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Austria

General Information

Country Name: Republic of Austria
Currency: Euro (EUR, €)
Primary Tax Authority: Austrian Federal Ministry of Finance (Bundesministerium für Finanzen)

Key Legislation:

  • Bundes-Verfassungsgesetz (B-VG): The Austrian Constitution sets the general principles for taxation and fiscal federalism, particularly in Articles 10-15, which distribute taxation powers between federal and regional authorities.
  • Bundesabgabenordnung (BAO): The core procedural tax law governing all aspects of tax administration, assessments, and appeals.
  • Einkommensteuergesetz (EStG): Governs personal income taxation.
  • Körperschaftsteuergesetz (KStG): Regulates corporate income taxation.
  • Umsatzsteuergesetz (UStG): Governs VAT in accordance with EU directives.
  • Finanzstrafgesetz (FinStrG): Defines tax offenses and penalties in cases of evasion or non-compliance.
  • Abgabenexekutionsordnung (AbgEO): Outlines the enforcement of tax debts.

Tax Authority and Collection Competence

Fiscal Authority Allocation:

Austria has a decentralized fiscal structure. While most taxes are legislated at the federal level, provinces and municipalities have limited tax authority in certain areas, particularly concerning local levies.

Taxes Collected by Federal Authorities:

  • Income tax (Einkommensteuer)
  • Corporate income tax (Körperschaftsteuer)
  • VAT (Umsatzsteuer)
  • Customs duties
  • Excise duties

Taxes Collected by State/Local Authorities:

  • Property tax (Grundsteuer) – collected by municipalities
  • Trade tax (Gewerbesteuer) – Austria does not impose a municipal trade tax, unlike neighboring Germany.
  • Tourism levies (Tourismusabgabe) – vary by region.

Revenue Sharing Mechanisms: Income tax, corporate tax, and VAT revenues are shared between the federal government, provinces, and municipalities based on formulas established in fiscal agreements.

Corporate Income Tax (CIT)

  • Standard CIT Rate: 25%
  • Taxable Income Definition: Corporations are taxed on their worldwide income if they are residents in Austria. Non-resident corporations are taxed on income sourced within Austria.
  • Deductible Expenses: Business expenses, depreciation, wages, and certain interest payments. Limits apply to entertainment costs and luxury expenses.
  • Loss Carryforwards/Carrybacks: Losses can be carried forward indefinitely, but carrybacks are not allowed.
  • Tax Incentives: Austria offers R&D incentives, investment allowances for specific sectors, and exemptions for foreign-source income under double tax treaties (DTT).

Value-Added Tax (VAT)

  • Standard VAT Rate: 20%
  • Reduced Rate: 10% (e.g., food, books, cultural services) and 13% (e.g., agricultural products)
  • Scope of VAT: VAT applies to all goods and services supplied within Austria. Intra-EU supplies may be zero-rated.
  • Exemptions: Education, healthcare, and financial services. Real estate transactions can also be exempt under specific conditions.
  • International VAT Treatment: Cross-border transactions within the EU follow the reverse-charge mechanism, meaning the buyer accounts for VAT. Exports are zero-rated, and imports are subject to VAT collection by customs.

Personal Income Tax (PIT)

  • PIT Rates: Progressive rates from 0% to 55%. The top rate of 55% applies to annual incomes exceeding €1 million.
  • Tax-Free Allowance: Income below €12,000 is tax-free.
  • Deductions and Exemptions: Social security contributions, work-related expenses, charitable donations, and special allowances for families.
  • Foreign Income Treatment: Austrian residents are taxed on their worldwide income, with relief provided through DTTs or unilateral tax credits.
  • Special Rules for Expatriates: Expatriates may benefit from certain exemptions, such as allowances for housing and moving expenses.

Additional Mandatory Contributions

Overview:

Austria requires mandatory social security contributions in addition to income tax. These contributions fund public programs like health insurance, pension insurance, and unemployment benefits. Participation is typically required for employees and certain self-employed individuals.

