Refund of foreign withholding tax

Income from foreign securities held by a taxpayer resident in Austria is subject to Austrian income tax, regardless of whether these securities are held in a foreign or a domestic bank custody account. Irrespective of this, as a rule the foreign state also taxes this income, e.g. in Switzerland at a rate of 35%. This tax is called withholding tax. In total, this results in a considerable tax burden, which can, however, be minimized.

The tax burden on securities income can be reduced on the one hand by crediting the foreign withholding tax against the domestic capital gains tax (KESt). This is usually done by the Austrian custodian bank. On the other hand, it is also possible to file an application for a withholding tax refund with the foreign tax authorities.

Crediting of foreign withholding tax by the custodian bank

As a rule, the domestic custodian bank can credit 15% points of the foreign withholding tax against the domestic withholding tax. If the domestic bank does not credit the foreign withholding tax because the investment income is received by a foreign bank, the credit can also be applied for in the income tax assessment procedure.

Withholding tax refund application

As the withholding tax credit is limited to 15% of the withholding tax, there is usually an additional burden abroad. Therefore, it is possible to apply for a withholding tax refund from the local tax authorities in many countries. However, different application deadlines and application formalities must be observed in each country, which is why advice should be sought.

Tip: If foreign investment income has not been declared in the Austrian income tax return and therefore a "clean-up" of the past becomes necessary, this can be done under certain conditions by way of a penalty-exempt voluntary disclosure to the Austrian tax authorities. However, due to the special formal requirements, such a voluntary disclosure should only be made with the assistance of a tax advisor.