AustriaTax Obligations Detailed

As of today, February 4, 2025, employers in Austria face several tax obligations, including income tax withholding, social security contributions, and other levies.

Income Tax Withholding

Austrian income tax operates on a progressive scale, meaning higher earners pay a larger percentage of their income in taxes. Employers withhold income tax directly from employee salaries.

• Tax Rates (2025): 0% (up to EUR 12,816), 20% (EUR 12,816 - EUR 20,818), 30% (EUR 20,818 - EUR 34,513), 40% (EUR 34,513 - EUR 66,612), 48% (EUR 66,612 - EUR 99,266), and 50% (above EUR 99,266, and 55% above EUR 1,000,000).
• Payment: Withholding occurs monthly, with payment to tax authorities due by the 15th of the following month.

Social Security Contributions

Both employers and employees contribute to the Austrian social security system, which covers areas like health insurance, pension, and unemployment insurance.

• Total Rate: The combined social security contribution rate is approximately 37.55% of an employee's gross salary, split between employer and employee contributions.
• Special Payments: Special payments like bonuses are subject to a different contribution structure, with employer and employee contributions amounting to 20.48% and 17.07%, respectively.
• Assessment Basis Limit: Contributions are calculated up to a maximum monthly assessment basis of EUR 6,450 for regular payments and EUR 12,900 annually for special payments.

Other Taxes and Levies

Employers are also responsible for several other payroll-related taxes and levies:

• Family Burdens Equalization Levy (FLAF): 3.7% of the employee's gross salary.
• Municipal Payroll Tax: 3% of gross salary for employers with a permanent establishment in Austria.
• Public Transportation Levy (Vienna): EUR 2 per week per employee in Vienna.
• Chamber of Commerce Contribution: 0.31% to 0.40% of gross salary, depending on the federal state. This generally doesn't apply to foreign employers.
• Occupational Retirement Fund (Mitarbeitervorsorgekasse): 1.53% of gross wages for employment contracts starting after January 1, 2003.

General Information Regarding Taxes in Austria

Austria has a comprehensive tax system encompassing various income types, including wages, self-employment income, capital gains, and rental income. The fiscal year aligns with the calendar year. Taxpayers can utilize the annual tax assessment (Arbeitnehmerveranlagung) to adjust their tax liability, claiming deductions for various expenses like work-related costs, special expenses, and extraordinary burdens. Some available deductions include those for home office expenses (up to EUR 300 annually), specific work-related costs (with a default standard deduction of EUR 132 if no specific expenses are listed), and a cost-of-living deduction (Teuerungsabsetzbetrag) for lower-income employees. For further details, consult official government resources or a tax advisor.

In Austria, employee tax deductions encompass income tax, social security contributions, and other potential deductions for specific expenses.

Income Tax

Income tax, or Lohnsteuer, is progressively scaled, meaning higher earners pay higher percentages. The rates for 2025 are as follows:

• Up to €11,693: 0%
• €11,693 to €19,134: 20%
• €19,134 to €32,075: 30%
• €32,075 to €62,080: 41%
• €62,080 to €93,120: 48%
• €93,120 to €1,000,000: 50%
• Over €1,000,000: 55%

Employers deduct income tax directly from employee salaries monthly (Lohnsteuer) and remit it to the tax authorities. Special payments like the 13th and 14th-month salaries are also subject to tax, although they have a separate, more favorable tax rate, and the first €620 is tax-free.

Social Security Contributions

Employees contribute a percentage of their salary to the social security system, which covers healthcare, pension, and other benefits. The total contribution is currently 37.45% of the gross salary.

