The Austrian Ministry of Finance published an EAS ruling dealing with tax issues of intra-group cross-border personnel leasing.
Under double tax treaties that follow the OECD Model Convention, the remuneration for posted employees may be taxed both in the state of residence and in the state in which the employment is exercised. However, art. 15(2) of the OECD Model Convention determines that the remuneration shall be taxable only in the state of residence, if, inter alia, (i) the recipient is present in the other state for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned; and (ii) the remuneration is paid by, or on behalf of, an employer who does not reside in the other state.
In 2013, the Austrian Supreme Administrative Court (Verwaltungsgerichtshof ) decided that an economic view, rather than a purely civil law perspective, has to be applied when determining the employer in terms of art. 15(2) of the OECD Model Convention (22 May 2013, 2009/13/0031). In a guidance note issued in 2014, the Austrian Ministry of Finance followed this approach and clarified that the judgement of the Austrian Supreme Administrative Court is only applicable to cases in which the employer is rendering passive services, i.e. services that do not constitute an integral part of the posting company's commercial activity such as advisory or training services (12 June 2014, BMF-010221/0362-VI/8/2014).
In that context, the Austrian Ministry of Finance recently dealt with a case where a German company incorporated an Austrian subsidiary and subsequently decided to post employees from Germany to Austria (EAS 3375). It was held that in such cases, the question of whether active or passive services are provided needs to be assessed on a case-by-case basis. According to the Austrian Ministry of Finance, active services are provided in cases in which (i) the personnel leasing caters for the interest of the posting company; and/or (ii) the posted employees remain subject to the instructions of the posting company. In contrast thereto, passive services are provided in cases where the leased personnel are used to pursue the receiving company's commercial activity. Furthermore, a passive service is deemed to exist if the receiving company requested the cross-border posting of employees due to a short-term shortage of manpower. The reason for this is that the personnel leasing will be carried out in the interest of the receiving company and the posted employees will provide their labour to the receiving company.
In the EAS ruling, the Austrian Ministry of Finance also dealt with art. 15(3) of the double tax treaty concluded between Austria and Germany, which in contrast to the OECD Model Convention, provides that the applicability of the 183 day rule shall not depend on the residence of the employer in the state in which the work is exercised in cases of commercial personnel leasing.
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