Tax Residency in Austria
1. Criteria for Determining Tax Residency in Austria
According to the Austrian Income Tax Act (Einkommensteuergesetz, EStG), an individual is considered a tax resident in Austria if they meet any of the following criteria:
- Residence for more than 183 days: An individual who resides in Austria for more than 183 days in a calendar year is considered a tax resident.
- Domicile in Austria: An individual who has their permanent home or habitual abode in Austria is considered a tax resident, regardless of the number of days they spend in the country.
- Center of vital interests in Austria: An individual who has their center of vital interests in Austria is considered a tax resident, even if they do not reside or have a domicile in the country. The center of vital interests is determined based on factors such as family ties, social and economic relations, and the location of assets.
2. Impact of International Tax Treaties on Tax Residency
Austria has entered into numerous double taxation agreements (DTAs) with other countries to prevent double taxation and promote cross-border trade and investment. These DTAs may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
Key Provisions in DTAs Relating to Tax Residency
DTAs typically include provisions that define the term "resident" for the purposes of the treaty. These provisions may differ from the definition of residency under domestic law. For example, some DTAs may use a "tie-breaker" rule to determine residency in cases where an individual is considered a resident of both countries under their respective domestic laws.
Modifications and Exceptions Introduced by DTAs
DTAs may introduce modifications or exceptions to the standard criteria for tax residency in order to prevent double taxation and ensure that individuals are taxed only once on their worldwide income. For instance, some DTAs may provide that an individual is considered a resident of a country only if they meet certain additional criteria, such as having a permanent home or habitual abode in that country.
Goals and Effects of Treaty Provisions
The treaty-specific modifications or exceptions to the criteria for tax residency are designed to achieve the following goals:
- Prevent double taxation: By establishing clear rules for determining tax residency, DTAs help to prevent individuals from being taxed on the same income in multiple countries.
- Promote cross-border economic activities: DTAs create a more favorable tax environment for cross-border trade and investment by reducing the risk of double taxation.
- Enhance tax compliance: Clear and consistent rules for determining tax residency help to improve tax compliance and reduce the risk of tax evasion.
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