Global expatriate tax guide

Expatriate tax - Austria

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Expatriates taking up employment in Austria will be subject to comprehensive rules and, in some cases, employment visa requirements. The expatriate services team at Grant Thornton Austria can help expatriates and their employers to deal with Austrian tax matters, as well as Austrian labour and social security issues.

In particular, Grant Thornton Austria can help expatriates and their employers identify tax planning opportunities and review tax equalisation policies, as well as provide compliance services regarding Austrian tax, social security and labour law requirements.

Click on each of the areas below to expand for more information:

Facts and figures
Pre arrival procedures

Before expatriates take up employment in Austria, it is important to make sure that the expatriate’s employment contract and benefit package are structured in a tax efficient manner.

In addition, visa and work permit requirements may have to be observed:

  • EU and EEA citizens as well as Swiss citizens do not require residency or work permits (exceptions apply to Croatian citizens until June 30th, 2020). They only need to apply for a registration certificate at the relevant local authority within a four-month period starting from the applicant’s arrival in Austria.
  • Transitional provision for Croatian citizens (applicable until June 30th, 2020): Croatian people do not need a residence title and a confirmation of registration suffices. During the transitional period, workers from Croatia need a labour market permit granted by the Public Employment Service (Arbeitsmarktservice, AMS). Croatians enjoy preferential labour market access compared to third-country nationals.
  • Non-EU nationals usually need to apply for a visa at the Austrian Embassy or Consulate in their home country before travelling to Austria. In addition, a work permit issued by the Public Employment Service (AMS) is required.
  • Special regulations may apply to foreign placements, eg where employees are sent to Austria by a foreign employer to fulfill a contractual obligation. If certain other conditions are met in addition (duration of the project, type of industry etc.) it is sufficient, if the Austrian contractor applies for a so-called foreign placement permit.
Employment visas

Non-EU/EEA citizens and Croatian nationals (until June 30th, 2020) may file applications for issuance of work permits with the Public Employment Service (AMS).

  • ‘Red-White-Red Card’ (RWR-Card): Obtaining a work permit is facilitated for highly qualified labour, skilled labour in understaffed professions, employed and self-employed key personnel, graduates from Austrian universities and start-up founders. The RWR-Card for these categories of personnel is issued for a period of 24 months and for employment with a specific employer. After a period of 24 months, he/she may apply for a ‘Red-White-Red Card Plus’, which grants unlimited access to the labour market for one and up to three years. Information on the conditions for obtaining the RWR-Card is available at: www.migration.gv.at.
  • An EU Blue Card may be granted to non-EU citizens if (1) they are university (or similar educational institution) graduates; (2) they have a binding job offer to work in Austria for at least a year in an employment corresponding to the education; (3) they earn a gross annual income of at least one and a half times the average gross annual income of full-time employees (in 2019: at least €62.265 annual salary plus special payments); and (4) there is no equally qualified worker registered with the Public Employment Service (AMS) available for the job. Once the individual has been employed in such a function in Austria for at least 21 months within the preceding 24 months, he/she may apply for the RWR-Card Plus which grants unlimited labour market access.
  • The issuance of other types of employment visas may be subject to quotas.
Tax year

The Austrian tax period is set for a calendar year.

Tax returns and compliance

Monthly payroll tax has to be deducted and paid to the Austrian tax authorities by the employer if he or she has a permanent establishment (PE) for payroll tax purposes (in general, if the employment is longer than one month). Furthermore, the employer has to comply with annual payroll tax reporting requirements. Employer payroll tax reports are due by the end of February of the following tax year when filed electronically. As of January 2020, foreign employers have to deduct monthly payroll tax for all employees with unlimited tax liability in Austria, regardless of whether the employer has a PE for payroll tax purposes in Austria.

For the employee, the income tax requirements can be fulfilled with the payment of payroll tax. However, an annual tax declaration may be obligatory, if the employee has other sources of income in Austria, depending on the specific circumstances.

Tax declarations are also obligatory for employees with Austrian Double Tax Treaty (DTT) residency, if they have additional foreign income that is exempt from Austrian taxation because of the DTT.

Employee income tax declarations are due by June 30th of the following calendar year (if submitted electronically, otherwise the due date is April 30th). A penalty of up to 10% of the tax due may be imposed at the discretion of the tax authorities in cases of late filings of tax declarations. In addition, interest is due on any tax owed.

Employees with limited tax liability in Austria only have to file a tax declaration if their Austrian source income that has not been subject to payroll tax exceeds €2,000.

Employees who are not required to file a tax return can still choose to file one within five years after the end of the respective tax year eg to consider deductible expenses that have not yet been taken into account in the payroll.

