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Income and taxes in Austria

Income tax system

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:

  • A limit of one sixth of the yearly recurring payments (so-called Jahressechstel)
  • On top of that, progressive tax rates apply in case this share is very high, starting with recurring payments totalling approximately 155,000 Euros per year.


Tax rates

  • Up to 11,000 0%
  • Above 11,000 up to 18,000 20%
  • Above 18,000 up to 31,000 35%
  • Above 31,000 up to 60,000 42%
  • Above 60,000 up to 90,000 48%
  • Over 90,000 50%

These rates apply to special payments within this share, and after deduction of employee contributions to social insurance:

  • For the first 620 Euros 0%
  • For the next 24,380 Euros 6%
  • For the next 25,000 Euros 27%
  • For the next 33,333 Euros 35.75%
  • Over 83,333 Euros Standard taxation rate, usually 50%


Employment income subject to income tax

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.


Income-related expenses, special expenses and extraordinary burdens

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:

  • commuting allowance
  • tax-exempt amounts based on a corresponding assessment
  • lump sum for income-related expenses: 132 Euros (already included)
  • lump sum for special expenses: 60 Euros (already included)
  • lump sum for income-related expenses for expatriates
  • contributions to the statutory social insurance system

 

Annual tax assessment

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:

  • operating expenses (computer, telephone, internet less a deductible, which for computers is usually assumed to be 40%)
  • specialist literature
  • traveling expenses
  • training and further education costs
  • relocation expenses
  • maintenance of two households
  • travel between the place of residence and the workplace (partial or comprehensive commuting allowance, better known as Pendlerpauschale, for distances of more than 20 km, or of more than 2 km if using public transport is not feasible)

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:

  • church tax (up to 400 Euros)
  • donations to certain institutions listed by the tax office
  • tax consultant fees
  • health care expenses (a deductible exceeding the amount of approximately one month’s gross salary)
  • child care costs

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 annual tax assessment is optional and may be withdrawn at any time if the tax return has been filed voluntarily.

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/

Evelyn Hetzinger Ansprechpartnerin für Welcome 2 Upper Austria | Standortagentur Oberösterreich, Business Upper Austria Care Area: all around upper Austria

Evelyn Hetzinger

CARE AREA / EXPAT
All around Upper Austria

 

Business Upper Austria - OÖ Wirtschaftsagentur GmbH

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