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 11,693 Euros 0%
- Above 11,693 Euros up to 19,134 Euros 20%
- Above 19,134 Euros up to 32,075 Euros 30%
- Above 32,075 Euros up to 62,080 Euros 41%
- Above 62,080 Euros up to 93,120 Euros 48%
- Above 93,120 Euros up to 1,000,000 Euros 50%
- Over 1,000,000 55%
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%
To find out what you get paid after taxes you can also use the following salary calculator: https://finanzrechner.at/en/
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
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 …
- who has worked in Austria for a maximum period of five years
- has an employment agreement with an Austrian employer (either an affiliated company or a company with operating facilities based in Austria)
- who has not been living in Austria for the last ten years
- whose place of residence is abroad
- whose salary is taxed in Austria
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.
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/
