Hiring International Freelancers – Tax Certainty for an Austrian Technology Company

How Kobled­er TAX Advi­sors helped an Aus­tri­an IT com­pa­ny estab­lish a tax-com­pli­ant work­ing rela­tion­ship with a free­lance soft­ware devel­op­er in Tunisia.

The Initial Situation

An Aus­tri­an tech­nol­o­gy com­pa­ny planned to engage a self-employed soft­ware devel­op­er from Tunisia for a new devel­op­ment project. The col­lab­o­ra­tion was to take place entire­ly remote­ly. The devel­op­er would con­tribute to the devel­op­ment of a new soft­ware solu­tion and invoice the Aus­tri­an com­pa­ny direct­ly for her ser­vices.

Although the con­trac­tu­al arrange­ments had already been well pre­pared, sev­er­al tax-relat­ed uncer­tain­ties remained.

The man­ag­ing direc­tor par­tic­u­lar­ly want­ed to know whether Aus­tri­an with­hold­ing tax had to be deduct­ed from pay­ments to Tunisia, how the invoic­es should be issued and treat­ed for VAT pur­pos­es, and which doc­u­ments were required to ade­quate­ly doc­u­ment the col­lab­o­ra­tion for the Aus­tri­an tax author­i­ties.

Anoth­er impor­tant ques­tion con­cerned the rights to the devel­oped soft­ware: How could the com­pa­ny ensure that it would be able to use the soft­ware com­mer­cial­ly with­out restric­tions in the future, with­out trig­ger­ing unex­pect­ed tax oblig­a­tions?

Our Advisory Services

Kobled­er TAX Advi­sors reviewed the pro­posed col­lab­o­ra­tion from an Aus­tri­an tax per­spec­tive and analysed the con­trac­tu­al doc­u­ments that had already been pre­pared.

A par­tic­u­lar focus was placed on dis­tin­guish­ing between ordi­nary soft­ware devel­op­ment ser­vices and the grant­i­ng of soft­ware licences.

While devel­op­ment ser­vices per­formed exclu­sive­ly abroad gen­er­al­ly do not trig­ger Aus­tri­an with­hold­ing tax, the grant­i­ng of cer­tain soft­ware usage rights in return for pay­ment may give rise to such an oblig­a­tion.

We showed the com­pa­ny how the con­trac­tu­al pro­vi­sions could be clar­i­fied to ensure that the per­ma­nent acqui­si­tion of the com­mer­cial exploita­tion rights to the new­ly devel­oped work results was clear­ly reg­u­lat­ed. At the same time, we rec­om­mend­ed that the use of the devel­op­er’s pre-exist­ing soft­ware com­po­nents be agreed upon sep­a­rate­ly and, where nec­es­sary, reviewed from a tax per­spec­tive.

We also clar­i­fied the VAT treat­ment of the ser­vices. We explained how the reverse-charge mech­a­nism works and which infor­ma­tion must be includ­ed on the invoic­es.

Final­ly, we com­piled a clear check­list of the required sup­port­ing doc­u­ments and rec­om­mend­ed using the offi­cial ZS-QU1 form to doc­u­ment the for­eign devel­op­er’s tax res­i­dence.

The Benefits for Our Client

Our advi­so­ry ser­vices pro­vid­ed the com­pa­ny with a clear foun­da­tion for its planned inter­na­tion­al col­lab­o­ra­tion.

The key ben­e­fits includ­ed:

• Avoid­ing unnec­es­sary tax risks: Poten­tial with­hold­ing tax issues were iden­ti­fied before the con­tract was signed, and spe­cif­ic adjust­ments were rec­om­mend­ed.
• Tax-com­pli­ant invoic­ing: The com­pa­ny received guid­ance on the cor­rect VAT treat­ment of the ser­vices and the applic­a­ble invoic­ing require­ments.
• Clear reg­u­la­tion of soft­ware rights: The rec­om­mend­ed con­trac­tu­al amend­ments pro­vid­ed a stronger basis for the future com­mer­cial use of the devel­oped soft­ware.
• Reduced admin­is­tra­tive effort: Clear require­ments and stan­dard­ised sup­port­ing doc­u­ments sim­pli­fied the tax doc­u­men­ta­tion process.
• Greater cer­tain­ty in inter­na­tion­al projects: The man­ag­ing direc­tor was able to pre­pare the col­lab­o­ra­tion on a sound tax basis.

Our Conclusion

Inter­na­tion­al free­lancers pro­vide Aus­tri­an com­pa­nies with access to spe­cialised exper­tise and enable flex­i­ble col­lab­o­ra­tion regard­less of loca­tion.

How­ev­er, par­tic­u­lar­ly in IT and soft­ware devel­op­ment projects, the rel­e­vant tax require­ments and the trans­fer of soft­ware usage rights should be clar­i­fied before enter­ing into a con­tract.

At Kobled­er TAX Advi­sors, we sup­port com­pa­nies in struc­tur­ing cross-bor­der busi­ness rela­tion­ships cor­rect­ly from a tax per­spec­tive, pro­vid­ing clear rec­om­men­da­tions and prac­ti­cal solu­tions that can be imple­ment­ed in every­day busi­ness oper­a­tions.

Are You Plan­ning to Hire Inter­na­tion­al Free­lancers or Soft­ware Devel­op­ers?

We would be pleased to advise you on Aus­tri­an tax mat­ters, VAT and poten­tial with­hold­ing tax oblig­a­tions relat­ing to cross-bor­der ser­vices.