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.
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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:
Non-EU/EEA citizens may file applications for issuance of work permits with the Public Employment Service (AMS).
The Austrian tax period is set for a calendar year.
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.
The following progressive income tax rates apply to the annual taxable income:
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 |
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 |
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.
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 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.
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.
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 (if consumption at workplace) or € 1.10 (for purchase of food) per working day.
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.
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 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.
In case of posting or assignment to Austria the Anti-Wage and Social Dumping Act (LSD-BG) applies. In accordance to this Act certain documents have to be kept ready (posting agreement in German or English, salary slips, ZKO form, A1 form).
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.
The employer is obliged to hold the following documents (in German or English) on site in paper or in electronic form: the ZKO form (copy of submitted form), form A1 (copy of submitted form), payslip documents, employment contract or employment notice and work permit of the secondment country (in case of posting of a NON-EU citizen to a EU-country.
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.
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).
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.
As of 1 August 2008, inheritance and gift taxes have been abolished in Austria. There are however reporting requirements for gifts.
In Austria certain types of taxes are levied by the local communities while other tax types are levied on a federal level.
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.
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 €66,600 per year or €5,550 per month (a separate ceiling of €11,100 applies to certain irregular remuneration items, such as the 13th or 14th month’s salary and certain bonuses) (2021).
For 2021, 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 2021 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 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.
There is currently no wealth tax in Austria.
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.
| 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
E christoph.schmidl@at.gt.com