Income tax rates

The following progressive income tax rates apply to the annual taxable income:

  • up to €11,000 : 0%
  • above €11,000 and up to €18,000: 25%
  • above €18,000 and up to €31,000: 35%
  • above €31,000 and up to €60,000: 42%
  • above €60,000 and up to €90,000: 48%
  • above €90,000 and up to €1,000,000: 50%
  • above €1,000,000: 55%

Employees pay income tax at reduced rates on special payments such as the 13th and 14th salary and certain bonuses when these are within the annual limit determined as one sixth of their annual regular pay in the respective year.

Annual amount of irregular remuneration in EUR (within the ceiling amount and after deducting corresponding employee social security contributions) Tax rate that applies to special payments
first 620 0.00%
next 24,380 6.00%
next 25,000 27.00%
next 33,333 35.75%
above 83,333 Regular tariff tax rate
Sample income tax calculation

The employee has no children and receives a monthly salary of €3,000 per month. He has a company car, which he can also use privately. The employee’s home is 30 kilometres from his place of work and using public transport for the commute would, in principle, be possible. In line with most collective agreements in Austria, he is entitled to 14 salary payments per year.

Salary (12x) 36,000.00
Car benefit (2% of value up to a maximum of €960 per month) 2,400.00
Total earned income excluding 13th and 14th salary 38,400.00
   
Less employee social security contributions excluding those on the 13th and 14th salary 6,958.08
Less standard lump sum deduction for expenses 132.00
Less standard lump sum deduction for special personal expenses 60.00
Income taxable at progressive rates 31,249.92
Computed income tax thereon 6,404.92
   
Less standard traffic tax credit 400.00
Income tax payable on income excluding 13th and 14th salary 6,004.92
   
13th and 14th salary 6,.000.00
Less social security contributions on 13th and 14th salary 1,.027.20
Income taxable at fixed rates 4,.972.80
6% tax on special payments within the annual limit amounts whereby a tax free amount of €620.00 is considered 261.16
   
Total income tax payable: 6,266.08
   
   
Basis of taxation
Charge to tax

For tax purposes, individuals are considered residents in Austria if they have either their domicile or habitual abode in Austria. Resident taxpayers are in general taxable on their worldwide income (unlimited tax liability). Married persons and children are taxed separately as individuals.

Individual non-resident taxpayers are in general subject to tax in Austria on their income received for work in Austria. A tax declaration has to be filed if the Austrian income which has not been taxed by way of withholding (payroll tax) exceeds €2,000. The zero-bracket for income up to €11,000 in the income tax table does not apply to non-residents – an amount of €9,000 is added to their taxable income when determining the tax, therefore the zero-tax bracket only applies up to €2,000 taxable income.

Furthermore, a tax declaration is obligatory in cases where the non-resident taxpayer earns income subject to Austrian payroll tax from two sources. Generally, a non-resident may only deduct expenses that are linked to his/her taxable income in Austria. Personal tax credits are generally not granted to non-residents.

Non-residents from the EU and the EEA can apply to be treated as residents for Austrian tax purposes if at least 90% of their worldwide income is subject to Austrian income tax, or if income not taxed in Austria does not exceed €11,000.

Residence

Domicile

A domicile is a place where the individual maintains a residence under circumstances, which indicate that he/she will keep and use it not only on a temporary basis.

Habitual abode

An individual is considered to have his/her habitual abode in Austria if the person is physically present in Austria for more than 183 days during a year.

Income from employment

Income from employment includes any remuneration, in cash or in kind received by an employed person, whether paid by the employer himself or by a third party. As a rule, the employer is required to deduct and retain the tax on such income at source. The taxation at source applies to most expatriates moving to Austria. In addition they have to file a tax declaration if they have other sources of taxable income or if they intend to consider certain deductible expenses.

Source of employment

The regulations of the double taxation agreement between Austria and the respective other country have to be observed. In general, the source of employment income is deemed to be in Austria if the work was performed in Austria. It is irrelevant for this purpose when, where and in which currency the remuneration is paid or where the contract was signed.

Benefits (in kind)

In Austria, most non-monetary benefits are taxable and subject to social security contributions and income tax as well as to employer payroll taxes (incidental wage costs). In any case, the benefit and incentive package of expatriates coming to Austria should be reviewed in detail with regard to tax implications.

The most common types of taxable benefits in kind in connection with expatriates are the right to use a company car privately, the payment of apartment rent by the employer for the employee and the taking over of personal income tax liability of the employee by the employer.

Insurance premiums paid by the employer whereby the employee or his/her family are beneficiaries are generally taxable. A tax-free amount of €300 applies for certain types of insurance under certain condition.

Employer contributions to a pension fund are tax free under certain conditions.

Company events are tax free up to an amount of €365 per employee per year. Non-cash benefits (eg Christmas presents) are tax free up to an amount of €186 per employee per year.

Employee stock purchase programs that meet certain requirements may be tax exempt up to an annual amount of €3,000.

