Living in Austria Paying taxes, double taxation agreements, family allowance and childcare costs
Here you will find extracts of the Tax Book 2017 containing important basic information about the Austrian tax system, receiving earnings and pensions from abroad, applying for family allowance and deducting childcare costs.
Table of contents
Persons with unlimited liability to pay tax are those whose place of residence or regular domicile is in Austria. Persons have a place of residence in Austria if a lodging on Austrian Federal territory is at their disposal that they (will) obviously use on a longer-term basis. The lodging need not be the principal place of residence, but must be suited for living, in line with one’s personal circumstances. The lodging need not be used on a permanent, but at least on a recurrent basis, in order to qualify as a place of residence.
Persons will have their regular domicile in Austria if they (are going to) stay on Austrian Federal territory not on a merely temporary basis (holiday, business trip, visit, etc.) but obviously for a longer period. In any event, persons have an unlimited liability to pay taxes after they have stayed in Austria for six months. Nationality is irrelevant in this context.
Unlimited liability to pay tax means that as a matter of principle all domestic and foreign earnings in Austria are taxable. Limited liability to pay taxes is incumbent on persons who obtain earnings in Austria (e.g. as employees) or from Austria (e.g. in the form of social security pensions), but have neither their place of residence nor their regular domicile in Austria.
The EU tax authorities have agreed on a cooperation in order to collect the taxes of their taxable population properly. The pivotal legislation in this field is Directive 2011/16/EU of the Council on administrative cooperation in the field of taxation.
With effect from the 1st January 2015, this Directive provides for the Automatic Exchange of Information the following categories of earnings and capital:
- Earnings from employment
- Remunerations for activity in supervisory or administrative boards
- Life insurance products not covered by other directives
- Retirement pays and pensions
- Ownership of immovable property and earnings from the same
Individuals with limited liability to pay tax can also apply for a tax assessment for the wage tax due on their earnings, claiming deductions for income-related expenses and special expenses incurred in Austria.
Please bear in mind, though, that an amount of 9,000 Euro is added to the tax assessment base of persons with limited liability to pay tax. This amount is not taken into account in standard payroll accounting.
The reason for the above is that – as a matter of principle – the non-taxable minimum income (subsistence level) of the country of residence must be taken into account. On the basis of a non-taxable income of 11,000 Euro pursuant to the tax scale, persons with limited liability to pay tax thus have a non-taxable basic income of 2,000 Euro.
EU/EEA citizens and citizens of countries with which Austria has a double-taxation agreement with non-discrimination clause, who do not have a place of residence in Austria but realise their earnings mainly in this country (90 % of the earnings are realised in Austria, or the total amount of earnings realised abroad is less than 11,000 Euro) can opt for an unlimited liability to pay tax when filing their return for tax assessment. In this context, only the earnings in Austria are taxed, in spite of the unlimited liability to pay tax. However, the amount of 9,000 Euro need not be added for the tax assessment. Moreover, individual tax deductions (single-earner deduction, single-parent deduction, support money deduction) and extraordinary burdens may be claimed.
Double taxation agreements prevent that taxes must be paid more than once on a single income, if an individual has places of residence or receives earnings in more than one country.
Special provisions apply to cross-border workers, i.e. persons residing in Austria but working in Germany, Italy or Liechtenstein and commuting every day. As a matter of principle, their earnings are taxed in Austria. Please check the Tax Book 2017 for more information concerning employees with earnings from which no wage tax has previously been deducted, or persons receiving earnings abroad.
Guest workers are treated as employees with unlimited liability to pay tax from their very first day in Austria. A prerequisite is a work permit for at least six months or an employment contract for a minimum period of six months.
For seasonal workers, unlimited liability to pay tax generally arises when their stay in Austria exceeds six months. In this case, the unlimited liability to pay tax commences on the first day of their employment.
For further information on wage tax and income tax, please refer to the Tax Book 2017
Earnings from abroad from a gainful employment activity or foreign pension remunerations are exempt from taxation under the provisions concerning progression, if so agreed between Austria and the respective source country on the basis of a double taxation agreement. The foreign earnings themselves are not taxed upon application of the exemption method in Austria. Since in the case of persons resident here, Austria has the right to taxation of the global earnings, foreign earnings are to be considered in the determination of the tax rate that is to be applied to theearnings taxable in Austria. Since foreign earnings are not taxed in Austria, crediting of the foreign tax is not possible.
Automatic Family Allowances without Application (ALF) is a no-stop-shop solution for parents with which family allowances for new-born children are paid out automatically. Filling in forms or a visiting the tax office is no longer necessary. This is relevant for about 80,000 families a year. The application has already received several international awards.
The service was launched on 1 May 2015. Citizens no longer need to visit the tax office, and in many cases it is no longer necessary to present documentation. Family allowance payments are handled automatically. This will save Austrian citizens 39,000 hours annually, and additionally reduces the time and cost for the Austrian public administration.
The initiative of the Federal Ministry of Finance and the Federal Ministry of Families and Youth applies to children born in Austria. Austrian tax offices start an examination – without any interference from parental side – on the basis of the data that are available and get in contact with the parents for necessary further information and to convey the result of the investigation process. Any contact with the tax office from parental side – if not asked for – is not necessary.
For more information you may consult the leaflet "Antraglose Familienbeihilfe" (in German)
- Child deduction and child supplements
For more information on child deduction and child supplements, refunds of the single-earner or single-parent tax credits and a potential refund of social security contributions or support money deduction please consult the Tax Book 2017