourt when challenging alleged treaty-shopping structures. In any case, it is advisable todocument the business reasons underlying the establishment of holding companies in Austria.In respect to outbound treaty shopping, the administrative response is to challenge thetransaction whenever it violates the substance-over-form rule.ivTreaty Limitations on Treaty ShoppingSome double-taxation treaties contain specific limitations on treaty shopping, such as thetreaties with Ireland, Liechtenstein, the Netherlands and the United States. One must also beaware of specific domestic tax provisions limiting benefits in particular circumstances.vTreatment of Inbound Treaty ShoppingIn a case of inbound treaty shopping, the Tax Office, depending on the circumstances, mightrefuse the privileges sought by treaty shopping, such as tax exemption of foreign dividendsand capital gains, as well as refusal of VAT credits.viTreatment of Outbound Treaty ShoppingIn respect to outbound treaty shopping, the Tax Office might apply the substance-over-formrule and treat the transaction as a domestic transaction fully subject to taxation.VTreatment of Offshore TransactionsiTax-Haven LegislationIn GeneralAustrian tax law and/or fiscal administrative practice does not either classify or list zero-taxand low-tax jurisdictions. Only in the context of the exemption of foreign dividends andcapital gains on the basis of participation may an overall threshold of 15 per cent of taxationwith respect to profits be relevant, provided the subsidiary’s main resources are dedicated topassive business.- 26 -