Payments the employer makes towards childcare costs of the employee are tax free up to an amount of €1,000 per child per year.

Employee meal vouchers may be tax-free up to an amount of €4.40 per working day.

Expatriate concessions

Inbound expatriates

Starting with the year 2016, it is possible to consider for inbound expatriates a lump-sum amount of 20% (up to €10,000 per year) of the employee salary as expenses in the monthly payroll. The lump sum expense may also be considered in the tax declaration instead. This provision applies to expats who have not been resident in Austria during the past ten years and only work in Austria temporarily (up to five years), if their salary is subject to Austrian tax. It is also a requirement that the expatriate keeps the domicile in his home country, and that he works in Austria on behalf of a foreign employer.

Furthermore, it is possible for the employee to consider expenses in the actually paid amount instead of the lump sum. Expenses that may be considered include the costs for keeping a second household (as long as both households are financially maintained by the expatriate) and the costs for family visiting trips.


Outbound expatriates

In cases of temporary assignments abroad it is possible under certain conditions to exempt 60% of the remuneration for the assignment (limited to the social security ceiling amount). The assignment abroad has to involve aggravating work risk factors (eg temperature, dust, dirt, health risks) or aggravating assignment country factors (countries where travel warnings have been issued or countries that are listed on the DAC List of ODA Recipients issued by the OECD).

The exemption is applicable for employees that are assigned to the project abroad by an employer resident in the EU/EEC or Switzerland or from a permanent establishment located within the EU/EEC or Switzerland if the assignment location is at least 400 kilometres from the Austrian border and the assignment duration is not shorter than one month. The assignment should not be to a permanent establishment of the employer. Certain other prerequisites may apply as well.

The tax exemption does not apply to irregular remuneration such as the 13th and 14th salary in Austria and certain bonuses.

Relief for foreign taxes

Austria has concluded double taxation agreements with more than 80 countries in the world. Where a Double Taxation Agreement (DTA) exists, double taxation is eliminated in accordance with the exemption or the imputation method foreseen in the DTA.

Where no DTA applies, double taxation on most foreign income is alleviated by exempting the foreign income from taxation in Austria provided that the average tax rates and taxation in the other country are comparable and appropriate documentation is maintained. The foreign income is still considered to determine tax progression. If the conditions are not met, foreign tax paid can be deducted from the Austrian tax payable on this type of income. The credit can however not be higher than the amount of Austrian taxes on such income.

Deductions from taxable income

Deductions may include special personal or family expenditures and extraordinary expenses, which can either be claimed in full or up to a certain amount.

Non-resident taxpayers can only deduct expenses that are directly related to their Austrian income. Personal and family expenditures of non-resident taxpayers cannot be considered.

Most frequent standard lump-sum deductions against income:

Standard lump sum deduction for expenses €132.00/year
   
Tax deduction for commuting, when public transport is considered reasonable, depending on the distance between work and home:  
− between 20 km and 40 km €696 per year
− between 40 km and 60 km €1,356 per year
− above 60 km €2,016 per year
   
Tax deduction for commuting, if public transport is deemed unreasonable:  
− between 2 km and 20 km €372 per year
− between 20 km and 40 km €1,476 per year
− between 40 km and 60 km €2,568 per year
− above 60 km €3,672.00 per year
   
Standard lump sum deduction for special personal expenses €60

Most frequent tax credits to be deducted from income tax:

Standard traffic tax credit €400 per year
Sole earner/ single parent child deduction - 1 child

€494 per year

Sole earner/ single parent child deduction – 2 children

€669 per year

Family bonus (tax credit as of 2019) Up to €1,500 per year and child

In the personal income tax declaration, numerous expenses e.g. for work related expenses and formation expenses that were not reimbursed by the employer, medical expenses that constitute an extraordinary burden, certain insurance premiums (only until 2020), certain donations to not-for profit organisations and church fees can be deducted from the taxable income.

Duty of notification of the ZKO: (LSD-BG)

In case of posting or assignment to Austria certain documents have to be kept ready (posting agreement in German or English, salary slips, ZKO form, A1 form, etc).

The posting or assigning company has a duty to notify the Central Co-Ordinating Agency (ZKO - Zentrale Koordinationsstelle des Bundesministeriums für Finanzen), charged with investigating illegal employment, of the Federal Ministry for Finance. This must happen at least one week before taking up a posting or assignment.

For this purpose, the ZKO provides two different forms:
The form 'ZKO 3' must be used for postings and the form 'ZKO 4' must be used for assignments to Austria. Each must be filed EDP-supported by the permanent employer in case of postings and respectively, by the assigning employer in case of assignments.

Please note that there are very high penalties in Austria in case the requirements of the LSD-BG are not fulfilled or the relevant documents are not ready in case of an inspection.