Other Deductions

Several other deductions can reduce the taxable income and thus the tax burden. Some common deductions are:

• Commuting Allowance (Pendlerpauschale): This covers travel costs between home and work, with the amount depending on the distance and availability of public transport.
• Work-Related Expenses: Expenses necessary for the job, such as work equipment, training costs, or professional literature, are deductible. A standard deduction of €132 applies automatically, but by providing receipts, employees may deduct the actual expenses if they exceed this amount.
• Home Office Deduction: For employees working from home, a deduction of up to €300 is available to cover related expenses, with an additional €300 allowed for home office furniture.
• Special Expenses: These include expenses like church tax, donations, or tax consultancy costs.
• Extraordinary Burdens: Significant costs, like high medical expenses or childcare costs, can be deductible under certain conditions.
• Family Bonus Plus: This bonus reduces the tax burden for families with children, with the amount varying depending on the number of children and their age.
• Single-Earner/Single-Parent Tax Credit: This credit reduces taxes for single parents or families with only one earner.

Tax Return and Assessment

While employees don't generally need to file an annual tax return if their employment income is their sole income source, doing so enables claiming deductions and potentially receiving a refund. The tax year aligns with the calendar year. There's a five-year window to file for a tax assessment (Arbeitnehmerveranlagung) and claim refunds retroactively. The deadline for employers to submit the annual payslip (Lohnzettel) to the tax office is typically the end of February.

Minimum Wage

The minimum annual gross income in Austria for 2025 is €19,809.32, with taxes and social security calculated from this amount.

In Austria, Value Added Tax (VAT), known as Umsatzsteuer (USt), is levied on most goods and services.

VAT Rates

• Standard Rate: 20% (19% in Jungholz and Mittelberg). This applies to most goods and services not covered by reduced rates or exemptions.
• Reduced Rate 1: 10%. Applies to essential goods and services like most food items, water, pharmaceuticals, passenger transport, books, newspapers, hotel accommodations, and restaurant services.
• Reduced Rate 2: 13%. Applies to specific goods and services, including tickets to sporting and cultural events, domestic flights, pet food, and certain artists' services or products.
• Zero Rate (0%): Applies to specific goods and services like exports and intra-community supplies of goods. It also applies to specified international transport services. This differs from an exemption because input VAT can still be reclaimed on 0% rated supplies.

VAT Registration

As of January 1, 2025, businesses established in Austria must register for VAT if their annual turnover exceeds €55,000. There is no threshold for businesses not established in Austria. That means they have to register before they make any taxable supply in Austria. For EU businesses participating in distance selling to Austrian consumers, the registration threshold is €10,000. This distance selling threshold includes online sales of goods and services. Non-EU businesses supplying electronic services to Austrian consumers have no threshold and must register immediately.

VAT Filing and Payment

• Monthly Returns: Businesses with an annual turnover exceeding €100,000 must file monthly VAT returns.
• Quarterly Returns: Businesses with an annual turnover between €55,000 and €100,000 file quarterly returns.
• Annual Return: All VAT-registered businesses, regardless of their filing frequency, must also submit an annual VAT return.

The deadline for monthly and quarterly VAT returns is the 15th day of the second month following the reporting period. Annual VAT returns are due by April 30th of the following year for paper submissions, or June 30th for electronic submissions via FinanzOnline. VAT payments are due at the same time as the return filing. Refunds, if applicable, are typically processed within four months, with payment made within ten business days of approval.

VAT Exemptions

Certain goods and services are exempt from VAT. Notably, essential supplies are exempted to ensure they remain relatively affordable. Examples of exempt categories include:

• Healthcare services provided by doctors and hospitals.
• Educational services by recognized institutions.
• Financial and insurance services.
• Transfer of immovable property (real estate)

Small Business Regulation (Kleinunternehmerregelung)

As of 2025, businesses in Austria ( including EU enterprises under certain conditions) with an annual turnover not exceeding €55,000 can opt for the small business regulation. This exempts them from charging VAT on their sales, thus simplifying their accounting processes significantly. However, they also cannot deduct input VAT paid. Businesses exceeding this limit can only have to charge VAT from the point they breach the threshold.

