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Austria's National Council has recently adopted a withholding tax agreement with Liechtenstein modeled on the accord between Austria and Switzerland, which entered into force on January 1, providing for the taxation of the hitherto undeclared and untaxed assets of Austrian residents held in Liechtenstein banks.
Liechtenstein banks and asset managers, such as trustees, will levy a withholding tax on past assets and will tax future investment income, payments to non-transparent foundations and payments from non-transparent foundations to beneficiaries. As a general rule, the value of assets as of December 31, 2011, and December 31, 2013, is taken as the basis for calculating the amount of the one-off tax payment. The tax rate applicable to the payment is determined by reference to a formula specified in the convention, which takes various factors into consideration, notably the amount of capital assets in question, the growth of the assets and the length of time for which the investments have been held.
The minimum tax rate is 15% and the maximum rate is generally 30%, although in some exceptional cases that rate may rise to 38% (where the amounts of assets involved is high). Tax is first collected by Liechtenstein banks and trustees, and the Liechtenstein authorities will then remit these one-time payments to the Austrian tax authorities in multiple instalments. Most of those transfers will be made over the course of the second half of 2014.
Although Opposition parties vehemently criticized the withholding tax accord concluded with the Principality, maintaining that the concessions are an "affront" to honest taxpayers, Austria's Financial State Secretary Andreas Schieder insisted that the treaty is the "best result" for Austria. The deal not only secures revenue for the Government, but also ensures "tax justice," Schieder stressed.
The National Council also adopted a bill amending the country's Foundation Entrance Tax Law (Stiftungseingangssteuergesetz). The modifications ensure that non-transparent foreign foundations are in future taxed at a higher entry rate of tax of 25%. The measure is designed to promote transparency and to support efforts aimed at combating international money laundering.
Finally, the Austrian National Council backed revisions to the existing bilateral double taxation agreement (DTA) between Austria and Liechtenstein. The revised text is in accordance with the Organization for Economic Cooperation and Development's (OECD) standards on fiscal transparency and on mutual assistance in tax matters. The revised DTA signed between the two countries adjusts the taxation of dividends and provides for enforcement assistance.
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