Austria - Income Tax

Austria - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

In general, income tax is assessed for the calendar year on the basis of an individual’s tax return, which should be filed by 30 April (if a paper version is filed) or 30 June (if filed electronically), respectively 30 September, in case salary is taxed via payroll, of the following year. An automatic extension up to 31 March of the next following year is granted if the individual is represented by a tax adviser. Further extensions are available on request in special circumstances.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Austria?

Residents

Generally, a tax return is required if the individual’s taxable income exceeds EUR11,000. Income tax on employment income is generally withheld at the source. Still, a tax return is required in case the individual has additional income, not previously subject to employer withholdings, in excess of EUR730. Please note that for foreign income from investment a threshold of only EUR22 applies under certain conditions.

Non-residents

Non-resident individuals must file an income tax return whenever they have taxable income in excess of EUR2,000 from a taxable source, unless the withholding tax applied represents the final settlement of the tax liability. For calculation of the tax rate the income will be increased by a hypothetical figure of EUR9,000.

Tax rates

What are the current income tax rates for residents and non-residents in Austria?

Residents

In the case of unlimited tax liability, the tax brackets with progressive tax rates for 2016 are as follows: 

Income tax table for 2016

Taxable income bracket Total tax on income below bracket Tax rate on income in bracket
From EUR To EUR EUR Percent
0 11,000   0
11,001 18,000   (income - 11,000) *1,750 / 7,000
18,000
18,000
1,750
9,72%
18,001
31,000
  ((income -18,000) * 4,550 /13,000) + 1,750
31,000
31,000
6,300
6,300
31,001
60,000
  ((income - 31,000) * 12,180 / 29,000) + 6,300
60,000 60,000 18,480 30,80%
60,001 90,000   ((income - 60,000) * 14,400 / 30,000) + 18,480
90,000 90,000  32,880 36,53%
90,001 1,000,000   (((income - 90,000) * 455,000)/910,000) + 32,880
1,000,000 1,000,000 487,880 48,79%
Over 1,000,000   (income – 1,000,000) * 55%+ 487,880

Austrian tax law distinguishes between regular payments, which recur every month, and special (non-recurring) payments. For special payments up to one-sixth of all regular/recurring payments earned within the same tax year, the special tax rate of 6 percent applies. As of 2013 a so called solidarity surcharge was implemented with tax rates for special payments from 0% - 55% depending on the amount of special payments and the total employment income. Therefore, and also due to collective agreements, it is very common to pay the yearly salary in 14 installments, 12 recurring payments (one each month) and a holiday and a Christmas payment as bonus. 

Otherwise to calculate the bonus, it would be most tax-effective, to pay one-seventh of the total yearly gross compensation as bonus. Please be aware, that there are several prerequisites to apply the one-seventh rule.

Please note that it is very important that the special (non-recurring) payments are actually paid separately. It is not possible to calculate them only hypothetically.

The income tax is reduced by the following deductions:

2016 EUR
Traffic allowance (flat refund of expenses incurred in traveling between private residence and place of employment)
400
Deduction for pensioners*
400
Deduction for sole wage earner in a family with a child (if the spouse derives taxable income not exceeding certain limits) **
494
Commuter deduction (annual deduction for the one-way distance between home and work place) 2 per kilometer

* There is a phase out for this deduction from EUR17,000 – EUR25,000. For pensioners with regular pension income of below EUR19,930 and who are sole-earners without a child, an increased deduction of EUR764 could be claimed. The increased deduction is phased out between EUR19,930 – EUR25,000.

** Increased to EUR669 with two children and additionally EUR220 for every additional child.

Furthermore, transfer payments per month are granted for each child entitled to a child allowance (EUR58.40 for each child). The child allowance is paid together with the following family allowance and is tax-free:

  2015
EUR
2016
EUR
Age 0-2 years
First child 109.70
111,80
Second child 123.10
125.60
Third child 146.10
149.00
Fourth child 161.90
164.80
Age 3-9 years
First child 117.30
119.60
Second child 130.70
133.40
Third child 153.70
156.80
Fourth child 169.50
172.60
Age 10-18 years
First child 136.20
138.80
Second child 149.60
152.60
Third child 172.60
176.00
Fourth child 188.40
191.80
Above 19 – 26 years
First child 158.90
162.00
Second child 172.30
175.80
Third child 195.30
199.20
Fourth child 211.10
215.00

The total amount of family allowance received is increased by a certain amount for every further child depending on the total number of children.

