The definition of permanent establishment closely follows the OECD definition. With respect to construction permanent establishments, however, the timing threshold is 6 months rather than 12 months as under the OECD Model (Austrian treaties use thresholds ranging from 6 to 24 months). The Austrian Ministry of Finance issued various guidance notes on (borderline) permanent establishment cases. Generally, the guidance notes have pursued a restrictive view as to the definition of auxiliary and preparatory activities, and an extensive view as to when a foreign company is deemed to have business premises at its disposal in Austria.
An agency-permanent establishment may exist where the Austrian agent is not legally and economically independent from the foreign principal and has the (not necessarily formal) authority to conclude contracts on behalf of the principal. Also, an Austrian subsidiary may form a permanent establishment for its non-resident parent company where the shareholding is substantial, the foreign parent comprehensively controls the management board of the subsidiary, and the subsidiary acts solely for the parent company.
In response to the COVID-19 pandemic, Austria has published guidance on the application and interpretation of double taxation treaties. The key points are:
- Employees working from home as a result of COVID-19 will not constitute a permanent establishment of a non-resident employer. However, a permanent establishment may exist if the work constitutes a permanent establishment even without the pandemic or working from home is allowed going forward; and
- For construction permanent establishments, and subject to the provisions of the applicable tax treaty, the interruption of construction or assembly work due to COVID-19 will be included in the calculation of the duration of the construction site for the purposes of determining if a permanent establishment is constituted. For example, where the fixed permanent establishment threshold is 12 months, and the duration of a construction or assembly project initially projected to last 10 months is increased to 13 months due to COVID-19 interruptions, then a fixed permanent establishment is constituted.