UN in Vienna - local tax for employees

UN Employees in Vienna: Avoid Tax Trouble in These 5 Cases

Tax exemptions—not without limitations

The UN headquarters in Vienna was established based on an agreement with the Republic of Austria. This agreement has been in place since 1998 and regulates not only the rights and relationship towards the UN as an institution but also towards its employees. This includes the tax exemption—which however is not without limitations.

The term “employees” in this context does not include all individuals working at the UN. The examination of the applicability of the tax benefits mentioned here is always an important preliminary question.

The Austrian exemption system

In Austria, by principle, the exemptions are applied to specific sources of income, not to specific individuals. The international agreement may seemingly deviate from this well-established system, as the privileges are assigned to the officials as specific individuals (in section 37: “Officials of the United Nations assigned to Vienna shall enjoy… the following privileges and immunities…”), however, the tax privileges point to specific income sources (e.g. sec 37 lit d: “…in respect of the salaries, emoluments, indemnities and pensions paid to them by the United Nations…”). This means UN employees are taxable as individuals—it is merely certain income sources that are exempt.

Exemption of foreign income—sec 37 lit f

Aside from the UN-related income, the agreement contains a general exemption clause: “…Exemption from taxation on all income and property of officials and members of their families forming part of their households, insofar as such income derives from sources, or insofar as such property is located, outside the Republic of Austria;…”. To rephrase, it can be said that unless a specific exemption applies, all income and property of officials are taxable, if the source or property are located in Austria.

Bad luck for Austrian citizens—sec 39

The privileges do not apply to every employee equally. According to section 39, the general exemption for foreign income in section 37 does not apply to (a) Austrian nationals and (b) stateless persons resident in Austria.

Negative discrimination is not rare. Would you like to hear about more cases like this?
Please leave a comment and let us know.

Case #1: Domestic active income unrelated to the United Nations

Salaries, emoluments, indemnities, and pensions paid by the United Nations are tax-free. These items are most likely the only active income of a UN employee. The case of an additional active income is hence rather marginal. Nevertheless, should a UN employee have additional active income from another employment or business activity in Austria, the potential declaration duties should be examined closely.

Would you like to know more about this topic?
Please leave a comment and let us know.

Case #2: Domestic capital gains

Passive income is much more likely the case. If capital investment is placed in Austria, it does not fall under the exemption of sec 37 lit f and by that definition, the Austrian capital gain tax applies. Note that in most cases it is the duty of the issuing institution to deduct and declare the tax for the individual. For instance, if you hold corporate shares of an Austrian company, it the company that has to deduct and pay the capital gain tax for you when paying out dividends. Nonetheless, whether and how this tax has to be paid should be part of the investment considerations as there are alternatives where this is not handled by the institution.

Would you like to know more about when you have to declare the capital tax yourself?
Please leave a comment and let us know.

UN employee real estate Austria

Case #3: Domestic real estate income

Domestic sale and rent of real estate are also not covered by the exemption of section 37 lit f. This means that income from a rented property in Austria is by principle taxable. However, Austria has a peculiar regulation when it comes to the taxation of private rentals. In most cases, the rented property qualifies as a small rental (e.g. a holiday house). The Austrian authorities will in such a case deny its taxability unless a financial prognosis can prove that overall profit can be expected within 20 years of first rent. Needless to say, real estate has its complexities and we recommend discussing each rental project or sale with a specialist.

Case #4: Repetitive sale of private items

The sale of other private items may fall under commercial activity. In general, a commercial undertaking is deemed to exist if an independent, sustainable activity is carried out with the intention of making a profit. In the case of the sale of private objects, independence and the intention to make a profit are usually given, so typically mainly the question of sustainability remains. A sustainable activity can already be established if there is an intention of repetition, even though there has not yet been any second sale yet.

We already talked about the rules for the sale of private items in our post about bitcoin

Case #5: Foreign income of all kinds—taxable somewhere after all

As discussed above the foreign income is exempt by section 37 lit f. This means that Austria cannot tax this income. Nonetheless, there is still the likely possibility that the foreign income is at least partially taxable in the country of origin. For dividends, for example, most countries retained a right to a withholding tax of 15% in their international tax treaties. In regard to real estate, often taxation in the foreign state combined with a system of tax credits takes place. A well-placed foreign investment might lead to a lower tax than in Austria. It should not be the expectation, however, that no tax is due anywhere.

Side note: Imports of personal items

Import taxes are noteworthy especially because it might be a point where UN employees pay unnecessarily—by shopping domestically. Additionally to a duty-free import of a vehicle every four years, they are also entitled to the duty-free import of personal items—this can be especially useful after moving to Vienna and acquiring new furniture. Import tax considerations should always be made prior to any purchase. Most retailers require a special arrangement beforehand in order to issue suitable documents and make sure the items delivered were truly shipped from abroad for that purpose. Obviously, the additional administrative effort does not always make it worth it for the retailer or the UN employee.

Conclusion

UN employees in Vienna have many privileges. It would be however inaccurate to say that they have no tax duties. Especially passive income from real estate and capital can trigger taxation either domestically or in a foreign country. On the other hand, personal items can be imported duty-free, which might be worthy of additional consideration, especially when planning relocation to Vienna.

Please note that this article is illustrative and cannot provide all specifics regarding this topic. Your case may differ. We always recommend consulting an experienced specialist before making decisions.

Read more…

– Agreement between the Republic of Austria and United Nations regarding the seat in Vienna (link)

Did you like this post?

Did we forget a topic you’re interested in? Did we get it right?
Please leave a comment or send us a message—we love hearing from you!

0 0 votes
Rating
0 Comments
Inline Feedbacks
View all comments
0
Would love your thoughts, please comment.x
()
x