Amendment of the Double Taxation Treaty between Austria and the United Arab Emirates

published on 13 December 2021 | reading time approx. 1 minute

    
On 1 July 2021, Austria and the United Arab Emirates signed a protocol amending several key provisions of the double taxation agreement adopted on 23 September 2003. The aim of the protocol is to implement the OECD standards on tax transparency and on combating the reduction and shifting of profits.
  

In addition to a more comprehensive exchange of information, the amendment essentially concerns the change from the exemption to the credit method in Article 24. The previous version of Article 24 provided for income from the UAE to be exempt from taxation in Austria in order to avoid double taxation (exemption method). With the amendment, the credit method is to apply in the future, according to which income from the UAE is no longer exempt from Austrian taxation, but that foreign taxes are credited against Austrian tax.

This is likely to have a particularly disadvantageous effect for those who are tax residents in Austria and income in the UAE. In this respect and against the background that under the previously valid regulations an exemption of income was provided for under progression proviso and that the UAE currently does not levy income taxes, it can be assumed that persons resident in Austria for tax purposes will be subject to a significantly higher tax burden in Austria on their income from the UAE than before. This should be taken into account in medium- as well as long-term tax planning for both individuals and companies.

When the changes apply

The protocol has been signed but has not yet entered into force. This requires prior adoption by the Austrian Parliament and publication in the Federal Law Gazette. Should the ratification - as expected - take place before the end of the year, the amendments would enter into force from the tax year 2022.

Who is specifically affected by this

Specifically affected by the measures are all natural persons and legal entities that are resident in one contracting state or in both contracting states within the meaning of the double taxation agreement, whereby in case of legal entities the registered office is to be taken into account. Furthermore, all other legal or natural persons who are part of a tax structuring model aimed at obtaining tax relief under the double taxation agreement are also covered by the scope of application.