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Austria: Austria signs treaty with Chile


Elinore Richardson

On December 6 2012, Austria signed its fourth treaty with a Latin American country – adding Chile to Brazil, Mexico and Venezuela as a treaty partner. The treaty is interesting for a number of reasons. First, the withholding rates in the treaty are set for dividends (15%), for interest (5% on bank loans, traded bonds and certain sales on credit and 15% otherwise) and for royalties (5% for those payable for use of industrial, commercial or scientific equipment and 15% for all others). The Austria-Chile double tax treaty protects Chile's right to levy its two tier tax and insures that the effective Chilean tax rate on dividends paid to foreign shareholders is not reduced.

Secondly, the treaty adopts the expanded definition of permanent establishment characteristic of Chile's double tax treaties including the UN model provision to cover building sites or construction and installation projects and related supervisory activities which last more than six months. In addition, the definition includes a services provision which catches such activities that continue for periods aggregating more than 183 days in any 12 month period. Chile has recently changed its domestic taxation of permanent establishments to include their worldwide income.

Finally, the treaty includes a capital gains provision on disposals of shares unusual to recent Austrian double tax treaties, but which appears in some ways to reinforce the Chilean domestic law provisions taxing capital gains of foreign taxpayers. Gains on disposal of shares are taxable in the residence state of the seller but may also be taxed by the state in which a company is resident if, either the foreign seller at any time during the 12 months preceding the sale directly or indirectly owned shares representing 20% or more of the company's capital, or more than 50% of the value of the gains is derived from immoveable property (no carve out for business immovables). Gains from the sales of other shares may be taxed in both the residence and source state, but the source state is limited to a tax of 17%. Neither of the provisions, however, applies to allow the source state to tax pension funds on their gains which are taxable only by their state of residence.

Elinore Richardson (

Wolf Theiss

Tel: +43 1 515 10 5900


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