Autria: Limits of temporary relief in the MAP (Mutual Agreement Procedure)

Prior to the EU Tax Dispute Resolution Act [EU-StbG], Section 48 of the Federal Fiscal Code (BAO) allowed for the unilateral elimination of international double taxation by means of the imputation method until 30 August 2019 within the framework of a discretionary decision. This was particularly important when it came to avoiding temporary double taxation for the duration of an ongoing bilateral procedure.

Once the EU Tax Dispute Resolution Directive takes effect on 1 September 2019, this proce­dure will only be possible in isolated cases. According to Section 48 Para. 5 of the Austrian Federal Fiscal Code (BAO), offsetting to avoid temporary double taxation is only an option if it is not possible to have a bilateral mutual agreement or hold arbitration proceedings. The explanatory remarks state that this is only the case if there is no double taxation agree­ment with the country concerned. Apart from these exceptional cases, temporary double taxation can no longer be unilaterally avoided.

This is relevant if, for example, more profits are generated in Germany and these have already been taxed in Austria, the country of residence. The lack of imputation opportuni­ties means that the only option available to the taxpayer is to apply for temporary relief abroad (in this case Germany). As such, it is necessary to examine in each individual case abroad whether and what possibilities there are for avoiding temporary double taxation. This means that in cases in which no temporary relief can be obtained abroad, double taxation applies until the dispute has been resolved in the bilateral procedure.

Decisions issued before 1 September 2019 under the former Section 48 BAO lose their validity as well. Applications for extensions beyond 1 September 2019 will be rejected.