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

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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.

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