There are several types of offshore jurisdictions that are financially attractive:
1. Tax havens–where a foreigner pays little or no taxes.
2. Asset protection havens–where local laws allow trusts, private family foundations and international business corporations.
3. Banking havens–where strict financial privacy laws guarantee banking secrecy. Some places combine all three.
The Austrian Republic is not a haven in the sense of low taxes, but it is a “banking haven.”
That’s because this nation has one of the strongest financial privacy laws in the world. That guarantee has constitutional protection that can be changed only by a national referendum of all voters.
Austria has long been a stronghold of banking privacy strategically located on what used to be considered as the border with Eastern Europe during the Cold War. From the end of World War II in 1945 to the collapse of Russian Communism in 1992, with the Soviet Union and the United States locked in armed confrontation, this convenient banking haven served as a willing financial and political go‑between for both West and East.
When Austrian national banking laws were officially codified in 1979, the well‑established tradition of bank secrecy was already two centuries old.
During this time, Austrian bank secrecy and privacy produced two major types of anonymous accounts. These accounts usually required no account holder identification, no mailing address, and no personal references. Just deposit funds and use the account as you pleased, all, of course, anonymously. Both the Sparbuch bank account and the Wertpapierbuch securities accounts have been abolished, due to the European Union’s fixation with destroying financial privacy wherever possible.
Notwithstanding the demands of the EU, current Austrian bank secrecy laws forbid banks to “disclose secrets which have been entrusted to them solely due to business relationships with customers.” The prohibition is waived only in criminal court proceedings involving fiscal crimes, with the exception of petty offenses. The prohibition does not apply “if the customer expressly and in writing consents to the disclosure of the secret.”
Austrian tax authorities found another way to profit from their attractive banking haven status: the government levies a 25% tax on the total bank interest earned. You can avoid the 25% tax on bond interest because no tax is withheld if you are a “declared nonresident.” Interest paid on investments held in Austrian banks, such as certificates of deposit, is also exempt from the withholding tax.
In my opinion, Austria’s financial and banking privacy laws will remain secure. The more outsiders try to pressure the government in Vienna, the more the Austrian people resent the interference in their internal affairs.
It’s wise to keep Austria near the top of your potential banking list, especially if your major area of business interest is in Eastern Europe and Russia.
Robert E. Bauman JD
For International Living
Editor’s Note: Robert Bauman is a regular writer for International Living magazine.