Profit Distributions to the Durch Silent Partner of an Austrian Asset Management Company

According to Art. 12 para. 1 of the Austro-Dutch Double Taxation Convention, the taxation right with respect to profit distributions to a Dutch resident under a silent partnership agreement concluded with an Austrian “enterprise” (an enterprise whose place of management is situated in Austria) is allocated to Austria.

The term “enterprise” is not defined in the Convention so that in accordance with Art. 3 para. 2 of the Convention, recourse to domestic law has to be taken. Under Austrian domestic law, all companies are deemed to carry on a business, regardless whether or not they perform genuine business activities or merely asset holding functions. As a result, Article 12 of the Austro-Dutch tax treaty allocates the taxing right on distributions under silent partnership agreements to Austria also in cases where the distributing Austrian company is a mere asset holding company (vermögensverwaltende Kapitalgesellschaft). The source taxation right granted under Article 12 is executed in Austria under the tax withholding regime which requires the levying of 25 % capital yields tax.

The term “enterprise” is also used in Article 5 of the Convention, and it is true that according to the Au...25.1.2008