Other taxes
Capital gains tax

In general, capital gains are considered taxable income irrespective of the holding period (eg income from capital investments, dividends, etc.).
The income tax rate on capital gains is in principle 27,5%. A reduced tax rate applies to certain capital gains such as interests from savings accounts and current accounts. In most cases, the capital gains tax is paid by withholding at the source (eg Austrian banks).

Real estate profit tax

30% real estate profit tax may be payable in cases of income from real estate sales. There are exceptional provisions, eg for selling a previous primary residence, and for properties bought before 31 March 2002.

Inheritance, estate and gift taxes

As of 1 August 2008, inheritance and gift taxes have been abolished in Austria. There are however reporting requirements for gifts.

Local taxes

In Austria certain types of taxes are levied by the local communities while other tax types are levied on a federal level.

Real estate tax

Immovable property situated in Austria is subject to a rather low real estate tax. The tax is levied based on the assessed standard value of immovable property. In general the assessed value of real estate is substantially lower than its market value. Real estate tax is levied at an annual basic federal rate of usually 0.2% multiplied by a municipal coefficient. Municipal coefficients range up to 500%.

The acquisition of real estate is also taxable in Austria. The basic tax rate is 3.5%. A lower rate applies to certain ‘acquisitions’, eg inheritances or gifts. The basis for this tax is usually the value of the compensation received. In certain instances eg when the value of the compensation cannot be determined or there is no compensation, the assessed standard value of immovable property times three is used as the basis.

Social security taxes

In general, employees are subject to compulsory social security under the Austrian social security system with income they receive for work mainly performed in Austria. Under certain conditions, employees who are placed in another country for not more than five years continue to be subject to social security in Austria even when their place of work is not in Austria during that time. EU/EEC regulations and social security agreements can mandate otherwise:

Within the EU/EEC and Switzerland, employees are subject to social security in only one country. Collision rules determine which country’s social security system applies based on the employee’s place of work – except for short term delegations to another country – and the country in which the employee is resident and other criteria.

Regarding the non-EU/EEC countries, Austria has entered into social security agreements with several countries. Some of these agreements do however only cover pension insurance as eg the agreement with the USA or Canada. Full scope social security agreements are in place with other countries such as Serbia and Bosnia. Generally, these social security agreements only apply to short term delegations and for example not to employees maintaining employment relationships in two countries at the same time – in these cases employees can be subject to social security in two countries, whereby each country levies social security on income from work performed mainly on its territory.

Under Austrian social security regulations, contributions are levied on income up to a ceiling amount of €62,640 per year or €5,220 per month (a separate ceiling of €10,440 applies to certain irregular remuneration items, such as the 13th or 14th month’s salary and certain bonuses) (2019).

For 2019, the employee contribution rates are:

Contribution for White-collar Blue-collar
  Rate (%) Rate (%)
Pension insurance 10.25 10.25
Health insurance 3.87 3.87
Unemployment insurance 3.00 3.00
Housing fund 0.50 0.50
     
Total 17.62 17.62

Certain employees must make a contribution to the chamber of employees (0.5%) additionally, other minor contributions can apply.

Employee social security contributions are deductible for income tax purposes.

For 2019 the employer contribution rates are:

Contribution for White-collar Blue-collar
  Rate (%) Rate (%)
Pension insurance 12.55 12.55
Health insurance 3.78 3.78
Unemployment insurance 3.00 3.00
Accident insurance 1.20 1.20
Insolvency Fund 0.35 0.35
Housing fund 0.50 0.50
     
Total 21.38 21.38

For employment agreements starting on or after 1 January 2003, the employer has to pay monthly contributions of 1.53% to a mandatory occupational retirement fund.

The employer is also liable to certain payroll taxes which are:

Local community tax: (KommSt) 3%
Employer contribution to FLAF (DB) 3.9%
Additional employer contribution to FLAF 0.34% to 0.42% depending on the state
Vienna City tax 2.00 EUR per week per employee

 

Stock options

Stock options are treated as income from employment and subject to the individual progressive tax rates. If the stock options are not traded options taxes are levied at the time of exercise and not at the grant date. Tax treaties often refer to the vesting date instead.

Wealth tax

There is currently no wealth tax in Austria.

Other specific taxes

Stamp duties are levied if certain legal transactions, eg lease and rental agreements or guarantee agreements are concluded in written form. The rates vary between 0,8% and 2% and some duties are levied as a fixed amount.

Under certain conditions even legal documents executed abroad may be subject to Austrian stamp duty, especially if the transaction will be performed in Austria or refers to an object situated in Austria.

Tax planning opportunities
Earnings description Planning possible
Cost of living allowance Y
Housing Y
Home leave Y
Club membership N
Moving expenses Y
Foreign service premiums Y

For further information on expatriate tax services in Austria please contact:

Christoph Schmidl.png

Christoph Schmidl
E christoph.schmidl@at.gt.com