On 14 November 2005, Austria-Norway signed a protocol amending their income and capital tax treaty of 28 November 1995. The changes to the 1995 treaty are summarized below.
Under the 1995 treaty, intra-group cross-border (minimum shareholding of 25%) dividends are subjected to a withholding tax of 5% which is in line with the OECDE Model Convention. According to the protocol, dividends are exempt from withholding tax if the beneficial owner is a company that is not a partnership. This new provision diverges from the OECD Model.
Under the 1995 treaty, gains from the alienation of property other than referred to in Art. 13(1) to 13(4) (in particular, gains from the alienation of shares and other financial instruments) are taxable only in the residence state of the seller. Consequently, it was possible to prevent taxation of such capital gains in the (original) residence state by a short-term expatriation to the other contracting state.
According to the amending protocol, in such cases, gains from the alienation of shares or other rights in a company, as well as the alienation of options or other financial instruments related to such shares or rights, may also be taxed in the other contracting state if the alienation takes place within 5 years of expatriation.
The amending protocol provides for the credit method to eliminate the double taxation of such capital gains.
Time limit for claiming refund of excess withholding tax
Under the 1995 treaty, there was no time limit for claiming a refund of excess withholding tax. According to the amending protocol, the time limit for claiming a refund of excess withholding tax is 5 years, starting from the year following the receipt of the underlying income.
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