An addition in the amount of EUR100 to the family allowance is paid in September for children between 6 and 15.

Non-residents

Income tax rates for non-residents are the same as for residents, but the hypothetical amount of EUR9,000 has to be added to the actual income. However, withholding tax rates may differ. Furthermore, various tax deductions are not available.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Austria?

An individual is deemed to be resident in case he/she either maintains any kind of accommodation, or is physically present, under circumstances indicating that his/her abode will not be temporary.

As a general rule, tax residence is deemed to exist if the individual’s stay in Austria exceeds six months (183 days). Once these six months have expired, tax residence is deemed to have commenced at the beginning of the stay in Austria. Citizenship is not relevant in determining residence.

Is there a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer cannot come back to the host country for more than 10 days after their assignment is over and they repatriate.

No.

What if the assignee enters the country before the assignment begins?

In general it is possible to have a period of limited and a period of unlimited tax liability. The days spent in Austria before the assignment are included in the calculation for determining the habitual abode.

Termination of residence

Are there any tax compliance requirements when leaving Austria?

The taxpayer’s tax office should be notified of a termination of residence as well as the residence certificate cancelled.

What if the assignee comes back for a trip after residency has terminated?

Depending on the purpose of the trip (business or vacation) and on the employer (foreign or Austrian), the income will be prorated and allocated to Austria. Furthermore, it is possible to have limited tax liability during this period.

Communication between immigration and taxation authorities

Do the immigration authorities in Austria provide information to the local taxation authorities regarding when a person enters or leaves Austria?

Usually not.

Filing requirements

Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

The assignee may have a filing requirement after repatriation if he/she still receives any compensation in connection to his/her ended assignment (such as bonus payments relating to the assignment as Austrian tax payments paid by employer).

Economic employer approach

Do the taxation authorities in Austria adopt the economic employer approach1 to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Austria considering the adoption of this interpretation of economic employer in the future?

Up to 2014, the Austrian Tax Authorities recognize the legal employer approach, which means that the employer must fulfill typical employer functions which could be checked by an edict of the Austrian Ministry of Finance.

Nevertheless, there was a switch to an economic employer approach in 2014 due to a Decree of the Ministry of Finance dated June 6, 2014, based on decisions of the Higher Administrative Court in 2013.

Since that Decree Austria applies an economic employer approach.

De minimus number of days

Are there a de minimus number of days2 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

No.

Types of taxable compensation

What categories are subject to income tax in general situations?

All types of remuneration and benefits received by an employee for services rendered under an employment agreement are deemed to be taxable income, regardless of where they are paid and by whom. The following typical items of an expatriate compensation package are fully taxable unless otherwise indicated.

  • Net pay agreements are much more common than tax reimbursements. The employee, in this case, draws guaranteed net pay but reimbursements of foreign and/or home country taxes would be taxable income.
  • School-fee reimbursements.
  • Benefits-in-kind generally form part of taxable compensation. Where a company car is provided, it may involve a deemed compensation for the private use of the car.
  • Cost-of-living allowances.
  • Home-leave reimbursements for the employee and family.
  • Housing allowances are fully taxable; the imputed value of housing provided directly by the employer is deemed to be a benefit-in-kind and, therefore, taxable income.

An employer contribution to rent is taxable as income. Free or below-market-value use of accommodation provided by the employer is taxable as income. The benefit is initially valued at fixed monthly rates per square meter, determined according to category of accommodation and year of construction.

This notional rent is compared with the actual rent paid reduced by 25 percent. The taxable value is the larger of the two figures.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Austria? If so, please provide a general definition of these areas.

Moving expenses

Moving expense reimbursements are generally not taxable if the
actual expenses were reimbursed and the employee was transferred within the
same enterprise or between group-related companies (if relocation is solely in
the interest of the entrepreneur and home residence is given up).

