Many parameters must be taken into account when determining the midpoint of life interests

The center of life interests plays a major role in assessing the residence of natural persons and, consequently, in determining the unlimited tax liability in one or another state. According to double taxation agreements (DBA), the center of life interests is primarily decisive when the natural person has a permanent residence (such as an apartment) in both states. In the specific case, the BFG (GZ RV/7100987/2017 of 14 April 2021) had to decide whether, in the context of a temporary assignment abroad – while maintaining an Austrian domicile – the center of life interests remains in Austria.

The starting point was a posting to Canada for almost 1.5 years by the Austrian employer. This posting was linked to a two-year employment (limited local service contract) at the Canadian branch of the company. In the contentious year 2012, the employee was working in Canada partly under the terms of the posting and partly under the terms of the local service contract. During this period, he had a place of residence for the purpose of performing his duties in Canada. Moreover, he used his private residence in Vienna during his stay in Austria (for work and for holidays to visit his parents living in Austria) for 70 days that year. The (Austrian) tax authorities were of the opinion that the center of his life interests in that specific year was located in Austria and that the employee was therefore subject to unlimited tax liability on his worldwide income in Austria. The DBA between Austria and Canada stipulates that the tax in Canada that is deducted from non-self-employed income must be credited to the Austrian tax (taking into account the amount of tax that can be deducted) in order to avoid double taxation.

In determining the center of life interests, the overall picture of personal and economic circumstances must be taken into account, with the preponderance of relationships to one or the other state being decisive. Typically, economic relationships receive less importance than personal relationships. Personal relationships typically include family ties, activities of a social, religious, and cultural nature, activities to develop personal interests and inclinations, or membership in associations, as well as other social engagements. The economic relationships, however, are based on activities or sources of income that are locally bound in the form of assets. To decide which of the two states has unrestricted tax liability for the natural person, a longer observation period (two years should be sufficient) must be taken into account. In cases of postings, maintaining one’s place of residence in the sending state is often considered an indicator that the employee has not moved his or her center of life interests to the other state. Following the VwGH, a temporary stay abroad does not mean that the center of life interests also remain in the home country; if the family moves to the work location abroad, but keeps the home in the home country, the center of life interests still remain there.

In the specific case, the BFG considered that the focus of life interests in that year in Austria was met, taking into account other aspects such as maintaining the apartment in Austria. In determining personal circumstances, on the one hand, no personal relationships with Canada could be established. On the other hand, regular visits by the parents are part of the family life; in the absence of other familial ties, the visit by the parents in Austria during their vacation is therefore decisive for the assessment of personal relationships. In determining economic relations, it is undoubtedly necessary to take into account that the income was derived from work in Canada during the posting. By contrast, the temporary nature of the employment relationship, the continued retention in the Austrian social security system, and also the overall short duration of the stay against Canada as the focal point of life interests - there is no indication that the taxpayer saw their economic future in Canada. Austria therefore taxes the worldwide income and must account for the Canadian tax as the country of residence. Moreover, in Austria the costs of double-accounting for the budget as advertising expenses can be claimed as expenses.

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