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In Austria, everyone who has their usual residence in the country is subject to tax. The country allows for generous benefits to scientists and researchers to attract people from these fields from outside the country to move to Austria to live and work. This article will help you have a greater understanding of the Austrian income tax system before you arrive.
Contents
Austria’s income tax rate
In Austria, income tax is known as Einkommensteuer. The tax system is pay-as-you-earn and is paid throughout the year. Anyone who lives in Austria is liable to pay an unlimited tax liability. Those who have no residence but work in Austria pay a limited tax liability. They are subject to tax only from the income earned in Austria and not elsewhere.
Researchers have three options in the way they are employed – stipend/grant/scholarship, independent personal services and employment. This is the determining factor in whether money earned is tax-free or taxable.
A stipend is tax-free if it is a remuneration for educational purposes, especially when grants are received for the writing of a master’s or PhD thesis. However, this must meet certain criteria. The grant cannot be a substitution of income, and the grant cannot be any higher than the yearly amount of the Austrian Study Grant (Studienbeihilfe) which is €8,148. Should the stipend be higher, this will then be subject to tax liability.
Independent Personal Service is essentially self-employment, where the individual comes to live in Austria to engage with a contract for work (Werkvertrag). This would be the most common form of employability within the tax system for researchers and scientists coming from outside Austria. It is the individual’s responsibility to file a tax declaration with the tax office (Finanzamt). If regular residence is not taken up but you conclude the contract for work, the income is subjected to tax liability. The institution withholds 20 per cent of the agreed amount, known as a withholding tax, and this is given to the tax office by the employer.
Wages are subjected to tax liability if you conclude an employment contract with your employer or host institution. As the employer is obliged to deduct the tax and social security contributions, you have no responsibility concerning tax matters.
In Austria it is also possible to work under a contract with a host institution in which you are free to decide when and how you work – known as a “freelance contract service” (Freier Dienstvertrag). Though you work as a freelancer, your employer is obliged to pay your social insurance contribution, but you are responsible for filing an income tax declaration as this is considered a form of self-employment.
Because tax in Austria is a pay-as-you-go system, tax brackets are entirely defined by how much is earned in a calendar year before special circ*mstances are applied. This is different to neighbouring Germany.
Tax brackets for Austria, 2017
| Bracket | Annual income | Rate |
| 1 | Up to €11,000 | 0% |
| 2 | €11,000 – €18,000 | 25% |
| 3 | €18,000 – €31,000 | 35% |
| 4 | €31,000 – €60,000 | 42% |
| 5 | €60,000 – €90,000 | 48% |
| 6 | €90,000 – €1,000,000 | 50% |
| 7 | Over €1,000,000 | 55% |
© academics
The Austrian tax system gives consideration to exceptional situations, such as special expenses and extraordinary burdens and it is therefore possible to receive a tax rebate. These include doctor’s fees and hospital costs, as well as cost for childcare and dental treatment. The individual can fill in an application known as ArbeitnehmerInnenveranlagung with the tax office.
Austrian social security tax is a compulsory element in employment taxation. It comprises of health insurance, pension insurance, unemployment insurance and accident insurance. These figures are determined as a percentage of total monthly earnings. The tax is partially paid for by the employee and partially by the employer.
The maximum contribution on a regular basis per month is €4,980. Special payments, which are those payments that do not occur monthly, such as a bonus, are also liable for social security tax. The taxation figure for these is capped at €9,960 a year.
Social Security Tax as of 1st January 2017
| Type of insurance | Paid by employer | Paid by employee | Total |
| Pension Insurance | 12.55% | 10.25% | 22.80% |
| Accident Insurance | 1.30% | 0.00% | 1.30% |
| Health Insurance | 3.78% | 3.87% | 7.65% |
| Unemployment Insurance | 3.00% | 3.00% | 6.00% |
| Others | 0.85% | 1.00% | 1.85% |
| Total | 21.48% | 18.12% | 39.60% |
| Severance Fund | 1.53% | 0.00% | 1.53% |
©academics
If you are coming from outside Austria and your main place of residence is not in the country, you may be able to opt for unrestricted tax liability. If your income abroad does not exceed a total of €11,000, or 90 per cent of earnings originate from Austria, you can opt for an Employee Tax Assessment Declaration (Erklärung zur ArbeitnehmerInnenveranlagung).
The Austrian Tax Ministry (Bundesministerium für Finanzen) offers an income tax calculator which estimates the percentage of income you have to pay.
As is the case with most EU countries, all individuals resident in Austria who are liable to be taxed receive a tax identification number, commonly known as TINs. These are nine-digit numbers that are required to process income tax. TINs are not official documents of identification, and it must be remembered that TINs change in different jurisdictions. TINs can be obtained via the local tax office.
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Double taxation agreements in Austria
Austria has bilateral arrangements with countries all over the world on an individual basis to prevent double taxation. These treaties are commonly known as Double Taxation Conventions (DTC). The principle here is to offset paying tax in one country which can be payable in another – thus avoiding paying two sets of taxes.
The treaties vary from country to country and some forms of income are exempt from tax or qualify for reduced rates. This is inclusive of royalties, dividends and capital gains.
Austria has concluded DTCs with well over 80 countries, including Germany, Switzerland and the United Kingdom.
Tax benefits for researchers
The Austrian government has set up special measures for generous tax allowances for researchers, known as Zuzugsbegünstigungsverordnung. This was specifically designed to appeal to scientists and researchers coming from outside Austria. This is a tax deduction (Zuzugsfreibetrag) of 30 per cent, which is limited to five years on income from scientific work. The allowance was set up to offset expense when moving to Austria. The benefits are aimed to compensate for differences in price. It also takes into account expenses in running two households, for learning German, as well as sending children to private schools.
The application for this benefit must be filed to the Austrian Ministry of Finance within six months from the date you moved to Austria.
As ‘independent personal service’, or self-employment, will be the most common form of taxation for scientists and researchers, they will be able to take advantage of the generous benefits for incurred expenses, which are tax deductible. These must be related to the work in which they are engaged with. Deductible expenses include studying fees, work clothes, specific literature, language courses (if coming from abroad) and cost of basic and further training. The cost of transportation, if commuting, is also deductible.
Finally, anyone paying their tax this way is entitled to a deductible lump sum of €132 regardless of whether they have incurred expenses or not.
Authors
Gerard Thompson
Source
academics - January 2019
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