Employers in Austria deduct income tax and transfer it directly to the Inland Revenue Office every month. This also applies to most foreign employers with registered offices in Austria, who also have to pay income tax. Provided employees have no other source of income, they are generally not required to file an income tax return. When it comes to the annual tax assessment and tax allowances, different regulations apply depending on whether a person is subject to limited or unlimited tax liability. The following applies to persons with unlimited tax liability whose residence or habitual place of abode is in Austria.
Austrian employees benefit from the fact that special payments (other remunerations) are taxed at only 6%. The first 620 Euros are tax-free. Special payments include additional salaries at Christmas and before the summer holidays (13th and 14th salary) as well as bonuses.
Two limits apply to preferential taxation:
These rates apply to special payments within this share, and after deduction of employee contributions to social insurance:
This includes monetary compensation as well as benefits in kind. Benefits in kind are usually taxed on the basis of their market value. There are, however, a number of special regulations for determining the value of company cars and company-provided accommodation, for instance. Some benefits in kind are tax-free, others are partially tax-free.
These reduce the tax base and can be claimed in the tax return in the course of the annual tax assessment. However, some of these expenses may already have been taken into account by monthly payroll accounting such as:
Employees can claim commuting allowance, better known as Pendlerpauschale, for travel between their place of residence and their workplace for distances of more than 20 km, or of more than 2 km if using public transport is not feasible. For this purpose, employees must submit a signed document to their employer specifying the distance travelled, which can be determined using the commuter calculator, the so called Pendlerrechner: >> pendlerrechner.bmf.gv.at/pendlerrechner
A notification on tax exemptions (better known as Freibetragsbescheid) enables the ongoing consideration of forecasted income-related expenses, special expenses and extraordinary burdens during payroll accounting. Otherwise, tax is only deducted in the annual tax assessment after the end of the year.
Expatriates are entitled to claim a lump sum for income-related expenses amounting to 20% of their gross salary (after deduction of tax-free payments and preferentially taxed special payments). The lump sum is limited to 10,000 Euros per year. Proof of actual income-related expenses is not required. An expatriate is an employee of a foreign company …
Payments of relocation expenses by the employer are exempt from tax if they are granted to the employee upon assignment to another location. The same applies to intra-corporate transferees. Payments of relocation expenses include compensation for travelling expenses incurred by employees and their families to their new place of residence, actual freight charges for household effects as well as other expenses. No proof of payment is required, with flat-rate compensation capped at a maximum of one fifteenth of the annual gross income. Please note that this only applies when leaving your current residence.
Within the scope of an annual tax assessment (known as 'Arbeitnehmerveranlagung'), the income tax which was deducted by the employer is recalculated. This may prove advantageous for employees who started their employment during the year. Due to the annual income tax system, they may have paid too much tax. This is because the tax base rests on the assumption that the monthly income is received over the entire year. Some business expenses and also some private expenses are deductible.
Furthermore, employees can claim deductions resulting in a lower tax base, which therefore gives rise to a tax credit. The following business expenses are deductible:
It is not possible to deduct expenses related to clothing (such as suits) as these can also be worn privately. However, it is possible to deduct private expenses such as:
There is also a tax allowance for sole earners (provided the partner does not earn more than 6,000 Euros, and the applicant shares a household with the child) as well as for single parents, which reduces the tax payable and is paid out as a credit. In addition, it is possible to claim child allowance. Persons with disabilities and parents of children with disabilities (increased family allowance) qualify for further tax deductions.
The declaration can be submitted online for the last five years via FinanzOnline. Just register once for the online portal, and your access data will be delivered to you by post. The Inland Revenue Office will provide answers to any minor issues related to the declaration. Further support can be obtained from tax advisers. finanzonline.bmf.gv.at/fon/