Swiss Holding Company with a 25 % Participation in an Austrian Company

According to Art. 10 para. 2 of the DTC with Switzerland, a Swiss company which holds at least 20 % of the share capital of an Austrian company is entitled to claim full relief from the 25 % Austrian dividend tax levied on distributions of the Austrian company.

However, if the Swiss company should be a mere holding company, relief from Austrian source tax can only be obtained through the refund procedure (cf. sec. 3 of the Ordinance BGBl. III No. 92/2005). In the course of such a refund procedure, the Austrian tax authorities may open an investigation as to whether the Swiss holding company is actually the beneficial owner of the profit distribution or whether in accordance with the respective Austrian tax law the distribution has to be allocated to the shareholders of the company. The latter would be required if the holding company were a mere letter box company. A letter box company is unable to exercise any activities (ruling of the Supreme Administrative Court, VwGH 22. 3. 1995, 93/13/0076); as a consequence, it will be the shareholder of the Swiss letter box company rather than the letter box company itself who acts in the interest of keeping the investment in the Austrian comp...