S.I. No. 29/1988 - Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of Austria) Order, 1988.

1. This Protocol shall be ratified and the instruments of ratification shall be exchanged at Vienna as soon as possible.

2. This Protocol shall enter into force on the first day of the third month next following that in which the exchange of instruments of ratification takes place and its provisions shall have effect

(

a

) In Austria

for any taxable year beginning on or after 1 January, 1976;

(

b

) In Ireland

(i) as respects income tax, for any year of assessment beginning on or after 6 April 1976;

(ii) as respects income levy, for any year of assessment beginning on or after 6 April, 1983;

(iii) as respects corporation tax, for the financial year 1974 and subsequent financial years;

(iv) as respects capital gains tax, for any year of assessment beginning on or after 6 April, 1974.

3. Where any greater relief from tax would have been afforded by any provision of the existing Convention than is due under the Convention, as amended by this Protocol, any such provision as aforesaid shall continue to have effect —

(

a

) In Austria for any taxable year;

(

b

) In Ireland for any year of assessment or financial year

beginning before 1 January in the calendar year in which this Protocol is signed.

IN WITNESS WHEREOF, the undersigned, duly authorised thereto, have signed this Protocol.

DONE in duplicate at Dublin the 19th day of June 1987, in the English and German languages, each text being equally authentic.

For

For the

IRELAND

REPUBLIC OF AUSTRIA

BRIAN LENIHAN

GERHARD RAINER

GIVEN under the Official Seal of the government this 23rd day of February, 1988.

CHARLES J. HAUGHEY,

Taoiseach.

AUSTRIAN PROTOCOL

EXPLANATORY NOTE

This Order gives the force of law to the Protocol with Austria which is set out in the Schedule. The Protocol amends the Convention between Ireland and Austria for the avoidance of double taxation with respect to taxes on income and capital which was signed on 24 May, 1966.

Article I of the Protocol amends Article 1of the Convention so as to secure that the taxes covered by the Convention will include corporation tax introduced under the

Corporation Tax Act, 1976

, capital gains tax brought in by the

Capital Gains Tax Act, 1975

, and income levy provided for under

section 16

of the

Finance Act, 1983

, and that the references to sur-tax and corporation profits tax which are obsolete are deleted.

Article II extends the definition of "Ireland" in Article 3 of the Convention to include designated areas of the Continental Shelf within which rights to the sea bed and sub-soil and their natural resources may be exercised by Ireland.

Article III inserts in the Convention a new Article 2A setting out the basis on which questions of residence are to be decided for the purposes of the Convention and provides rules for determining the country of residence where under the residence criteria of each country there would be a double residence position.

Article IV provides that for the purpose of the Convention a "permanent establishment" of an enterprise of a Contracting State exists where exploration of natural resources is carried on by that enterprise in the territory of the other Contracting State.

Article V contains a new article relating to the treatment of dividends to be substituted for Article 8 of the Convention. Where a company which is a resident of Ireland pays a dividend to a resident of Austria (other than a company which controls at least 25 per cent of the voting power in the paying company) the recipient is, subject to certain conditions, to be entitled to the tax credit to which an individual resident in Ireland would have been entitled had he received the dividend and to payment of any excess of that tax credit over an income charge not exceeding 15 per cent of the aggregate of the dividend and the tax credit. Dividends received by an Irish resident from a company resident in Austria will be subject to Austrian withholding tax of 10 per cent. Furthermore, an Austrian company which derives dividends from an Irish resident company is to be granted the same relief from Austrian tax on the dividends as would be granted if the paying company were a resident of Austria. The effect of these provisions in relation to relief from Austrian tax is that a measure of "matching credit" for Irish tax incentive relief's in relation to profits and dividends will be provided.

Article VI sets out a revised meaning for the term "interest" as used in the Convention.

Article VII contains a new article in relation to capital gains to be substituted for Article 11 of the Convention. Capital gains arising from the alienation of immovable property or of shares of a company the assets of which consists principally of immovable property may be taxed by the country in which the property is situated. Capital gains from the alienation of other property are to be taxed only in the country of residence of the alienator unless they arise from the alienation of assets of a permanent establishment or fixed base in the other country.

