The Austrian Federal Fiscal Court recently decided on the tax treaty classification of payments made for the right to use software. In the present case, an Austrian company sold software to a distributor in China. The software was purchased and no intellectual property rights such as the right to duplication were transferred. The Austrian Federal Fiscal Court decided that these payments generate business profits in the sense of Art 7 DTC China and not royalties in accordance with Art 12 DTC China, the latter of which follows the pre-1992 version of the OECD MC. Benjamin Beer and Severin Schragl analyze the judgement and discuss the implications of the points raised by the court.
