The Austrian Supreme Administrative Court decided that losses derived from a foreign permanent establishment have to reduce the taxable income of an Austria resident, no matter whether or not the foreign permanent establishment is located in a country having agreed the method of exemption with progression in a double taxation treaty with Austria. This decision is - according to current practice - applicable to any kind of negative foreign income. Since foreign losses reduce the income taxable in Austria, the reduction of the Austrian tax rate by applying the method of exemption with progression in case of negative foreign income is not possible anymore. In some cases, this fact may trigger a higher tax burden than according to the interpretation of the method of exemption with progression before this decision. This new method of charging foreign losses directly with Austrian profits triggers a new system of levying Austrian income tax on foreign profits of later periods up to the amount of the foreign losses charged in earlier periods. The authors are of the opinion that the method of progression demands a detailed analysis of which parts of the foreign income may increase the Aust...