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Austria; Bahrain

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Treaty between Austria and Bahrain – details

Details of the income and capital tax treaty and protocol between Austria and Bahrain, signed on 2 July 2009 in Vienna, have become available. The treaty was concluded in the German, Arabic and English languages, each text having equal authenticity. In the case of divergence, however, the English text prevails. The treaty generally follows the OECD Model Convention and the protocol of the treaty explicitly mentions that the OECD commentary, as it may be revised from time to time, is relevant for the interpretation of the treaty.

The maximum rates of withholding tax are:

-   0% on dividends;
-   0% on income from debt claims (interest); and
-   0% on royalties.

Deviations from the OECD Model include that:

-   A person is resident in Austria according to Art. 4 of the OECD Model. However, an individual is resident in Bahrain if he is a national of Bahrain and is present in Bahrain for a period or periods totaling in the aggregate at least 183 days in the fiscal year concerned. Companies or other legal persons are regarded as resident in Bahrain if they are incorporated or have their place of effective management in Bahrain.;
-   According to Art. 5 Para. 2, the term "permanent establishment" also includes a refinery, a sales outlet and a warehouse in relation to a person providing storage facilities for others;
-   Art. 13 does not include a provision according to which gains derived by a resident of a Contracting State from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State;
-   Director's fees and other similar payments shall, according to Art. 16, be taxed only in the State where the recipient of the payments is a resident;
-   For artists and sportsmen, the treaty provides for taxation only in the state of residence of the artist or sportsman if a visit is wholly or mainly supported by public funds or by an institution which is recognized as a non-profit institution in the other Contracting State (Art. 17 Para. 3);
-   Art. 19 Para. 2 of the treaty (taxation of students) includes an additional "183-days-rule" for remuneration which a student or business apprentice, who is or was formerly a resident of a Contracting State, derives from an employment which he exercises in the other Contracting State if the employment is directly related to his studies or apprenticeship;
-   Art. 24 (mutual agreement procedure) includes an arbitration clause upon application of the taxpayer concerned if a case cannot be resolved within two years; and
-   Exchange of information also includes banking information. Therefore, the full OECD-standard regarding transparency and exchange of information has been implemented in the treaty.

The treaty provides for the credit method to avoid double taxation for both countries. However, if a resident of Austria is engaged in substantive active business operations in Bahrain and the income in Bahrain is liable to tax in Bahrain, Austria exempts the income.

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