Social Security Contribution Rates:

  • Total Contribution Rate: Approximately 39.85% of gross salary (split between employer and employee).
  • Health Insurance: 7.65%.
  • Pension Insurance: 22.8%.
  • Unemployment Insurance: 3%.
  • Accident Insurance: 1.3%.

Mandatory Participation:

Social security contributions are mandatory for employees and certain self-employed professionals. Freelancers and independent contractors may have varying rules depending on their field and earnings.

Contribution Thresholds:

  • Contributions are capped by a ceiling for certain insurance programs. For example, pension and health insurance contributions are capped at an annual salary of €79,380 (2024).

Tax Deductibility:

Social security contributions are partially deductible for personal income tax purposes.

Employer and Employee Contributions:

  • Employer Share: The employer generally pays approximately 21% of the total contributions.
  • Employee Share: The employee’s share amounts to approximately 18.85%.

Withholding Taxes

  • Dividends: 27.5% withholding tax on dividends. Reduced rates may apply under DTTs.
  • Interest: 0% withholding tax on most types of interest, except for specific investment instruments (e.g., savings accounts).
  • Royalties: 20% withholding tax, subject to DTT reductions.
  • Payments to Non-Residents: Subject to withholding taxes, with reductions possible through DTTs.

Transfer Pricing Rules

  • Documentation Requirements: Austria adheres to the OECD’s transfer pricing guidelines. Documentation must be maintained for related-party transactions.
  • Arm’s Length Principle: Transactions between related parties must comply with the arm’s length principle.
  • Penalties for Non-Compliance: Significant penalties apply for non-compliance or insufficient documentation, ranging from fines to income adjustments.

Special Tax Regimes

  • Free Trade Zones: None specific to Austria. However, various regional incentives may be available.
  • Industry-Specific Tax Incentives: Austria offers R&D tax credits, renewable energy incentives, and special allowances for film production and other creative industries.
  • Taxation of Trusts/Foundations: Private foundations (Privatstiftungen) are subject to a 25% tax on income. Additional inheritance tax may apply.

Other Taxes

  • Real Estate Transfer Tax: 3.5% on the sale of real estate.
  • Capital Gains Tax: 27.5% on gains from the sale of financial assets. Real estate gains are taxed at 30% unless the property was held for more than 10 years and was owner-occupied.
  • Inheritance and Gift Tax: Austria abolished its inheritance and gift tax, but certain transfers are subject to a 3.5% to 6% real estate transfer tax if property is involved.
  • Trade Tax: Austria does not impose a municipal trade tax.
  • Church Tax: 1.1% of income tax liability, applicable to members of recognized churches.

Double Taxation Agreements (DTAs)

  • Key Partner Countries: Austria has over 90 DTAs, including treaties with the US, UK, Germany, China, and EU member states.
  • Reduced Withholding Tax Rates: DTTs typically reduce dividend and royalty withholding taxes to 0-15%, depending on the treaty.
  • Tax Treaty Benefits Application Process: Residents must submit a certificate of residence to claim benefits under DTTs.

Local Taxes

  • Real Estate Transfer Tax: 3.5% on real estate sales, payable by the purchaser.
  • Property Tax: Assessed on property ownership, rates vary depending on the municipality.
  • Tourism Taxes: Certain regions impose local tourism taxes on accommodation providers, usually a flat fee per guest per night.

Compliance and Reporting

  • Corporate Tax Filing Deadlines: The corporate income tax return is due annually by June 30 of the following year, but extensions are often granted.
  • VAT Filing Requirements: Monthly or quarterly VAT returns are required, depending on turnover. An annual VAT reconciliation is also mandatory.
  • Penalties for Late Filing/Non-Compliance: Late filings incur penalties of 10% of the unpaid tax. Severe delays or non-compliance may lead to additional fines and interest charges.

Recent Developments

  • Recent Tax Law Changes: Austria has introduced measures to combat tax evasion and aggressive tax planning, including new regulations for cross-border transactions.
  • Upcoming Reforms: Planned corporate tax reforms aim to reduce the CIT rate from 25% to 23% by 2025.
  • Global Tax Initiatives: Austria is a signatory to the OECD’s Base Erosion and Profit Shifting (BEPS) initiatives and is working to implement the global minimum tax rules.

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