Update on the suspension of the double taxation agreement Russia – Effective date & unilateral elimination of double taxation
By decree dated 8 August 2023, Russia suspended the application of most parts of the double taxation agreement (DTA) Austria-Russia. After Austria successfully and congruently also suspended the agreement at the beginning of December 2023, the Austrian tax authorities published a decree on the effective date of the suspension and the unilateral elimination of the double taxation agreement.
Background
In August 2023, in response to the Western sanctions, Russia suspended significant parts of the DTA Austria-Russia (as well as provisions of 30 other DTAs) with immediate effect. The suspension affected, among others, allocation rules and, therefore, has a major impact on the Austrian taxpayers (see our newsletter dated 16 August 2023). In December 2023, as a result, Austria published an identical suspension, however, Austria stated by decree that comprehensive administrative assistance with regard to Russia is still available (further details may be found in our newsletter dated 7 December 2023). However, previously, the specific effective date of the suspension and how the elimination of the double taxation is to be achieved remained uncommented. This has now been clarified in the decree dated 30 May 2024 (reference number 2024-0.317.354).
What is the effective date of the suspension?
The decree clarifies that Austria’s suspension is effective as of 7 December 2023 (= day of the publication of the suspension in the Austrian Federal Law Gazette). This means that for income incurred as of this day, there is no longer an effective double taxation agreement. The decree quotes the following example:
An investor residing in Russia (with limited tax liability) receives a dividend on 5 August 2023 from a stock corporation residing in Austria. At the time the dividend income is attributed to the taxpayer, the provisions of the DTA Russia have not yet been suspended. Any capital gains tax refund on the basis of Article 10 can therefore also be applied after 6 December 2023 under the conditions of section 240 para. 4 in conjunction with section 240a BAO (Austrian Federal Fiscal Code). However, if the dividend is not received by 6 December 2023, a capital gains tax refund is no longer possible.
If the income cannot be deferred exactly to the effective date, a pro rata temporis allocation (monthly) is possible for reasons of simplification.
How can a unilateral elimination of the double taxation be achieved?
In the case of a double taxation, an application for relief pursuant to section 48 para. 5 BAO can be filed. The decree specifies which information has to be disclosed in the application. Among other things,
- a statement of facts including a legal assessment,
- proof of double taxation that has already occurred (e.g. translated tax assessment notices),
- a declaration by the taxpayer that he/she is not affected by EU sanctions and
- a properly maintained list of Russian sources of income including supporting documents
must be presented or provided, whereby the authority reserves the right to request further information. In the proceedings, the taxpayer is also subject to a more extensive duty to co-operate in the case of foreign matters.
Moreover, the decree clarifies that the ordinance on section 48 BAO does not apply, as this would require that no DTA exists at all. Since the DTA Austria-Russia still exists in principle, the prerequisites for applying the ordinance according to the Austrian Ministry of Finance (BMF) are not met.
Outlook
The now published decree clarifies some of the issues raised in practice. We recommend to all affected taxpayers to assess the impact which this suspension will have on their structures and transactions and, if necessary, to take corresponding adjustment or relief measures (e.g. based on section 48 BAO). We are happy to support you with this matter.
Author: Sophie Schönhart
