Tax Relief at Source: New Austrian Supreme Administrative Court Ruling on Proof of Tax Residency

Summary
In October 2024, the Austrian Supreme Administrative Court (VwGH) issued a landmark decision regarding tax relief at source for cross-border income. The ruling addresses the formal requirements for proving tax residency via ZS-QU 1 and ZS-QU 2 certificates. While the court eases strict formalism, uncertainty remains for taxpayers and their advisors.
The Case
An Austrian company hired a lecturer (MN) residing in Switzerland to conduct seminars. During an external audit, the Austrian tax authorities determined that withholding tax under Section 99 of the Austrian Income Tax Act (EStG) should have been deducted. As no residency certificate on the official ZS-QU 1 form was submitted, tax liability notices were issued against the company.
Legal Situation under the DBA Relief Regulation
According to the DBA Relief Regulation, tax residency must be confirmed by the foreign tax authority using the official forms ZS-QU 1 (for individuals) or ZS-QU 2 (for legal entities) to obtain withholding tax relief.
Decision of the Federal Fiscal Court (BFG)
The Federal Fiscal Court supported the tax authorities’ view. The submitted confirmation from the Swiss tax authority regarding the lecturer’s tax obligation in Switzerland was deemed insufficient as equivalent proof under the regulation.
Clarification by the Supreme Administrative Court (VwGH)
The VwGH clarified that the DBA Relief Regulation does not require residency certificates to be submitted exclusively using the ZS-QU 1 or ZS-QU 2 forms. This contradicts the strict interpretation by the tax authorities and the BFG. However, the court did not specify which alternative documents would be accepted as equivalent proof.
Practical Implications
The ruling provides some relief by suggesting that alternative proof may be acceptable. However, uncertainty remains as no definitive guidance exists on what constitutes equivalent documentation. Therefore, taxpayers and fiscal representatives in Austria are strongly advised to continue obtaining the official ZS-QU 1 or ZS-QU 2 forms to avoid disputes with the tax authorities.
Heinz Kobleder — Tax Advisors offers comprehensive support to foreign entrepreneurs regarding withholding tax relief and DBA Relief Regulation issues in Austria.