Understanding the tax system is crucial for expatriates arriving in Austria to guarantee compliance and guide wise financial choices. Greater incomes are taxed at greater rates under the progressive taxation paradigm that underlines the Austrian tax system. For expats, Austria’s tariff rules are also very open and compliant with EU standards, which provides a predictable surroundings.
Income Tax paid by Foreigners in Austria
The income tariff is among the most crucial taxes foreigners should be familiar with. Income is taxed gradually in this country, hence your tax percentage increases with increasing income. For yearly earnings more than €1 million, Austria’s income tariff rates fall between 0% and 55%.
- Up to €11,000: 0% (no income tax)
- €11,001 to €18,000: 20%
- €18,001 to €31,000: 35%
- €31,001 to €60,000: 42%
- €60,001 to €90,000: 48%
- €90,001 to €1,000,000: 50%
- Above €1,000,000: 55%
Higher earners are guaranteed to pay more of their income to the tax system under this progressive structure. Income tariff is usually deducted at source by your company via the PAYE (Pay As You Earn) system for foreigners employed in Austria. If you have particular deductions to claim or extra income, you must, nevertheless, submit an annual tax return.
Taxes on global income
For expats, Austria taxes its citizens on their worldwide income, hence, should you decide to become a tax resident, you will have to pay tariff on all of your worldwide income. To escape double taxation, Austria does, however, have a vast network of double taxation treaties with nations all across the globe. These treaties guarantee that people do not pay twice on the same income by allowing expatriates to balance taxes paid in their own country against Austrian tariff obligations. Either dwell in Austria for more than 183 days in a calendar year or have your main abode there to be regarded as a tax resident in the country. This classification assigns complete liability for Austrian income taxes.
Social security taxes
Apart from income tariff, foreign residents of Austria pay social security taxes covering health insurance, pension plans, unemployment insurance, and accident insurance. Split between the employer and the employee, workers contribute around 18.12% of their gross pay overall towards social security.
- Pension Insurance: 22.8% (split equally between employer and employee)
- Health Insurance: 7.65%
- Unemployment Insurance: 6.8%
- Accident Insurance: 1.3%
Value-added tax
Value-Added Tax (VAT) systems used in Austria resemble those of other European nations. Most products and services have this consumption tariff placed upon them. Most products and services sold in the country are liable to the 20% standard VAT rate. There are, nonetheless, lower tariffs for some goods and services:
- 10% used for food, literature, newspapers, lodging, and certain other goods.
- 13% applied to activities like entry fees to theatres, museums, and some modes of transportation.
You will pay VAT as an expat while making purchases or utilizing services in Austria. However, it’s important to keep in mind that companies in this country have to register for VAT should their yearly turnover be more than a certain level. If you run your own company, you will have to make sure correct VAT reporting and consider VAT in your pricing system.
Additional taxes
Apart from income tariff, social security payments, VAT, expats in Austria might also be liable to many additional taxes including:
Property tax
Should you be a property owner in Austria, you could have to pay a yearly property tariff commensurate with valuation.
Inheritance and gift taxes
Austria has inheritance and gift taxes, differing rates depending on the connection between the dead or donor and the beneficiary.
Motor vehicle tax
Should you possess a car in Austria, you will be liable an annual motor vehicle tariff determined by the kind and weight of the vehicle.
Taxes deductibles and benefits
To lighten the total tariff load, Austria grants many tax discounts and credits. Among the frequent deductions are:
- Work-related expenses including commuting expenses, professional training, and home office costs.
- Expat parents can deduct childcare expenses.
- Contributions to pension schemes may also be deductible.
Depending on their family situation and dependent children, expats may also claim tax incentives, therefore decreasing their taxable income and maybe their whole tax payment.
Filing your taxes in Austria
Since their companies automatically deducted taxes, most workers in this country do not have to submit a tax return. You have to submit a yearly tax return, nevertheless, whether you have extra income sources or need to claim deductions. Usually at the end of April, the deadline for tariff returns is extended until the end of October should one be submitting via a tax counsellor. See a local tax adviser or accountant knowledgeable with expat taxes in Austria if you’re unsure about your tax responsibilities, particularly if you’re self-employed or have complicated income sources.
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