Moving bonus

If certain requirements are met, a moving bonus of up to one-fifteenth of the total annual salary may be granted tax-free.

Per diems

The employer may pay tax-free per diems up to certain limits.

Expatriate concessions

Are there any concessions made for expatriates in Austria?

There is only one expatriate concession, which allows a lump sum
deduction of income related expenses. This deduction can either be claimed in
the annual income tax return or already up front in the payroll. Several,
specific requirements have to be met.

Salary earned from working abroad

Is salary earned from working abroad taxed in Austria? If so, how?

An Austrian resident individual is taxed on his/her worldwide income in Austria, however there may be an exemption according to double tax treaties.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Austria? If so, how?

Austrian residents are subject to income tax on their worldwide income derived from capital and investment, including dividends, interest, profit shares of dormant partners, rents and royalties, capital gains.

Non-residents are subject to tax on income derived from Austrian sources, such as dividends from Austrian companies, interest on loans secured by mortgages on real estate located in Austria, of foreign dormant partners in Austria, rents and royalties from real estate located or patents utilized in Austria, transactions involving sales of Austrian real estate.

Dividends, interest, and rental income

Dividends and interest received by an Austrian resident recipient are generally subject to a withholding tax at a special rate of 27,5 percent. However, in case of interest derived from bank deposits and non-bonded receivables at a financial institution are subject to a withholding tax at a special rate of 25 percent.

Interest income derived from bank deposits subject to the 25 percent respectively dividend income and fixed interest-bearing securities subject to the 27,5 percent withholding tax are not subject to income tax at the level of the recipient (final taxation). Furthermore, any obligation to pay any inheritance tax that might accrue on this income (also gift tax from 1 June 2001 until 31 December 2003), is deemed to be discharged. This final taxation only applies if the recipients are individuals (partners of partnerships included).

If the dividend or interest is paid by an agency abroad, no Austrian withholding tax can be withheld. In this case the income has to be reported in the Austrian income tax return and a flat tax rate of 27,5 percent respectively 25 percent can be applied.

Income from investment funds is treated differently depending on whether the fund is an Austrian or a foreign fund and whether it is considered to be registered and represented or neither registered, nor represented.

Basically the taxation of foreign funds is the same as of Austrian investment funds.

A special taxation regime exists for unregistered funds, which are taxed on a lump-sum basis. Besides the actual payments, 90 percent of the difference between the redemption price at the beginning and the end of the year (at least a minimum of 10 percent of the last redemption price) are taxable.

The sale of private assets is taxed as follows:

The sales gain (difference between the sales proceeds and the purchase price) should be subject to capital gain tax under the following circumstances:

  • If shares were acquired before 1 January 2011 and are sold after one year holding period the gain is tax free, unless the individual held 1 percent or more of the company’s total capital stock within the last 5 years.
  • If shares are acquired after 31 December 2010 and sold after 31 March 2012, but before 1 January 2016 capital gain tax is levied at flat tax rate of 25 percent regardless of the period the shares were held.
  • If shares are acquired after 31 December 2010 and sold after 31 December 2015, capital gain tax is levied at flat rate tax of 27,5 percent regardless of the period the shares were held.

A loss on the sale of shares does not trigger capital gain tax, but may be available to offset against other capital gains made during the tax year.

In case of termination of Austrian residence, exit taxation occurs if Austria loses the taxation right of the respective source of income. In this case, the value increase during Austrian residence period is taxed as capital gains.

Rental income from properties located in Austria will be taxed at normal rates. Rental income deriving from real estate located in foreign countries may be considered as (progression) income depending on the respective double tax treaty.

Gains from stock option exercises

The value of a stock option, granted in respect of services rendered in Austria, is included in the taxable income, regardless of when the option is exercised. The taxable value of an option is the difference between the fair market value of the shares at the date of exercise and the acquisition costs paid by the employee.

However, the Austrian tax law foresees some tax benefits which are granted if certain restrictions are met.

The following dates of taxation apply to restricted stock options:

Residency status

Taxable at:

  Grant Vest Exercise
Resident N N Y
Non-resident N N Y
Other (if applicable) N/A N/A N/A

Foreign exchange gains and losses

The Austrian income tax return has to be filed in Euros. So gain or loss in a foreign currency resulting from a source of income is included in the tax return and taxed at the normal tax rates.

