For expats living and working in Austria, this helpful guide explains all you need to know about filing your income tax and preparing for tax time.
When moving to a new country, there will be many daunting tasks hanging over your head. Taxes will definitely be on that list, especially if you are a freelancer or self-employed or starting your own business. Depending on which country you come from, you might also want to read up on filing UK taxes, Canadian taxes, or US taxes when you live abroad.
But before you begin tax hopping, this helpful guide explains how to file your income taxes in Austria, and includes the following information:
- Income tax in Austria
- Earnings subject to income tax in Austria
- How to file your tax return in Austria
- Income tax rates in Austria
- Income tax in Austria for foreigners
- Tax refunds in Austria
- Tax fines in Austria
- Income tax advice in Austria
- Useful resources
Income tax in Austria
The income tax system in Austria
Income tax is called Einkommensteuer in Austria and there is a progressive rate of income tax (0-50%). The tax assessment base equals the sum of income minus income-related expenses and tax-free amounts for a calendar year. Along with social insurance contributions, income tax is automatically deducted from employees’ wages or salaries and sent to the tax authority by the employer.
There are a number of expenses that are tax-deductible in Austria. These include single parent’s allowance, children’s allowance, flat-rate allowance for commuters, professional expenses (e.g., business travel expenses), charges at Austrian hospitals, and support costs for children.
Everyone living in Austria is legally responsible for paying an unlimited tax liability. Conversely, non-residents who work in Austria will have to pay a limited tax liability.
Who pays income tax in Austria?
Essentially, if you have been living in Austria for less than six months and don’t have residency, you will only have to pay a reduced tax rate on the income you have earned since living there. However, after six months, you will need to pay tax on your global income.
Who is exempt from income tax in Austria?
In Austria, the tax-free bracket for those with low income is €11,000. If your business is going through insolvency, however, you may apply for tax relief. Furthermore, foreign losses shall be deductible only to the extent of 75% of the total profit. Taxpayers may apply for a full or partial deferral of due taxes in Austria if it is not possible to pay them due to financial duress. In these cases, the tax authorities may grant a temporary suspension of payments.
Earnings subject to income tax in Austria
Taxes on income and salary in Austria
Any income in Austria is subject to the income tax threshold (see further information below for capital gains tax on investments). This includes income from employment, trade, and craft sales. It also applies to income from rental properties (see more on this below).
Efficiently, tax goes directly from deductions in your salary, made by our employer, to the tax office on your behalf. However, people who are self-employed will need to file and pay either online or through the assistance of an accountant. For a quick look at your tax position, this Austria Tax Calculator is updated for the 2021/22 tax year.
Taxes on employment benefits
Importantly, both employees and employers have to pay social insurance contributions in Austria. The exception to this is accident insurance, which only the employer needs to pay.
In 2020, the following rates applied (employees’ and employers’ shares combined):
- Sickness insurance – manual workers, white-collar workers, freelance workers, new self-employed (GSVG): 7.65%
- Accident insurance – manual workers, white-collar workers, freelance workers: 1.2%
- Unemployment insurance – manual workers, white-collar workers, freelance workers: 6%
- Pension insurance – manual workers, white-collar workers, freelance workers: 22.8%, new self-employed (GSVG): 18.5%
Additionally, both employees and freelance workers pay 0.5% of their gross income as Chamber of Labour (Arbeiterkammerumlage) contribution. Employees must also pay 1.00% as the housing construction promotion levy, however, freelance workers don’t need to pay this.
Taxes on savings and investments
In Austria, capital gains are incomes from investments. This includes income from dividends, derivatives, and capital gains from shares and bonds. This is taxable at a special rate of 27.5%, while a special rate of 25% applies only with regard to income derived from saving accounts, bank deposits, and non-securitized other receivables from certain banks.
Generally, if individuals who are tax liable use an Austrian bank, a final withholding tax will be levied on the investment income. However, if no final withholding tax is levied, the investment income must be taxed at the same rate via the annual assessment of the taxpayer. Furthermore, lower rates may apply to dividends, and interest and royalty payments to non-residents with which Austria has a double tax convention. You can read more about this further down the guide.
Taxes on rental income
Typically, if you own property in Austria that you rent out, you will need to file a tax return on it. However, different municipalities have different tax requirements. In Vienna, for instance, you will need to open a tax account online. You can find out the exact amount of tax you will need to pay with the government’s local tax calculator.
How to file your tax return in Austria
Individuals with only one source of employment income, which is subject to wage tax, do not need to file income tax returns. As mentioned, tax goes directly from deductions in your salary, made by our employer, to the tax office on your behalf. However, if you work for yourself, you will need to file your taxes yourself, rather than have an employee arrange this for you automatically. You can read more about this in our Guide to taxes for freelancers and the self-employed in Austria.
Conveniently, the entire tax process can be done online at FinanzOnline, the government tax office portal. You can register on the website and request a tax number. This includes e-signing online as well. Conversely, if you prefer a more analog approach, you can fill out the forms at your local tax office and submit them in person.
