The Protocol scheduled to this Order makes certain alterations to the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income) (Austria) Order 1970 (S.I. 1970/1947). These alterations follow mainly from the introduction of the new United Kingdom corporation tax system which, so far as it relates to the tax treatment of dividends paid by United Kingdom companies to overseas shareholders, came into operation on 6th April 1973.
The Protocol states as a general rule that the rate of tax on dividends flowing from one country to the other is normally not to exceed 5% where the dividend is paid to a company which controls, directly or indirectly, at least 25% of the voting power in the company paying the dividend and it is not to exceed 15% in all other cases. The Protocol then makes specific provision for dividends paid by a United Kingdom company to a resident of Austria as long as under United Kingdom law an individual resident in the United Kingdom is entitled to a tax credit in respect of dividends paid by a company resident in the United Kingdom. It prescribes that where a United Kingdom company pays a dividend to a resident of Austria, other than to a company which controls, directly or indirectly, at least 10% of the voting power in the paying company, the recipient will be entitled to the tax credit to which an individual resident in the United Kingdom and in receipt of such a dividend would have been entitled, less income tax at a rate not exceeding 15% on the aggregate of the dividend and the tax credit.
The Protocol also provides that the rate of Austrian withholding tax on dividends paid to a United Kingdom company controlling at least 25% of the voting power in the paying company shall not exceed 10%, as long as the Austrian rate of corporation tax on distributed profits is lower by more than 10 percentage points at the highest taxation level than the tax on undistributed profits.
The Protocol is to have effect in relation to dividends paid on or after 6th April 1973.