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UK-Austria DTT

Posted: Sun Feb 10, 2019 3:30 pm
by Tom1991
Hello!

I am wondering whether anyone here is familiar with the Double Taxation Treaty between UK and Austria.

In a nutshell, I am wondering whether an Austrian resident, who has a limited company in the UK, would be taxed twice: both in the UK and Austria on Divident payments and/or income tax if such resident does not live in the UK and operates from Austria. The UK company would be receiving payments from within the UK. The Austrian resident would be a sole Director and Shareholder of the UK Ltd.

My main question would therefore be: 1) Would the company be paying Corporation tax in the UK and; 2) Would the individual be taxed in the UK RE: dividents/income tax.

Thank you!

Tom

Re: UK-Austria DTT

Posted: Tue Feb 12, 2019 3:38 pm
by maths
Unfortunately the position may not be as straight forward as it seems.

It is necessary to determine the source of the dividends.

If the company is resident in the UK then the dividends have a UK source. In which case no UK income tax arises on the recipient non-UK resident shareholder. Only Austrian tax may be levied.

If the UK incorporated company is non-UK resident (which given the facts it may well be) then the dividends do not have a UK source. In which case no UK income tax arises on the recipient non-UK resident shareholder. Only Austrian tax may be levied.

The company as it is incorporated in the UK is resident. However, as you are sole shareholder and director it is likely the company could also be resident outside the UK ie in Austria.
It would thus be dual resident. The UK/Austria double tax agreement provides a tie-breaker test. In the absence of more facts it is unclear what this test would show,
It is possible that the company's UK source income may not in fact be subject to UK tax (corporation or income tax).

You ask:
My main question would therefore be: 1) Would the company be paying Corporation tax in the UK and; 2) Would the individual be taxed in the UK RE: dividends/income tax
.

In short:
(1) Depending upon the facts the company may be subject to corporation tax but under the treaty may not be subject to any UK tax.
(2) No UK income tax on dividend income.