Potentially higher income tax burden through amendments to the Double Taxation Treaty between Austria and the United Arab Emirates
On 1 July 2021 Austria and the United Arab Emirates (UAE) have signed a protocol amending several key provisions of the Double Taxation Treaty. The most significant changes are made to Article 24 of the Double Tax Treaty. Currently this Article states that the double taxation of Austrian tax residents is avoided by exempting the UAE sourced income from taxation in Austria. The amending protocol seeks a switch from the exemption method to the credit method. This means that for Austrian tax residents the entire UAE sourced income would be fully taxable in Austria and – as the UAE currently does not levy income taxes on individuals – no taxes can be credited in Austria. This will lead to a significantly higher income tax burden in Austria for example for Austrian tax residents who receive employment income from the UAE.
The amendments to the Double Taxation Treaty must go through the Austrian parliament before they will come into effect. In case the amendments are ratified this year, then they will come into effect as of 1 January 2022.
Are you or your employees affected by these changes? If yes, you can contact us for further information.