| Austria Income Tax Rates Austria individual income tax rates for 2009 are progressive up to 50%
Income tax rates in Austria increase in progressive steps up to 50% for income exceeding €60,000. Income tax table for 2009 is as follows:
Taxable Income (€) / Marginal Tax rate % / Effective Tax Rate %
€ 0 - 11,000 0% 0%
€ 11,000 - 25,000 36.5% 20.44%
€ 25,000 - 60,000 43.21% 33.73%
€ 60,000 and more 50%
The tax-free bracket for low income in Austria is raised from € 10,000 to € 11,000 in 2009.
Austria Tax Reform of 2009In March 2009, a tax reform called the 'Tax Reform 2009' was enacted in Austria. The tax rates on salaries and income have been reduced, retroactively as of 1 January 2009. In addition, a four-step-programme has entered into force to support families with children. Some advantages of the 2009 tax reform in Austria, applicable to individual taxpayers are:
- Reduction of tax rates on salaries and income
- Increase of the exemption limit and changes concerning the reduced tax rate of other receipts.
- Increase of the child tax credit from € 50.90 to € 58.40/month
- Analogue adjustment of the single-parent tax credit
- Introduction of a child tax-free amount of € 220/child/year
- Deductibility of child care costs up to € 2,300/child/year for children up to an age of 10
- Tax exemption for employers' subsidies for child care up to € 500/child/year
- Change from the tax-free amount for profits invested by entrepreneurs subject to accounting to a tax-free amount for profits as from 2010: the tax-free amount will be increased from 10 % to 13 % and the requirement for investing profits will be abolished up to € 30,000
- Abolishment of the preferential taxation for retained profits as from 2010
- Abolishment of the preferential tax treatment of stock options as from 1 April 2009
- Tax deductibility of donations for humanitarian purposes, for development cooperation and emergency aid up to 10 % of the profits or income of the previous year
- Increase of the maximum deductible amount of contributions to churches to € 200 as from 2009.
Austria Income Tax Act covers the following seven categories of income:
(1) Income from agriculture and forestry
(2) Income from independent (professional) services (including scientific, artistic, literary, educational, or other professional services)
(3) Income from trade or business, including gains on the sale of a business or partnership share
(4) Income from employment, e.g. wages and salaries, social security pensions
(5) Income from capital assets (dividends and interest)
(6) Income from rentals and royalties
(7) Income from annuities and other income of a recurring nature, speculative gains, and income from special services.
Who is Liable to Pay Tax in Austria?
For Residents: Unlimited liability for tax applies to those persons whose place of residence or regular domicile is in Austria. In any event after the elapse of six months of permanent residence in Austria, unlimited liability for tax ensues, dating back to the first day. Temporary stays abroad suspend this time limit. Nationality is of no consequence in this respect. Unlimited liability for tax signifies that, in principle, all sources of income, whether in this country or abroad, have to be declared for tax purposes in Austria.
For Nonresidents: Limited liability for tax applies to persons who have income in Austria (e.g. as employees) or who derive income from Austria (e.g. social security pensions) but who have no place of residence, nor their regular domicile in Austria. Individuals with limited liability for tax can also apply for assessment as employees, claiming deduction of income-related expenses and special expenses incurred in Austria.
Tax Year: Tax year in Austria is the calendar year.
Austria Corporate TaxAustria corporate tax rate for 2009 is 25%.
The corporate income tax in Austria is a tax on profits of companies (profits tax). Austria corporate tax is a common federal tax.
Subject to the corporate tax are:
Stock companies, limited liability companies, private foundations, associations, trade or business of entities of public law, institutions, foundations without independent legal existence and accumulations of property for a specific purpose.
Corporate taxpayers are subject to national corporate income tax. There are no other taxes on the income of companies.
Resident companies are taxable on their worldwide income and capital gains. A company is resident if it has its legal seat or its place of effective management in Austria. Companies which are established under Austrian commercial law must have their legal seat in Austria.
The Individual Income Tax Law lists up all kinds of sources which constitute the so called taxable income.
Income and capital gains are pooled and taxed at the same rate. Unless the Corporate Income Tax Law provides otherwise the computation of the income follows the rules of the Individual Income Tax Law.
Domestic and foreign dividends are exempt (participation exemption).
Contributions by shareholders to the capital of a company upon formation or increase, if in return for shares or other membership rights or in proportion to shareholding are also exempt.
