BFG: Capital income from foreign "black fund”

Aug 18, 2021 Benn-Ibler Rechtsanwälte

The Federal Fiscal Court (Bundesfinanzgericht, BFG) dealt with the tax base of investment income from a foreign "black fund".

The plaintiff held shares in an investment fund at a Swiss private bank. This was a so-called "black fund", i.e. a foreign investment fund without a tax representative in Austria, which meant that there was no proof of income equivalent to distributions.

The plaintiff received capital gains from the fund in question in 2012. Since there was no tax representative in Austria who reported this income in accordance with Sec. 40 (2) (3) Investment Fund Act (Investmentfondgesetz, InvFG), the tax office had to estimate the distribution-equivalent income. In doing so, the tax office used the method of Secs. 40 to 42 InvFG, according to which the income is calculated from 10% of the last redemption price determined in the calendar year. The tax office claimed that this estimation method was mandatory and that any other estimation would be unlawful.

The plaintiff filed a request for referral to the BFG, attaching a "report for tax purposes" from the private bank, which contained the actual amount of the income equivalent to distributions for the year 2012.

According to the BFG, it was contentious to what extent the income should now be recognized. In a comparable case, the Supreme Administrative Court (Verwaltungsgerichtshof, VwGH) stated in its ruling that a mandatory and irrefutable flat-rate taxation of income from black investment funds was contrary to Community law.

Sec. 40(2) InvFG, which is relevant in this respect, provides that the unit holder of a - foreign or domestic - fund has the opportunity to present evidence of his or her own and thus to present the income and expenses independently.

The plaintiff did this in the context of her application for referral and the actual income and expenses could also be derived from the "reporting for tax purposes". Accordingly, the taxes are to be calculated on the basis of the income contained therein and not on the basis of the estimate according to Secs. 40 to 42 InvFG.

An official appeal was lodged against this decision.

BFG RV/6100643/2016