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Living in Austria Paying taxes, double taxation agreements, hiring workers from abroad, family allowance and childcare costs

Here you will find extracts of the Tax Book 2018 containing important basic information about the Austrian tax system, receiving earnings and pensions from abroad, applying for family allowance and deducting childcare costs.

Personal Liability to Pay Tax

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.

Note on the Information Exchange in the EU

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. 

Double Taxation Agreements

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 2018 for more information concerning employees with earnings from which no wage tax has previously been deducted, or persons receiving earnings abroad.

Information about Childcare 

(Extracts of the Tax Book 2018)

For a child who constantly lives in Austria, in another Member State of the European Union or a State of the European Economic Area or  in Switzerland, a child allowance applies, which is to be requested during the employee tax assessment. The tax exclusion for children (€ 440) may be claimed by the person or the spouse who is entitled to receive the family allowance for this child for a period of more than six months in the calendar year. 

If both parents claim the tax exclusion for children, the amount is €300 per parent. A parent not living in the household who receives the support money deduction for more than six months in the calendar year is entitled in terms of the tax exclusion for children amounting to € 300. In this case, only this parent and the person who received family allowance for that child during a period of more than six months in a calendar (but not their respective spouse) may each claim € 300 as tax exclusion for children.

The social security number or the personal identification code on the European health-insurance card of the child must be indicated in the tax return when applying for the tax exclusion for children. Both numbers can be found on the e-card.

Automatic Consideration of Tax Exclusion for Children

The tax exclusion for children (annually to the amount of € 300) is automatically taken into account in the context of the assessment for persons entitled to support money deduction and single parents. Automatic consideration requires entitlement to the tax exclusion for children, and to the support money deduction for this child or to the single-parent tax credit, respectively.

Costs of Childcare as an Extraordinary Burden

As extraordinary expenses, childcare costs can be taken into account. This means that the costs of childcare reduce the tax assessment base and thus the taxable income. No deductible needs to be applied; hence, the deductible costs lower the income tax by the amount of the respective marginal tax rate. Childcare costs must be recognised as an extraordinary burden up to the end of the calendar year in which the child turns 10 (16 for handicapped children).

What amount of the costs can be deducted?

The deductible costs of childcare are limited to an amount of € 2,300 per year and child.

When does a child entitle to deducting childcare costs?

Whenever a child has not turned 10 at the beginning of the calendar year and whenever child deduction may be claimed for more than six months in a calendar year.

Who can deduct childcare costs?

The person who is entitled to child deduction for the child in question for more than six months in the calendar year, or spouse or the parent obligated to pay child support (e.g. the divorced parent), if he/she is entitled to claim child deduction for more than six months in a calendar year, whenever the costs of childcare are incurred on top of child support.

Each of the persons in this group of persons can claim the childcare costs incurred by him / her. Altogether, not more than € 2,300 per child during the calendar year may be deducted as an extraordinary burden.

If two or three taxpayers jointly exceed the maximum amount of € 2,300 per year, as a matter of principle the maximum amount will be distributed in relation to the actual costs incurred.

Can the parents of handicapped children claim costs of childcare on top of other tax benefits?

On the basis of the Ordinance on Extraordinary Expenses (Verordnung über außergewöhnliche Belastungen), a monthly lump sum tax exclusion of € 262 can be claimed for children entitling to an augmented family allowance, reduced by any nursing care allowance payments.

Moreover, the costs for educational modules in a special and nursing school, or the costs for working in a sheltered workshop may be claimed at the tax office in the documented amount. Moreover, childcare costs that are not related to a special or nursing school or a sheltered workshop for children up to the age of 16 are tax-deductible to a maximum of € 2,300 per child and calendar year. Any care benefits received must be subtracted from these costs whenever there is a need for care and attendance.

What happens if the costs of childcare amount to more than € 2,300 per child?

Whenever more than € 2,300 is spent on childcare, only an amount of € 2,300 may be claimed under extraordinary burdens.

Only in special cases (e.g. single mother or father) can expenses in excess of € 2,300 be deducted as extraordinary burdens, but the income-related deductible must be subtracted.

Which costs may be claimed? 

The childcare costs must be actually incurred expenses. Whenever therefore an employer contributes a subsidy for the childcare costs, then only the costs actually incurred by the taxpayer may be claimed. The care must be provided in private or public childcare facilities (e.g. kindergarten, after-school care centres, daytime boarding schools, boarding schools) or by a person with pedagogical qualifications.

The childcare costs, as well as the costs for meals and handicraft materials may be claimed. The tuition fee for private schools and coaching lessons may not be claimed. The costs for staff-placing agencies and the travel costs to the childcare facility may not be claimed either.

Childcare costs are definitely incurred up to the age of compulsory school attendance. For older children, a distinction is made between expenses for school attendance and care required outside of school hours. However, the costs for care outside of school hours (in the afternoon, during holiday time) may be claimed if the care is provided by a person with pedagogical qualifications or an institutional childcare facility. All costs (e.g. also those for meals and accommodation, sports events, travel costs for the bus to the camp and back) for any care required during holiday time (e.g. summer camps) may be claimed if the care is provided by a person with pedagogical qualifications.

Who must look after the child?

The care must be provided by a public or private institutional childcare facility (e.g. a kindergarten, a boarding school, a day-care centre for children) or by a person with pedagogical qualifications (e.g. a day nanny).

What is a childcare facility?

