During the recent Austro-German tax treaty negotiations held in Vienna from 11 to 15 May 1998 a break through could be achieved. Almost full agreement was reached on a new treaty which shall replace the current tax treaty of 4 October 1954. The new treaty will be based on the OECD Model Convention but will contain several substantial modifications. One of the main problems in the treaty revising process was the necessity to find a balanced solution for curbing tax motivated abusive transfers of capital from Germany into Austria on the one hand and for avoiding undue interference with the principle of freedom of establishment and the principle of free movement within the European Union on the other hand.