The European Court of Justice has today ruled in Austria’s favor a dispute between Austria and Germany (Case C-648/15) concerning which country can tax interest from profit-participation certificates (Genussscheine) received by an Austrian bank from a German bank.
The dispute concerned whether such profit-participation notes fell within Article 11(1) of the treaty, which provides that income from rights or debt-claims with participation in profits, including income received by a silent partner from his participation as a silent partner or income from profit-participating loans and profit-sharing bonds can be taxed in the State Party in which it arises, in accordance with the laws of that State.
The Court concluded, that the phrase ‘income from rights or debt-claims with participation in profits,’ within the meaning of Article 11(2) of the treaty must be interpreted as meaning that it covers income which provides a creditor with a part or a share of the debtor’s profits, to the exclusion of income which varies only in the event of losses incurred by that debtor.