Electronically Supplied Services (ESS)

Specific rules apply to electronically supplied services (ESS), also known as digital services, for B2C transactions. If a business supplies ESS to Austrian consumers and its sales, combined with other distance sales, do not exceed €10,000, it can charge VAT at its home country’s rate. However, once this combined amount exceeds the threshold, Austrian VAT applies, and the business must either register in Austria or use the EU’s One-Stop Shop (OSS) system for VAT reporting and payment. The OSS allows businesses to report all EU distance sales via a single online portal in their home country, streamlining reporting obligations for cross-border transactions within the EU.

Intra-EU Transactions

For intra-EU transactions, the general rules for goods and services apply. However, specific documentation and reporting requirements are in place. A separate report for intra-community transactions needs to be filed with the tax office, showing details of cross-border transactions within the EU.

Austrian tax incentives for 2025 include credits for individuals and businesses, deductions, and exemptions.

Individual Tax Incentives

• Transportation Tax Credit: €487 for single taxpayers and sole earners. This increases to €601 with one child, €813 with two children, and an additional €268 for each subsequent child. The spouse's income must not exceed €7,284 annually.
• Child Alimony Tax Credit: €37 monthly for the first child, €55 for the second, and €73 for each additional child.
• Retiree Tax Credit: Up to €1,476 for those married for over six months or in registered partnerships, with pension income not exceeding €24,196 and spouse's income not exceeding €2,673. Without these conditions, the credit is €1,002. The credit reduces proportionally for income between €24,196 and €30,957 (or €21,245 and €30,957 for the standard credit) and is unavailable for higher incomes.
• Family Allowance: Monthly cash payments for children up to 18 (or 24 if in education or disabled up to 25 under certain conditions), provided no foreign child benefit exists. The amounts are €138.40 for children under 3, €148.00 for ages 3-10, €171.80 for ages 10-18, and higher for orphans and children with disabilities.
• Personal Allowance: Increased to €13,308.
• Tax Brackets Adjustments: Income tax brackets are adjusted for 2025, with a 0% rate up to €13,308, 20% for €13,309 to €21,617, 30% for €21,618 to €35,836, 40% for €35,837 to €69,166, 48% for €69,167 to €103,072, 50% for €103,073 to €1,000,000, and 55% above €1,000,000.
• Additional Child Amount: For single earners and parents with low or no income tax liability, the additional child amount is increased to €550, paid as a negative tax.
• Tax Benefits for Incoming Scientists and Researchers (Zuzugsbegünstigung): Substantial tax benefits are available for eligible foreign researchers and scientists meeting specific criteria, including relocation in Austria's public interest, shifting life's center to Austria, and formal application. Two types of benefits, relocation allowance (up to 5 years, 30% deduction on income) and elimination of additional tax burden (10 years, flat average tax on certain foreign income), are offered.

Business Tax Incentives

• Research and Development (R&D) Incentives: R&D costs are incentivized through a 14% R&D tax credit, requiring approval from the Austrian Research Promotion Agency (FFG). Applications are submitted after the fiscal year, electronically, with no need for patent protection or proof of success.
• Value Added Tax (VAT) Exemption for Small Businesses: From January 1, 2025, small businesses established in other EU member states can utilize the VAT exemption in Austria under certain conditions.
• Foreign Tax Credit (Matching Credit): Foreign withholding tax (WHT) is generally creditable against Austrian corporate income tax (CIT), and in specific cases, double taxation treaties provide for a matching credit exceeding the paid WHT.
• Investment Tax Credit: A tax credit of 10% or 15% is available for certain investments in depreciable fixed assets, up to €1 million annually.

General Information on Austrian Taxes

• Taxpayers can claim relief from Austrian withholding taxes under double tax conventions through relief-at-source or refund procedures.
• Non-residents have the same income tax rates as residents but with a hypothetical €10,486 added to their income, and certain deductions are not available.

It's important to consult with tax professionals or official Austrian tax authorities for precise details and up-to-date information, as these details are subject to change. This information is current as of February 4, 2025.