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C 72 E/116

Official Journal of the European Communities



(2001/C 72 E/145)


by Paul Rübig (PPE-DE) to the Commission

(9 June 2000)

Subject: Taxation of interest on foreign accounts and dividends on foreign shares in Austria

In connection with Austria’s accession to the European Union, the country’s tax laws have been amended many times for the purposes of implementing directives and ensuring fundamental freedoms.

Under sections 97 and 37(1) and (4) of the Austrian Income Tax Law, however, dividends on foreign shares are subject to a tax rate of up to 50 %, compared with a rate of 25 % for domestic shares. This also applies, above all, to holders of foreign accounts. Pursuant to the aforementioned provisions, dividends, interest and other earnings from domestic shares as well as interest earned on deposits with domestic credit institutions, even if based on banking operations, are subject to a capital yields tax rate of 25 % representing the taxpayer’s final tax liability in respect of those payments, and are thus excluded from income tax assessment. However, on request, such income may be included in assessment, in which case it is subject to a half rate of tax, with taxation at the half rate not necessarily always the more favourable alternative.

On the other hand, dividends, interest and other earnings from foreign shares and income from deposits with credit institutions are not subject to tax withheld at source representing the taxpayer’s final tax liability. They are therefore subject to income tax at the full rate, not qualifying for a half rate of tax.

These measures mean that Austria is imposing tax at double the rate on recipients of foreign dividends as well as on all savers who do not have their money in a domestic bank.

Does the Commission take the view that the provisions in question comply with the rules on the free movement of capital in the EU, and in particular Article 56(1) in conjunction with Article 58(1)(a) and (b) and (3) of the EC Treaty?

Answer given by Mr Bolkestein on behalf of the Commission

(27 July 2000)

According to Austrian tax legislation, dividends (and other income from equity participation) from foreign companies, as well as interest income received from foreign credit institutions, are added to other income accrued by a natural person, resident in Austria, and taxed together with his other income.

If such capital income stems instead from Austrian companies or Austrian credit institutions, a with- holding tax of 25 % is applied. Moreover, the Austrian taxpayer may request a tax refund if the income tax rate applicable to his income level is lower than 25 %.

Concerning dividends from domestic companies, the Austrian taxpayer may furthermore request that they be taxed at half the tax rate applicable to his overall income including the dividend income. This may yet be more favourable than the above-mentioned option.

This issue is presently pending before the Court of justice under Article 234 (ex Article 177) of the EC Treaty (case C-516/99). In its observations submitted to the Court, the Commission has concluded that the above provisions of the Austrian tax legislation constitute an unjustified restriction of the free movement of capital and are thus incompatible with Article 56 (ex Article 73b) of the EC Treaty.