Income tax deadlines in Austria
Tax submissions are due for all residents by April 30, or by June 30 if you are filing them electronically.
Income tax forms in Austria
If you prefer to not file your taxes online, you can download every form in PDF format from the Ministry of Finance website and submit them in person.
Income tax rates in Austria
In Austria, income tax is calculated at a proportional rate based on your annual income. Rates are subject to annual change, and at the moment, they vary between 25% and 55%. Typically, the self-employed rate is around 25%. Notably, there is no joint taxation of married couples or households in Austria.
An example of an average tax calculation
For an employed worker who is married, has two children, and receives a taxable annual income of €148,007, the Austrian tax owed would be €52,166. You can see a full calculation of this here.
Personal tax allowance and deductions in Austria
Certain personal tax allowances are available against taxable income in Austria. However, this only applies if the annual income does not exceed €60,000. These allowances include:
- Sickness, life, and accident insurance premiums
- Voluntary employer pension contributions
- Building a new house or renovating an existing space expenses
- Family bonus plus tax credit that combines the childcare deduction and the child tax-free amounts
- Single parent’s allowance
- Flat-rate allowance for commuters
- Professional expenses
- Hospital charges
- Charitable contributions to certain institutions
- Church tax
- Austrian tax adviser fees
- A tax break for cars with a CO2 value of up to 95g/km and purely electric vehicles
Self-employed income tax allowances in Austria
Unfortunately, when you are self-employed in Austria, you have to file your own taxes. You will likely have to pay freelance tax if you earn over the tax-free threshold of €11,000. Furthermore, if you make more than €30,000, you will have to pay VAT. As mentioned, Austrian tax is calculated on a progressive scale, but freelance tax is typically about 25%.
Essentially, as a self-employed person, you get to deduct all expenses that in any way relate to your business. This includes things like transportation and travel expenses, anything relating to business communications, office supplies, and liability insurance. If you work at home, you can also offset your home office expenses. After you log in to your FinanzOnline account, you will want to choose Eingaben (tax entries) and then Erklärungen (tax declarations).
Income tax in Austria for foreigners
In essence, you are a tax resident if you live in Austria and spend more than 180 days per year in the country. Beneficially, Austria has double taxation agreements with several countries worldwide including Australia, Canada, China, and the United Kingdom. These are in place to ensure that citizens and residents do not pay tax twice on the same income. An exhaustive list of the countries with double taxation agreements is available at Austria’s Federal Ministry of Finance website.
Additionally, Austria has the Qualifying Recognized Overseas Pension Scheme (QROPS). This is an overseas pension scheme that allows you to transfer your UK pension rights. Essentially, it enables you to leave your remaining fund to your heirs without any deduction of UK tax upon death. For non-EU countries, there are several countries that Austria has social security agreements with. You can check out our global Portable retirement planning guide if you need more information on this.
Austria is also a member of the Automatic Exchange of Information (AEOI) system and has agreements that allow the exchange of information between tax authorities of different countries to help stop tax avoidance and evasion. The information includes details about financial accounts and investments.
Tax refunds in Austria
Generally, if your income for the year did not exceed the income tax threshold, you will get a return for all your taxes. However, if your annual income did exceed the threshold, you are only eligible for a return on the income taxes that you overpaid.
Normally, returning taxes from Austria takes between three and six months. You can use services such as RT Tax that will review and process your tax returns for you up to the past five years. The charges depend on the returned tax sum but there is a minimum fee of €59.
In terms of a VAT refund, the process is very simple. Tax-Free Forms are submitted through ‘eValidation‘ online or in Terminal 1 and 3 of the airport where you can present your receipts. Generally, if you live in a non-EU country and are over the age of 18, you can get a refund on your VAT from shopping in Austria. However, the amount must exceed €75.
Tax fines in Austria
Filing your taxes on time is obviously important if you don’t fancy paying a boat-load of sizeable penalties. Essentially, in Austria, the late-payment charge is 2% of the amount of tax due, which increases by an additional 1% after three months and another 1% after another three months. In total, the penalty tops out at 4% interest. If you have messed up your tax return to the point of gross negligence, you will generally be penalized with a monetary fine up the amount of the evaded tax. Usually, tax returns are subject to a plausibility check before an assessment is made.
Income tax advice in Austria
It is generally a good idea to seek income tax advice if you are working in Austria, particularly if you are self-employed. After all, making sure that you don’t pay more than you need to, and that you claim back everything that you are eligible for, is paramount.
Luckily, there are plenty of independent accountants in Austria who can help you save time and money on your taxes. To find tax consultants in your area, the Austrian Chamber of Tax Advisors and Auditors has a handy search portal that you can use.
- Austrian Finance Ministry – a useful government website with information on all tax rules and legislation
- Migration.gv.at – a government website that provides information on income and taxation in Austria
- FinanzOnline – allows you to complete your Austrian tax return online
- Tax Foundation – provides in-depth information about the tax system in Austria and its ranking in the OECD