Principal residence gains and losses

Since April 1, 2012, Austria has implemented a taxation regime on the sale of non-business property with grandfathering-rules.

Taxation of “new property”:

In case the real estate would still have been qualified as “speculative” on March 31, 2012 (eg the ten years holding period was not over), or the real estate is bought after that date, the sale of this real estate is always considered as taxable event on which a special tax rate of 30% can be applied for sales after 31 December 2015.

Taxation of “old property”:

The sale of real estate that did not fulfill the requisitions of speculative transaction on March 31, 2012 (eg as it was held for more than 10 years) is now also considered as a taxable income on which a special tax rate of 30% can be applied for sales after 31 December 2015. There is the possibility to apply a lump-sum taxation on property which has not been rededicated: 14% of the sales price can be taxed at 30% tax rate (effective tax burden of 4,2%).

Since April 1, 2012 two tax exemptions for the sale of a real estate which was used as primary residence are applicable:

  • the property was used as primary residence since the acquisition until the sale, but for at least 2 years.
  • the property was used as primary residence for at least 5 consecutive years within a 10-years period prior to the sale (newly introduced tax exemption).

Capital losses

Capital losses may only be set off against capital gains within the same year and cannot be carried forward.

Personal use items

The sale of personal use items is taxable if sold within one year after acquisition and certain tax free amounts are exceeded.

Gifts

Following a decision of the Austrian constitutional court, inheritance and gift tax are abolished from 1 August 2008 onwards.

However, in order to prevent avoidance of income tax it is required to report gifts over EUR15,000 within five years (EUR50,000 within one year for relatives) to the tax authorities. There is a penalty of up to 10 percent of the value if the report was not done deliberately.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Austria? If so, please discuss?

No.

Are there capital gains tax exceptions in Austria? If so, please discuss?

Pre-CGT assets

Not applicable

Deemed disposal and acquisition

Not applicable

General deductions from income

What are the general deductions from income allowed in Austria?

There are only minor general standard deductions for income-related expenses, such as the general standard deduction from taxable employment income of EUR132. Non-recurring payments of salaries and wages, such as 13th and 14th month salary payments and bonus payments, enjoy a tax-free allowance of EUR620 per year in aggregate; a tax deduction of for commuters of EUR400 (note that this is a reduction of the tax due) is granted as a flat refund for travel between the residence and the place of employment. If the distance between the private residence and the place of employment exceeds certain limits, additional standard amounts can be deducted from taxable income and from the computed income tax (different commuter deductions).

The following items can also reduce taxable income.

  • Special personal expenses not related to the income of a particular source may be deducted from taxable income. These include premiums for voluntary health, accident, and life insurance policies provided that the corresponding contract was concluded before January 1, 2016; payments incurred to finance private house building and improvement provided that the corresponding contract was concluded before January 1, 2016; For these categories, a flat annual allowance of EUR60 per year is granted unless higher payments are substantiated. Twenty-five percent of the actual payments are deductible, with limitations (up to EUR730 per year for the taxpayer, another EUR730 if the spouse has no income or only low income plus EUR365, if they have at least three children) from the tax basis. These expense deductions are phased out from an income exceeding EUR36,400 up to EUR60,000. Other special expenses are certain recurring payments and are not subject to phase out; expenses for professional tax advice; contributions to churches and other religious bodies if recognized by law (up to EUR400 per year); donations for research purposes as well as among others humanitarian organizations (registered at the Austrian tax authorities) are subject to limitations; tax losses carried forward from previous years.
  • Expenses necessarily incurred by a taxpayer due to extraordinary circumstances may be deducted from taxable income, usually after allowing a retention ranging from 6 percent to 12 percent of the taxable income. The percentage of retention is reduced by 1 percent for each sole earner and for each child entitled to a child allowance. Certain expenses are deductible at flat amounts (such as children’s tuition at a boarding school; invalidity certified by the health authorities). These extraordinary expenses are not deductible by individuals who are subject only to limited tax liability.

