The new digital tax covers digital advertising services in the Austrian market. This means that the Austrian digital tax applies to revenues generated in Austria through sales of online advertising space, such as banner advertising, search engine advertising as well as any other comparable advertising service.
In order to specify any other comparable advertising service and taking into account future technical developments, the Austrian Digital Tax Act 2020 expressly provides the power to enact additional regulations. In any event, the definition of an online advertising service does not, for instance, include the supply of digital content, such as software as a service (‘SAAS’), streaming services or e-books (online subscriptions to magazines or newspapers).
One main condition is that the online advertising is displayed on an user’s device with an Austrian Internet Protocol (‘IP’) address and is directed (also) towards domestic (“Austrian”) users according to its content and design. “User” means any individual or legal person or legal entity using a device by which they access a digital interface. “Digital interface” means any type of software (including a website or parts thereof, as well as mobile applications) that users can access. Based on a connection to the IP address, there will not, for instance, be an Austrian IP address if one is using Wireless Lan device abroad. If an entirely different technology is used for geo-localization (geo-targeting or geolocation), such technology will be deemed equivalent to the IP address.
An online advertisement is only subject to the Austrian Digital Tax if the online advertisement is directed at domestic (“Austrian”) users, including the content and design of the online advertisement. The traditional advertising tax foresees in a similar demand for an Austrian connection. If for instance TV advertising is intended to be received in Austria and broadcasted from Germany, it is deemed to have been rendered in Austria for the Austrian advertisement tax purposes.
With regard to online advertising, a distinction has to be made between individualized online advertising and general online advertisement.
Individualized online advertising, which most likely includes personalized banners through Retargeting will always be addressed to Austrian users, given them a tailor made character.
For the more general banner advertising services this is different, there has to be a specific connection to the Austrian market. A banner advertisement addressed to the Austrian market is usually addressed to domestic users. In contrast to, for instance on the website of a German online newspaper, a fixed banner advertisement appears for all users/readers, it can be assumed that such fixed banner is aimed at German users, even if the advertised products can also be purchased in Austria. Furthermore, in our opinion online advertisements intended for foreign countries (e.g. online advertisement for holidays in Austria on a website) should not trigger any digital tax liability, even if they can be consumed in Austria.
However, if there is a special banner or offer advertisement for Austrian users then the advertisement will be subject to the Austrian digital services tax. The problem of a territorial delimitation without reference to a (domestic) contracting partner becomes clear here. Further clarifications are therefore likely.
According to a recently published decree of the Federal Minister of Finance in those cases where, in the first full financial year of application of the Digital Tax Act 2020, online service providers are unable for technical reasons to allocate fees for the performance of online advertising services to domestic users, the competent tax office may, upon request, permit another method for determining the tax base of the digital taxpayers if the online service provider substantiates that this method leads to similar results.