From income tax and VAT to property tax and rebates, we explain everything you need to know in order to navigate the tax system in Austria.
When settling into life as an expat, learning how to file your income taxes is one of the many things you need to do. Depending on which country you come from, you may also want to read up on filing UK taxes, Canadian taxes, or US taxes when you live abroad. Additionally, you might want to look into specific taxes such as freelancer tax and property transfer tax in Austria.
But first, this helpful guide provides an overview of the tax system in Austria, including the following information:
- The tax system in Austria
- Local taxes in Austria
- Taxes on goods and services (VAT) in Austria
- Who has to pay tax in Austria?
- The Austrian tax system for foreigners
- Income tax in Austria
- Tax on property and wealth in Austria
- Inheritance tax in Austria
- Company taxes and VAT rates in Austria
- Rebates and tax reliefs in Austria
- Tax avoidance and evasion in Austria
- Advice on tax in Austria
- Useful resources
The 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 the country. These include single parent’s allowance, children’s allowance, flat-rate allowance for commuters, professional expenses (e.g., business travel expenses), hospital charges, and support costs for children. Everyone living in Austria is liable to pay an unlimited tax liability. Conversely, non-residents who work in Austria will have to pay a limited tax liability.
Social insurance contributions
Importantly, social insurance contributions have to be paid by both employees and employers. The exception to this is accident insurance, which is only paid by employers.
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%
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.
There are several other taxes in Austria that you need to be aware of as an expat, as follows:
Real estate transfer tax
Referred to locally as Grunderwerbsteuer, this is typically a flat rate of 3.5% of the property value, but generally 2% for a transfer between relatives. You can read more about this in our Guide to buying real estate in Austria and Writing a will and planning your estate in Austria.
In Austria, businesses pay municipal tax to the municipality where the business is based.
Vehicle tax (or Kfz-Steuer) literally means engine-related insurance tax. This is a complex tax that tabulates according to the power of the engine (kW). Effectively, the more kilowatts, the more tax. You pay this tax together with your vehicle insurance which gets forwarded to the tax authorities.
Companies in Austria do not pay income tax, but they do pay corporation tax of 27.5%.
Capital gains tax
Capital gains relating to investments are subject to a 27.5% capital gains tax, while capital gains from real estate are subject to a 30% tax.
Local taxes in Austria
If you own property that you rent out, different municipalities have different tax requirements. For example, in Vienna, 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. You can also submit your yearly tax declaration online.
Taxes on goods and services (VAT) in Austria
Value-added tax (VAT) is an indirect tax on purchases of a product or service by the end consumer. In Austria, the current rates sit between 10 and 20%.
Can you get a refund on VAT?
Basically, if you are over 18 and live in a non-EU country, you can get a refund on your VAT from shopping in Austria. However, the invoice amount (possibly including VAT) must exceed €75.
Fortunately, travelers no longer need to go to Customs with their tax-free goods. Tax-Free Forms are submitted through ‘eValidation‘ online or in Terminal 1 and 3 of the airport where tourists can present their receipts.
Who has to pay 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.
Tax allowances and exemptions in Austria
Since 2019, the childcare deduction and the child tax-free amount are now one scheme. This is the family bonus plus tax credit. Effectively, it reduces the amount of tax paid. The annual tax credit is €1,500 per child for children up to the age of 18 years who live in Austria. Importantly, if both parents claim the family bonus plus, both taxpayers get 50% of the tax-free amount, which is €750 per year. Additionally, for children aged 19 to 24, you can still apply for the family bonus plus up to an amount of €500 per year.
In Austria, there is a childcare allowance available for every mother and father. This comes from the Family Burdens Equalization Fund (FLAF) and the tax office distributes the funds.
All residents in Austria are eligible for long-term care benefits and the amount depends on the extent of care that is necessary for each individual. Primarily, there are seven decision-making bodies at the federal level in this system, and tax revenue funds this benefit. As a universal scheme, this means that all residents in Austria are eligible.
There is also tax relief for special expenses such as building a home or voluntary contributions to pension plans and life insurance. The relief is available against taxable income if the annual income does not exceed €60,000.
Beneficially, any resident who incurs extraordinary expenses may also obtain some tax relief. These unavoidable expenses include funeral costs, stays at Austrian hospitals, and special medical treatments. Depending on income and family status, the taxpayer may be able to deduct an amount that exceeds a certain percentage of one’s income.
The Austrian tax system for foreigners
Essentially, you are a tax resident if you live in Austria and spend more than 180 days per year in the country. Austria also 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. Check out our global Portable retirement planning guide if you need more information on this.
Austria is 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.
Income tax in Austria
In Austria, income is taxed at a proportional rate, based on your annual income. Income tax applies to employment, capital assets, trade, and craft sales. Additionally, it applies to income earned from rental properties. Rates are subject to yearly change. Currently, they vary between 25% and 55%.
