Sec 98 para 1 no 6 Austrian Income Tax Act stipulates that royalty income from the licensing of rights is subject to limited tax liability in Austria if either the underlying rights are registered in an Austrian public book or registry (“Austrian registered rights“) or the rights are exploited in an Austrian permanent establishment (“Austrian exploited rights“). If a limited tax liability for royalties is triggered at the level of the licensor, Austrian taxation is executed by way of a special withholding tax that has to be deducted by the licensee and paid to its competent Austrian tax office (Sec 99 et seq Austrian Income Tax Act). According to the mere wording of the relevant Austrian provisions, royalties paid for Austrian registered rights are therefore subject to special withholding tax irrespective of whether the licensee is an Austrian resident or whether payment of royalties is effected from Austrian sources. Against the background of recent developments in Germany, which has similar tax provisions in this respect, Gerald Gahleitner and Martin Eckerstorfer take a closer look at taxation of foreign royalties for Austrian registered rights.