Business entities that are deemed to be corporations by the Corporate Income Tax Act are subject to corporate income tax. Resident corporations, which have their registered office or the place of management in Austria, are subject to unlimited tax liability.
Nonresident corporations are taxed only on their income from Austrian sources.
Tax on Nonresident corporations may be reduced under a double taxation treaty between Austria and other state or Country.
Partnerships are treated as though every individual partner would conduct a partnership business on his/her own account. Partnerships therefore do not pay corporate income tax but each partner is subject to personal income tax.
The taxable income of corporations in Austria is computed in a similar manner to that of individuals. Income from all seven sources of income is included.
All income generated by corporations which are subject to double-entry bookkeeping according to the Commercial Code is by law regarded as income from trade and business.
Austria Tax Reform Law of 2009 - Support for BusinessesIn March 2009, a tax reform called the 'Tax Reform 2009' was enacted in Austria. Some advantages of the 2009 tax reform in Austria, applicable to businesses are:
- Increase of the tax-free amount for profits from 10% to 13%
- Extension of the tax-free amount for profits from taxpayers applying the cash-accounting method to taxpayers applying the accruals accounting method
- Abolishment of the investment requirement for profits up to € 30,000
- Inclusion of buildings into the list of possible investment assets
- Abolishment of the preferential taxation for retained profits
The New Tax-Free Amount for Profits
Individuals may claim a tax-free amount for profits for their business (or their businesses). Thus, the profit of each business is diminished by 13%. The maximum amount per person and year amounts to € 100,000.
The tax-free amount for profits is divided into two parts: a basic tax-free amount and a tax-free amount for profits invested. The new tax-free amount for profits applies to assessments as from the year 2010.
For which categories of income may the tax-free amount be claimed?
It may be claimed for profits from business income, which is income from agriculture and forestry, income from independent personal services and income from commercial activities. It may not be claimed for income from renting or leasing.
For which methods of determining taxable income may the tax-free amount be claimed?
In this case, a difference has to be made between the basic tax-free amount and the tax-free amount for profits invested.
Basic tax-free amount: Cash accounting method, accruals accounting method and flat deduction regime.
Tax-free amount for profits invested: Cash accounting method and accruals accounting method.
What does basic tax-free amount mean?
When calculating the taxable base a difference has to be made between the first € 30,000 of profits (total profits of all businesses of the entrepreneur) and the remaining profits: For the first € 30,000, 13% are taken into account automatically as a "basic tax-free amount" (thus a maximum of € 3,900/person/year).
For partnerships the basic tax-free amount is limited to € 3,900 per person and year and, in addition, per partnership.
How to profit from the basic tax-free amount?
The basic tax-free amount is granted ex officio and is automatically taken into account in the tax return for the year 2010.
What does the tax-free amount for profits invested mean?
If profits (total profits of all businesses of the entrepreneur) exceed € 30,000, 13 % of the exceeding amount may only be claimed as tax-free amount for profits invested under the condition that, up to the respective extent, depreciable assets with a useful life of more than four years (NEW: buildings, too) or privileged securities have been acquired.
The tax-free amount (basic tax-free amount and tax-free amount for profits invested) is limited to € 100,000 per person and year and, in addition, per partnership.
How to profit from the tax-free amount for profits invested?
In order to be entitled to the tax-free amount for profits invested you have to allocate the basic tax-free amount to one business (out of several) in your tax return. For that part of the profit for which you would like to claim the tax-free amount for profits invested you have to indicate the assets acquired that correspond to the profits of this business in your tax return.
The tax-free amount may be claimed in the tax return of the year 2010 for the first time.
Abolishment of the preferential taxation for retained profits
The preferential taxation for retained profits can, for the last time, be claimed in the tax assessment for the calendar year 2009. The profits preferentially taxed until the tax assessment for the calendar year 2008 may be recaptured at a tax rate of 10 % in the tax assessment for the calendar year 2009. In this case preferential taxation for retained profits may not be claimed for the tax assessment 2009.
How to claim the preferential ad hoc recapture?
The tax return 2009 will provide for a respective box.
Minimum Corporate Income Tax (MCT) in AustriaCorporations subject to unlimited tax liability have to pay Minimum Corporate Income Tax (MCT) in Austria, regardless if profitable or not.