There is also a tax-free threshold, and those who earn under the limit don’t have to pay it if they meet the requirements. A resident taxpayer must file an income tax return if his or her annual income exceeds €10,000. However, a non-resident taxpayer must file a tax return if his or her taxable annual income in Austria exceeds €2,000.
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.
How to file your income tax return in Austria
Fortunately, you can do the whole process online at FinanzOnline, the government tax office portal. You can register here and request a tax number. This includes e-signing online as well. Alternatively, you can fill out the forms at your local tax office and submit them in person.
Importantly, you will want to get your tax return in on time to avoid having to pay late-filing penalty charges. The Austrian tax authority decides these individually but they must not exceed 10% of the tax. Furthermore, if you don’t pay your tax on time, the authority can add a late-payment charge. This is always 2% of the amount of tax due, which increases by an additional 1% after three months and another 1% after another three months.
Self-employed income tax in Austria
There are many things to think about when you are your own boss in Austria. And although there are many benefits to being self-employed, doing your own taxes isn’t likely to register as one of them. As an independent contractor, you will have to pay freelance tax in Austria.
However, this only applies if you go over the tax-free threshold of €11,000. Either way, you will still need to make a tax declaration. Notably, if you make more than €30,000, you will have to pay VAT. Although tax works on a progressive scale in Austria, you can still expect to pay a freelance tax of about 25%.
Tax on property and wealth in Austria
In Austria, there is a 27.5% tax rate for capital gains from the disposal of immovable assets (i.e., investments). Additionally, there is a tax rate of 30% for capital gains from real estate. For property tax, each municipality levies an annual tax on Austrian real estate. Notably, this is deductible from rental income. Property tax is based on the unit value and is decided upon by local authorities. Generally, the tax rate is between 0.1 and 0.2% annually.
Usually, a written rental agreement on a property in Austria is liable to a stamp duty rate of 1% of the contract value. Ordinarily, stamp duty is borne by the lessee. However, residential lease agreements are exempt from stamp duty. There is no net worth/wealth tax in Austria and you may find our Guide to protecting your finances while living abroad helpful.
Inheritance tax in Austria
Currently, there is no inheritance tax in Austria. In essence, the process of inheriting property is the same as any other property transaction. Notably, however, there is a transfer tax of 3.5% and 2% for close relatives. When planning your estate in Austria, you must declare gifts of cash, shares, and such to the tax authorities if they exceed €50,000 in the case of relatives; or €15,000 in the case of third parties. You can read more about this in our Guide to writing a will and planning your estate in Austria.
Company taxes and VAT rates in Austria
Generally, the tax assessment period in Austria is the calendar year. That said, a company’s financial year may stray from this. When the tax and financial years deviate, the assessments are based on the profits derived in the financial year(s) ending in the respective calendar year. Beneficially, the corporate tax rate was reduced to 25% with the government announcing further reductions going forward. Essentially, this makes Austria one of the world’s most business-friendly nations.
All Austrian businesses have to pay value-added tax (VAT) which is typically 20% of their income. However, partnerships and sole traders who earn less than €30,000 a year don’t have to pay VAT. Instead, they must pay income tax, which can range from 23% to 50%.
Furthermore, on top of this, corporate companies have to pay a quarterly 25% corporation tax. The minimum amount is €1,750 for legally independent companies or €3,500 for limited-liability companies. Corporations also have to pay a 25% profit tax.
Rebates and tax reliefs in Austria
Recently, cars with a CO2 value of up to 95g/km now receive a tax break of €30 per year for a maximum of five years. Additionally, there is a ten-year tax exemption for purely electric vehicles which makes it very appealing for drivers to make the switch to electric.
Essentially, charitable contributions to certain institutions are deductible up to 10% of the current year’s taxable income. Church tax is also deductible up to €400. Additionally, Austrian tax adviser fees are fully deductible.
Tax avoidance and evasion in Austria
In Austria, criminal tax evasion is punishable with a fine of up to twice the tax amount or up to two years’ imprisonment. Where false documents are in use, the punishment increases to up to 10 years in prison. Generally, for commercial tax evasion, where a taxpayer has deliberately evaded taxes in a criminal way, this can be up to five years. However, if the evasion is down to negligence, it is generally penalized with a fine. Usually, tax returns are subject to a plausibility check before an assessment is made. Ordinarily, tax return reviews only happen if aspects of the return are unclear to the tax officials. The Financial Crime Act applies to individuals and legal entities which means that legal entities are also subject to large fines.
Tax advice in Austria
In general, if you are a freelancer or self-employed, its a good idea to get some professional financial advice. Finding an independent accountant that can assist you with navigating the system and your business tax liabilities may save you money; not to mention time and a tax-related headache. To find tax consultants in your area, the Austrian Chamber of Tax Advisors and Auditors has a handy search portal.