 

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Austria?

From KPMG Austria’s experience, hypotax agreements are usually concluded.

Calculation of estimates/ prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Austria? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

Basically, there is the obligation for employers to withhold payroll tax from their employees and to forward it to the responsible tax office. If there is no permanent establishment for the payroll administration, which could withhold the wage tax or there is no withholding obligation for other reasons, the tax is paid to the tax office by the individual.

If tax return filing is applicable, quarterly prepayments of the expected tax have to be made.

When are estimates/prepayments/withholding of tax due in Austria? For example, monthly, annually, both, and so on.

Taxes are collected during the tax year either by the tax office or through withholding at the source. Prepayments must be effected by 15 February, 15 May, 15 August, and 15 November each year for personal income tax purposes. These payments are generally based on the prior year’s tax. Payroll tax will be withheld by the employer and paid monthly (until the 15th of the following month) to the tax authorities.

Withheld or prepaid taxes are credited against the final tax liability. If the taxpayer’s final tax liability exceeds the aggregate of the amounts already withheld or paid, tax is refunded. The final tax is payable within one month after the tax assessment.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Austria? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

Austria has concluded more than 90 double taxation treaties based on the OECD model tax convention, thus providing relief against double taxation to taxpayers resident in the contracting states.

In the absence of a tax treaty, the Austrian Federal Tax Act grants credit or exemption under certain circumstances in relation to actual double taxation.

General tax credits

What are the general tax credits that may be claimed in Austria? Please list below.

There are only some tax credits, which may be claimed against the taxpayer’s tax liability. Several requirements have to be met:

  • sole earner credit (lump sum)
  • pensioners tax credit (lump sum – phased out)
  • traffic tax credit (lump sum)
  • alimony payments (lump sum)
  • commuter deduction (lump sum – depending on km)

Sample tax calculation

This calculation assumes a married taxpayer resident in Austria with two children whose three-year assignment begins 1 January 2016 and ends 31 December 2018. The taxpayer’s base salary is USD100,000 and the calculation covers three years. 

  2016
USD
2017
USD
2018
USD
Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,000 6,000 6,000
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Exchange rate used for calculation: USD1.00 = EUR0.901. 

Other assumptions

  • All earned income is attributable to local sources.
  • The salary is paid out in 12 installments and the bonus is considered as special payment.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
  • Interest income is not remitted to Austria.
  • The company car is used for business and private purposes and originally costs USD60,000.
  • The employee is deemed resident in Austria throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income (EUR)

Year-ended 2016
EUR
2017
EUR
2018
EUR
Days in Austria during year 366 365 365
Earned income subject to income tax      
Salary 90,100
90,100
90,100
Bonus 18,020
18,020
18,020
Cost-of-living allowance 9,010
9,010
9,010
Net housing allowance 10,812
10,812
10,812
Company car 11,520
11,520
11,520
Moving expense reimbursement 18,020
0 18,020
Home leave 0
4,505
0
Education allowance 2,703
2,703
2,703
Total earned income 160,185
146,670
160,185
Other income 5,406
5,406
5,406
Total income 165,591
152,076
165,591
Deductions 23,401
13,924
23,401
Total taxable income 142,190
138,152 
142,190

 

Calculation of tax liability (EUR)

  2016
EUR
2017
EUR
2018
EUR
Taxable income as above 142,190
138,152
142,190
Austrian tax thereon 49,524
47,506
49,524
Less:      
Domestic tax rebates (dependent spouse rebate) 1,069
1,069
1,069
Foreign tax credits 0 0 0
Total Austrian tax 48,455
46,437
48,455

FOOTNOTES

1Certain tax authorities adopt an ‘economic employer’ approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee’s salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the ‘economic employer’ and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.

2For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.

3Sample calculation is generated by KPMG Alpen-Treuhand GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft (Wien), the Austrian member firm of KPMG International, based on the Austrian Tax Book 2016 presented by the Austrian Federal Ministry of Finance.

© 2016 KPMG Alpen-Treuhand GmbH Wirtschaftsprüfungs-und Steuerberatungsgesellschaft (Wien), an Austrian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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