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Court Strikes Down Unequal Taxation Of Foreign, Domestic Unit Trust Funds

publiziert: 
World SEcurities Law Report
Datum: 
8. Juli 2002
In a judgment issued on March 7, 2002, the Austrian Constitutional Court abolished the unequal treatment of domestic and foreign unit trust funds in the field of final taxation. In order to allow time for legislative amendments to be adopted, the decision will not become effective until the beginning of April 2003.

The Unconstitutional Legal Situation

The taxation of capital gains of domestic and foreign investment funds under the present legal situation is non-uniform. Whereas domestic investment funds are integrated into the system of final taxation, effecting a settlement of all other tax duties (e.g., duty payable on death), capital gains of foreign investment funds are not subject to final capital-yields taxation, but income tax without final taxation-privilege.

The Austrian Constitutional Court found this provision of the Austrian Income Tax Act (Einkommenssteuergesetz) to be not in conformity with the Austrian Constitution, because capital gains of foreign investment funds are excluded from the effect of final taxation.

Effective Date

As mentioned, the abolishment of this unequal tax treatment will become effective on April 1, 2003. In its judgment, the court was concerned that in the field of foreign unit trust funds, due to the abolishment, certain capital gains could become subject to the effect of final taxation, which in fact should not take place according to the Austrian Final Taxation Act (Endbesteuerungsgesetz) or other tax policy-related considerations.
In view of the long lead time before the effective date of the abolishment, the Austrian legislator has been given a sufficient period of time to create a new regulation in conformity with the court´s ruling.

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