Article 25 to exchange information — U.S. Income Tax Treaty

in relation to a specific case, or spontaneously.

   Paragraph 2 explains that the obligations undertaken in
paragraph 1 to exchange information do not require a contracting

State to carry out administrative measures which are at variance

with the laws or administrative practice of either State. Nor

does that paragraph require a Contracting State to supply infor mation not obtainable under the laws or administrative practice

of either State, or to disclose any trade, business, industrial,

commercial or professional secret or trade process, or other

information, the disclosure of which would be contrary to public

policy.

Regarding subparagraph (b), due to the limitations under the

internal law of Austria concerning bank secrecy, Austria will be
able to obtain bank information only in connection with a penal

investigation in the United States, as interpreted and agreed in

the Memorandum of Understanding. Either Contracting State may,
however, at its discretion, subject to the limitations of the
paragraph and its internal law, provide information which it is
not obligated to provide under the provisions of this paragraph.

Regarding subparagraph (c), the Memorandum of Understanding

contains the agreement of the Contracting States that, on the

basis of paragraph 19 of the OECD Commentary on Article 26 of the

OECD Model Convention, the provisions on bankers discretion (bank

secrecy rules) do not constitute a professional, trade, business,

industrial, or commercial secret. In Austria, this opinion is
supported by German and Austrian jurisprudence. (The German

language has one term referring to both "trade" and "business;"

thus, the German language version of the Convention uses the same
word to refer to both.)

   Paragraph 3 provides that when information is requested by a
Contracting State in accordance with this Article, the other
Contracting State is obligated to obtain the requested informa
tion as if the tax in question were the tax of the requested

State, even if that State has no tax interest of its own in the

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case to which the request relates. The paragraph further pro vides that the requesting State may specify the form in which

information is to be provided (e.l.,. depositions of witnesses and authenticated copies of original documents) so that the informa tion can be usable in the judicial proceedings of the requesting

State. The requested State should, if possible, provide the information in the form requested to the same extent that ^it can obtain information in that form under its own laws and adminis trative practices with respect to its own taxes. Providing information in the form requested is a continuation of present practice.

Paragraph 4 clarifies that the tax authorities of a Contracting State may deliver documents to persons in the other Contracting State by using postal services. Each Contracting

State shall, for purposes of its taxes, determine in accordance
with its domestic law the legal efficacy or sufficiency of the
documents so delivered.

   Paragraph 5 clarifies that the information exchange provi

sions of this Article apply to assistance carried out under penal, as well as non-penal, investigation procedures. Paragraph

5 also provides that requests for arrest of persons are not
covered by the Convention.
   As discussed above, paragraph 6 provides that the informa

tion exchange provisions of this Article.shall apply to taxes of

every kind imposed by a Contracting State.
   Paragraph 7 provides for assistance in collection of the
taxes specified under Article 2 to the extent necessary to ensure

that treaty benefits are enjoyed only by persons entitled to those benefits under the terms of the Convention. Under this

paragraph, a Contracting State will endeavor to collect on behalf
of the other State only those amounts necessary to ensure that
any exemption or reduced rate of tax at source granted under the
Convention by that other State is not enjoyed by persons not
entitled to those benefits.

Subparagraphs a), b), c) and d) of paragraph 7 impose conditions on collection assistance. Under subparagraph a), the

requesting State must produce a copy of a document certified by

its competent authority specifying that the sums referred for collection assistance are finally due and enforceable. The tax of a requesting State shall be considered "finally due and enforceable" when the requesting state has the right under its

internal law to collect the tax and all administrative and

judicial rights of the taxpayer to retrain collection in the requesting State have lapsed or been exhausted. Thus, the concept of "finally due and enforceable" is equivalent to "final

ly determined" in the U.S. income tax treaties with Canada and

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the Netherlands.

  Under subparagraph b), a document described in subparagraph
a) shall be rendered enforceable in accordance with the laws of
the requested State. Under Austrian law, such documents must be
rendered enforceable by the Regional Finance Directorates
(Finanzlandesdirektionen). Where the U.S. Competent Authority
accepts a request for collection assistance, the Austrian tax
claim shall be treated by the United States as an assessment
under United States laws against the taxpayer as of the time the
request is received.

  Under subparagraph c), the requested State shall effect
recovery in accordance with the rules governing the recovery of
similar tax debts of its own; however, tax debts to be recovered
shall not be regarded as privileged debts in the requested State.
This provision establishes the rule that a tax for which collec
tion assistance is provided shall not have in the requested State
any priority specially accorded to the taxes of the requested
State. Thus, the priority enjoyed by the requested State for
collection of its own taxes in relation to conflicting creditor

claims (eg_, in bankruptcy) are not automatically extended to

the tax claims of the requesting state.

  Also under subparagraph c), in the Republic of Austria,
judicial execution shall be requested by the Finanzrokuratur or
by the finance office delegated to act on his behalf. Where the
U.S. competent authority accepts a request for collection assis
tance, and judicial enforcement is required to effect such
assistance, judicial enforcement will be iequested and the matter
will be referred to the Department of Justice as if the Austrian
tax claim were a U.S. tax assessment.
  Under subparagraph d), appeals concerning the existence or
amount of the debt shall lie only to the competent tribunal of
the requesting State.

   Finally, paragraph 7 provides that the Contracting State
asked to collect the tax is not obligated, in the process, to
carry out administrative measures that are different from those
used in the collection of its own taxes, or that would be con
trary to its sovereignty, security, public policy or essential
interests. Under the Memorandum of Understanding, the
Contracting States agree that the "essential interest" clause
above can be invoked by a Contracting State if requested to
recover a tax on behalf of the other Contracting State and the
requested State denies that the tax in question is levied in
accordance with the provisions of the Convention.

   Regarding all provisions of Article 25, the Memorandum of
Understanding provides two clarifications. First, it is

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understood that the requested State shall be obligated to ^obtain

the requested information according to its procedures at the time of the request. Therefore, if either State undertakes new and more comprehensive procedures to obtain information for ^its own purposes, those procedures shall be used to obtain information

under those procedures for the other Contracting State. Second,

it is understood that this Article is not confined to taxes
levied, or information coming into existence, after the

Convention becomes effective. Therefore, it is clear that the date on which the information is exchanged is the relevant date for purposes of determining whether Article 25 applies. Thus, an exchange of information is within the scope of the Convention

whether or not the information is in existence before, or the

taxable year is before, the effective date of the Convention.