Centre of vital interests in Austria for (short-term) posting to the USA

For the unlimited tax liability in a state, from which the right to tax world income regularly results, several criteria are decisive, which must be examined one after the other in accordance with the Double Taxation Agreement (DBA). This ensures that taxpayers are only liable to tax in one state with their world income (both domestic and foreign income), and that double taxation is avoided.

The BFG had been considering sending an employee from Austria to the USA (GZ RV/7103375/2024 of 12.11.2024), with unclear consequences regarding whether Austria or the USA should have the tax rights to the salary earned in the USA between 2017 and 2018. The background was a temporary assignment (the actual return to Austria took place in December 2018) from the Austrian employer to a (group) company in the USA between 1.2.2017 and 31.1.2019, with the employee moving to the USA for this purpose – including his spouse, two children and two pets. Originally, the assignment was intended for three years, with the option of extending it by two years.

The first criterion for determining the tax residence in a state under the DBA is whether the taxpayer has a permanent place of residence there. This has been the case both in the USA and in Austria. A permanent place of residence in Austria (or the existence of a domestic residence) is also present when a fully furnished apartment is left unoccupied during the period of stay abroad and is not rented out. Therefore, in the next step, the state with which the closest personal and economic ties exist must be determined for the purpose of determining the tax residence (the focal point of life interests).

In principle, the overall picture of the personal and economic circumstances of the taxpayer must be taken into account; in general, economic relationships are of lesser importance than personal relationships. From a temporal perspective, when determining the midpoint of the interests of life, it is not only necessary to take into account the circumstances of a single year but also a longer observation period. Regarding Austria’s current deployment to the USA, the following factors are considered to be the focal point of life interests in Austria: the home registered in Austria as a secondary residence, the continuous Austrian social security number, the wife’s donations in Austria, transfers to an Austrian bank and savings account, the stay of the taxpayer’s close relatives in Austria, who also maintain a regular work contract with the Austrian employer during the deployment, and in particular the plan to integrate the children into the Austrian school system after their return. Furthermore, it should be noted that a temporary stay abroad does not mean that life interests also remain in Austria, even if the family moves to the place of work abroad, but the family remains in the country.

For the United States, however, the centerpiece of the life interests was that the salary during the assignment to the United States was transferred to a bank account in the United States and that the sons attended a school in the United States and were active in local sports clubs. Moreover, the taxpayer’s wife had completed her yoga training in the United States and offered free yoga classes locally. Finally, during the assignment period, the entire family had stayed exclusively in the United States and spent all their free time and vacations there.

The BFG concluded - also taking into account a previous decision of the VwGH - that primarily the personal circumstances of the taxpayer speak for the central focus of life interests in Austria. In particular, the decision was made as early as before the end of the assignment to return to Austria to enable the children to reintegrate smoothly into the Austrian school system - in fact the return to Austria took place after 23 months. The closer ties to Austria already during the duration of the stay abroad are also evident in the fact that before and during the assignment contact was established with the school and the Austrian Ministry of Education regarding the children’s academic development. According to the BFG, however, in the USA there were no memberships in associations or more than the usual contact with colleagues at work; this meant that the predominance of personal relationships with the USA could not be assumed in any way. Therefore, the American income in Austria had to be included in the calculation of taxes, after deducting the American tax.

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