The following, in particular, are childcare facilities:

  • crèches (day-care centres for babies and toddlers)
  • nursery schools (general nursery schools, integrative, special and training nursery schools) 
  • company-run kindergartens 
  • after-school care centres (general after-school care centres, integrative, special and training after-school care centres) 
  • childcare facilities for children of mixed age (e.g. day-care centres, children’s groups, nurseries) 
  • children’s groups managed by parents 
  • play groups 
  • childcare facilities provided at universities 

Public facilities are those operated by Federal, regional or municipal units or groups of municipalities. Private facilities are especially those that are operated by associations, publicly recognised churches and religious communities, church-related organisations, foundations, family organisations, companies and physical persons. Moreover, types of day-care facilities at schools such as, for example, open schools (classes in the morning, care provided optionally in the afternoon), after-school care at school, daytime boarding schools (classes and care must be clearly separated, no overnight stays) must also be recognised, although they may not need any statutory permit.  Who is a person with pedagogical qualifications? 

From the year 2017 on, the following applies: Persons with pedagogical qualifications can prove that they have obtained a minimum of 35 hours of training in childcare and education. Child minders must have reached the age of 18. A completed vocational training in this field can also be used to demonstrate pedagogical qualification. The following types of training meet the required standard:

  • Training courses for day parents in keeping with regional laws and regulations
  • Training courses for kindergarten teachers, after-school educators, childhood educators 
  • Pedagogical studies at university level (e.g. teacher-training studies), at a pedagogical academy or comparable institution.

For the following trainings, a minimum of 35 course hours must be documented:

  • Training to become an au pair 
  • Parent training seminars or training seminars in childcare (e.g. babysitter training)

The training courses listed above are recognised if the training (training course for day parents pursuant to the relevant regional laws and regulations, training for kindergarten teachers, after-school educators and childhood educators) or studies (pedagogical studies at a university, a pedagogical academy or a comparable institution) has/have been completed. For individuals who are in training in one of these facilities, but have not or not yet completed the training, the educational institution (school or university) can confirm completion of the required training contents amounting to 35 hours. Pedagogical courses that are part of other curricula are not recognised. 

If a child minder has obtained training in an EU or EEA country that is equivalent to the training recognised in Austria, this will be accepted as proof of qualification.

If an eight-hour training course has already been completed in the years before, these eight hours can be credited against the required training of 35 hours.

If this training has already been completed by 31st December 2017, childcare costs are deductible in 2017.

The training in childcare and child education may be obtained at the organisations listed on the website of the Federal Ministry for Family and Youth (In German only) The relevant organisation will be able to provide information as to whether a specific course offered by that organisation is a course leading to a qualification.

Au pairs  must also take a course of 35 hours. Experience from a previous au-pair assignment is not sufficient evidence. Childcare costs can be recognised for tax purposes only from the time when the child minder has obtained the required training. In case of au pairs, the childcare costs may be considered starting with the arrival of the au pair, if the au pair training takes place within the first two months of the au pair activity in Austria.

Can the costs of childcare provided by relatives be claimed at the tax office?

If the childcare is provided by a person with pedagogical qualifications who is a relative (e.g. parents, siblings) and who belongs to the same household as the child, the childcare costs may not be deducted.

Which cost refunds reduce the childcare costs?

Any possible non-taxable allowances and refunds that were obtained for childcare services will reduce the expenses that can be claimed at the tax office. However, childcare benefits, family allowance, child deduction or tax exclusions for children are not subtracted from the expenses. Taxable childcare grants do not reduce the costs of childcare that can be claimed either.

How to provide evidence of childcare costs?

The childcare facility or the child minder with pedagogical qualifications must issue an invoice and / or payment receipt as evidence, which must contain the following information:

  • name and social security number and/or identification code of the European health insurance card of the child 
  • addressee of the invoice (name and address)
  • date of issue
  • consecutive invoice number
  • period of childcare 
  • the name and address in case of public childcare facilities; also the reference to permits to operate the facility for private childcare facilities 
  • name, address, social security number and/or identification code of the European health insurance card in case of child minders with pedagogical qualifications and proof of the specific qualification by enclosing a copy of the relevant diploma
  • invoiced amount (including value-added tax, if applicable, if the child minder is not a small entrepreneur).

Like all other documents, these receipts must also be kept for seven years and shown to the tax office upon request. You will find further information about the issues of costs of childcare (providers of babysitter training, parent training facilities, etc.) at the website of the Federal Ministry for Family and Youth (in German only)

Extraordinary Burdens due to Dependants

What payments for dependants may be claimed?

As a matter of principle, payment of the statutory support-money (alimony payments) for children or a divorced spouse is not an extraordinary burden. The current costs for children are covered by the child or support money deduction. Extraordinary burdens are incurred if costs are borne for the dependant that per se constitute an extraordinary burden. This includes, for example, medical costs for a child (such as spectacles or an orthodontic treatment), or the cost of an education away from home. These expenses may be taken into account only for a person required to pay alimony, if they are incurred on top of the current alimony payments.

However, maintenance payments to children may also constitute extraordinary burdens if (because no family allowance is received) one is not entitled to claim a child deduction and (because no support money is paid) one is not entitled to claim a support money deduction either. This applies, for example, to support money payments for children who permanently live in a country outside the EU/EEA plus Switzerland and who belong or do not belong to the household of the taxpayer. In such cases, as a matter of principle fifty per cent of the current maintenance amount may be claimed that is appropriate according to the cost-of-living index of the country concerned. In practice, usually a lump sum is deducted (for a child normally: € 50 per month). A deductible is not calculated in this case