Companies incurring a tax loss or earning small profits must pay a minimum tax of EUR 1,750, EUR 3,500 or EUR 5,452 depending on the legal status of the company and the industry. Nonresident companies are not subject to a minimum tax. Minimum tax may be credited against corporate tax payable in the following years.
Minimum Corporate Income Tax for Joint Stock Companies: €3,500 per annum
Minimum Corporate Income Tax for Limited Liability Companies: €1,750 per annum
Minimum Corporate Income Tax for Banks and Insurance Companies: €5,452 per annum
The Minimum Corporate Income Tax (MCT) is levied on a quarterly basis; for the first four quarters after the foundation of a newly established corporation the MCT amounts to €273 per quarter.
Capital Gains TaxThere is no specific capital gains tax in Austria. Capital gains and losses are generally treated as ordinary business income (or loss) and are taxed at standard corporate income tax rates of 25%. However, under the international participation exemption, gains from the sale of a participation in a nonresident company are tax exempt unless the resident company has excercised an option to have capital gains treated as taxable income. Individuals have reduced rates for 50% of the individual's average tax rate, up to a limit of 25%.
Austria Social Security TaxThe maximum social security rates in Austria are:
Employer: 21.9%
Employee: 18.2%
Austria social security contributions are payable by both employers and employees. Employee rate is 18% to 18.2%. Employer rate is 21.7% or 21.9% depending on the status of the employee. Apart from social security contributions, employers have to pay approximately 9.5% salary-related charges on top of gross salary. In all, staff costs are approximately 32% of gross salary.
Fringe Benefits Tax (FBT)There is no specific fringe benefits tax in Austria. However, fringe benefits are subject to salary tax according to the value of the benefit in kind. For assessment of the latter, special rules may apply. The fringe benefits are taxed on the employee.
Foreign Tax ReliefAustria has concluded a number of double taxation treaties with other countries. Generally, an Austrian resident is subject to taxation in Austria. The double taxation treaties may either exempt foreign-sourced income or grant a credit against Austrian tax for foreign taxes paid on the same income or gain in the same accounting period.
Withholding TaxDividends: Austria imposes a 25% withholding tax on dividends, unless double taxation treaties provide otherwise. A withholding tax exemption applies if the recipient company directly owns at least 10% of the paying company's share capital. Otherwise, the amount withheld can be credited by the recipient company against its own tax liability. For international participations, the EC Parent-Subsidiary Directive applies. If the tax authorities suspect cases of tax avoidance or abuse, the withholding tax exemption can only be claimed through a refund procedure. In principle, Austria levies a 25% withholding tax not only on dividends but also on certain interest payments and capital income derived from securities. Corporate investors may achieve a tax exemption if certain conditions are met. For receiving resident companies, the withholding tax is deemed an advance payment and will be credited against corporate income tax.
Interest: No withholding tax is levied on interest unless the loan is secured against Austrian real estate or various other Austrian rights (the tax rate may be reduced or become tax exempt under an applicable tax treaty).
Royalties: Royalties are subject to a 20% withholding tax, but this 20% tax rate may be reduced or exempt under an applicable tax treaty or the EC interest and royalties directive.
Other Taxes in AustriaPayroll Tax: A city tax of 3% is levied on total salaries, wages and social contributions of enterprises based in Austria.
Real Property Tax: Municipalities in Austria impose an annual real estate tax up to 2% of the assessed value of property.
Real Estate Transfer Tax: Transfers of real estate are subject to an acquisiton tax of 2% to 3.5% of the real estate value (plus a 1% registration fee).
Capital Transfer Tax: A 1% capital transfer tax on contributions to company capital.
Insurance Tax on Insurance premiums: Insurance tax on insurance premiums range between 1% - 11%.
Stamp Duty: Stamp duties are due on certain transactions and documents, ranging from 0.8% to 1.5% on mortgages and loans, as well as on various other transactions (e.g. rent and lease contracts)
Inheritance / Gifts Tax: Austria abolished the tax on inheritance and gifts since August 2008. No tax is imposed on gratuitous transfers (except for land transfer tax which is usually based on a tax value considerably lower than market value) but mandatory reporting on such transfers exceeding certain limits has been implemented.
Austria Value Added Tax (V.A.T)The standard rate of Value Added Tax in Austria is 20%. A reduced V.A.T. rate of 10% applies to tourism services, food and agriculture. Some transactions such as exports are zero rated. A number of transactions are exempt from VAT.
| 
