Which types of taxes are regulated in the Taxation Convention?
In Austria the Income Tax as well as the Corporate Income Tax are regulated in the Taxation Convention. In the US the Federal Income Taxes, i.e., all taxes imposed by the Income Revenue Code (IRC), are regulated in the Taxation Convention. Social Security expenses are exempt from the Taxation Convention.


I have taxation liability in Austria, but I pay US taxes for my income earned in the US. Can I deduct the taxes paid in the US from Austrian taxes?
To avoid double taxation, taxes paid in the US can be deducted from Austrian taxes up to the "Maximum Tax Credit." According to Article 22 of the Convention, and the exemption method used in the Convention, the taxes paid in one Contracting State are deducted from the taxes to be paid in the State of residence ("Tax Credit Method"). Following the Tax Credit Method, the Country of residence maintains the right to taxation of a person's world income. The actual taxes paid in a foreign country (Source Country) will be deducted from the taxes to be paid in the Country of residence. Also the US deducts the taxes paid in Austria.

The maximum contribution for tax credit has to be calculated with the formula (VwGH 93/14/0202):





In practice, the Tax Credit Method is limited in several ways:

• The taxpayer has to use all options of tax benefits in the source country. If the taxpayer neglects any options, the deductible tax refund will not be deducted from his/her taxes in the country of residence.

• The maximal amount of deducted taxes corresponds to the amount of taxes actually paid in the foreign country.

• The tax credit cannot be greater than the amount for which foreign incomes are pro-rata taxable under the Austrian Income Tax. The tax credit cannot be higher than the average Austrian tax burden for foreign incomes.

I am an Austrian citizen and receive payments from Austria/ the US, which are not regulated in the Taxation Convention. Where do I have to pay taxes for this income?
Income not regulated in the Taxation Convention is taxable in the Contracting State in which the taxpayer is a resident.


Relevant Links:

Internal Revenue Code (IRC): http://www.irs.gov/taxpros/article/0,,id=98137,00.html

Formula to determine the Maximum Tax Credit:
http://www.ris2.bka.gv.at/Dokument.wxe?QueryID=Vwgh&Dokumentnummer=JWR_1993140202_19940222X01&WxeFunctionToken=
eea0f2a6-da9e-459c-8260-821ab02bb50c