Article VIII substitutes a new article for Article 22 of the Convention. Broadly, the new provisions secure that where income or capital gains are not otherwise relieved from double taxation under the Convention as amended by the Protocol a measure of double taxation relief by way of a credit is to be granted by the country of residence of the recipient of the income or capital gains. In Ireland relief is to be given by allowing against the Irish tax on Austrian income or capital gains credit in respect of the Austrian tax which the income or capital gains has borne, including in the case of dividends received by an Irish resident company which controls directly or indirectly 25 per cent or more of the voting power in the Austrian resident company paying the dividends, the Austrian tax payable by the company in respect of the profits out of which the dividends are paid.

The Protocol, by reference to the provisions of Article IX, will be effective in Ireland —

(i) with respect to income tax, for any year of assessment beginning on or after 6 April, 1976;

(ii) with respect to income levy, for any year of assessment beginning on or after 6 April, 1983;

(iii) with respect to corporation tax, for the financial year 1974 and subsequent financial years;

(iv) with respect to capital gains tax for any year of assessment beginning on or after 6 April, 1974.

4. For the purposes of paragraphs 1 and 2 income, profits and capital gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with the provisions of this Convention shall be deemed to arise from sources in that other Contracting State.".

ARTICLE IX

5. Capital gains from the alienation of any property other than those mentioned in paragraphs 1, 2, 3 and 4 shall be taxable only in the Contracting State of which the alienator is a resident. Provided that where under the law of that Contracting State an individual, in respect of such gains, is subject to tax thereon by reference only to the amount thereof which is remitted to or received in that Contracting State, the foregoing provisions of this paragraph shall not operate in relation to so much of such gains as is not remitted or received in that Contracting State.

6. For the purposes of this Article the term "immovable property" means immovable property as defined in paragraph 2 of Article 4.".

ARTICLE VIII

The following Article shall be substituted for Article 22 of the Convention

"Article 22.

7. The term "dividends" as used in this Article means income from shares, "jouissance" shares or "jouissance" rights, founders' shares or other rights, not being debt-claims, participating in profits, as well as any income or distribution assimilated to income from shares by the taxation law of the State of which the company making the distribution is a resident.

8. The provisions of paragraphs 1, 2 and 5 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividend is a resident, through a permanent establishment situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment. In such case, the provisions of Article 5 shall apply.

9. Where a company which is resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment situated in that other State, nor subject the company's undistributed profits to a tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.".

ARTICLE VI

The following paragraph shall be substituted for paragraph 2 of Article 9 of the Convention

"2. The term "interest" as used in this Article means income from Government securities, bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, and other debt-claims of every kind as well as all other income assimilated to income from money lent by the taxation law of the State in which the income arises but shall not include any income which is treated as a distribution under Article 8.".

ARTICLE VII

The following Article shall be substituted for Article 11 of the Convention

"Article 11.

S.I. No. 29 of 1988.

DOUBLE TAXATION RELIEF (TAXES ON INCOME AND CAPITAL GAINS) (REPUBLIC OF AUSTRIA) ORDER, 1988.

WHEREAS it is enacted by

section 361

(1) of the

Income Tax Act, 1967

(No. 6 of 1967), as amended by

section 86

of the

Finance Act, 1974

(No. 27 of 1974),

section 38

(1) of the

Capital Gains Tax Act, 1975

(No. 20 of 1975),

section 166

of the

Corporation Tax Act, 1976

(No. 7 of 1976), and

section 47

(4) of the

Finance Act, 1983

(No. 15 of 1983), that if the Government by order declare that arrangements specified in the order have been made with the government of any territory outside the State in relation to affording relief from double taxation in respect of income tax, corporation tax or capital gains tax and any taxes of a similar character, imposed by the laws of the State or by the laws of that territory, and that it is expedient that those arrangements should have the force of law, the arrangements shall, notwithstanding anything in any enactment other than

section 47

of the

Finance Act, 1983

, have the force of law

AND WHEREAS it is further enacted by section 361 of that Act that where such an order is proposed to be made, a draft thereof shall be laid before Dáil Éireann and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann

AND WHEREAS a draft of this Order has been laid before Dáil Éireann and a resolution approving of the draft has been passed by Dáil Éireann

NOW, the Government, in exercise of the powers conferred on them by

section 361

of the

Income Tax Act, 1967

(No. 6 of 1967), as amended by

section 38

(1) of the

Capital Gains Tax Act, 1975

(No. 20 of 1975),

section 166

of the

Corporation Tax Act, 1976

(No. 7 of 1976), and

section 47

(4) of the

Finance Act, 1983

(No. 15 of 1983), hereby order as follows