Mazars in AUSTRIA

Corporate taxes and other direct taxes

The Austrian corporate income tax is flat with a rate of 25%. The Austrian Corporation Tax Act defines the tax framework for corporations, setting an annual minimum tax of EUR 3,500 for public companies (AG) and a minimum tax per year of EUR 1,750 for limited liability companies (GmbH). These minimums are to be considered as a tax in advance, and as such, the amounts can be set off against any future corporate tax obligation. The company’s profits are computed by summing up the income generated by business activities performed, the passive income and the capital gains. In principle, all expenses linked to the conduct of the business are deductible. Losses can be carried forward indefinitely (but only 75% of one year’s profit can be offset), carry back is not permitted. Incentives concerning R&D are provided in the form of a 14% premium in cash for certain types of expenditure. An expert report from the FFG (“Forschungsförderungsgesellschaft”) is compulsory to request this tax incentive.

Transfer pricing in Austria
Arm’s lenght principle since 1998
Documentation liability since 1988 / 2016
APA since 2011
Penalty
Lack of documentation CbCR not provided up to KEUR 50
Tax shortage late payment interest if fraud: fiscal penal code
Related parties 20% < direct or indirect ownership
Safe harbours  

Level of attention paid by Tax Authority:

8/10

Thin capitalization is not subject to any specific regulations. However, in order to avoid insolvency, the reorganization law stipulates guidelines. The standard tax rate on capital gains is 27.5%. Dividends paid out from resident companies to the resident shareholder (not individuals) in Austria are exempt regardless of the participation percentage. Several important exemptions exist, such as an international participation exemption for dividends from non-resident companies. These dividends are tax free if a minimum of 10% direct or indirect shareholding has existed for at least one year (applicable also for less than 10% shareholding if extensive mutual assistance exists with such countries). Royalties and interests are also subject to exemptions in accordance with tax treaties and EU directives; otherwise the standard tax rate is 20%. Austria, with 90 tax treaties, offers double taxation conventions with a large number of countries.

Austria has a group taxation regime: profits and losses of the group members are attributed to the group holder and the aggregated balance is subject to taxation. Losses from nonresident companies can be used in Austria (again, the 75% limitation is applicable and the foreign losses have to be calculated by applying Austrian accounting rules if extensive mutual assistance exists. These losses can be subject to a recapture in cases of liquidation or if they are used abroad.

VAT and other indirect taxes

The general rate is 20% for the sale of goods and services. A reduced rate of 10% is used for agricultural products and rentals with a residential purpose (in certain cases 13% for entertainment, art). Exemptions are in place for banking transactions, and no VAT is levied on exports. Entrepreneurs with annual sales below EUR 30,000 are exempted from VAT obligations. Non-residents trading in Austria are also subject to registration. Monthly returns are electronically recorded, and annual returns are to be completed by 30 June of the following year. Companies represented by a tax advisor can have the deadline substantially extended.

VAT Options in Austria Applicable / limits
Distance selling EUR 35,000/year
Call-off stock
VAT group registration
Cash accounting EUR 700,000/year
Import VAT deferment
Local reverse charge gas, electricity, heating, emission quotas, mobile phones, game consoles, construction services, scrap, compulsory auction of immovable property
Option for taxation
- letting of real estate
- supply of used real estate
VAT registration threshold* EUR 30,000/year

* Not applicable for capital companies

Personal income tax / Social security system

The Austrian income tax rate is progressive (maximum of 55%). The personal income tax progression adds up as follows:

 
  • annual income up to EUR 11,000 is not taxed,
  • from the 11,001st to the 18,000th Euro earned, the marginal tax rate is 25%
  • from the 18,001th to the 31,000th Euro earned, the marginal tax rate is 35%,
  • from the 31,001st to the 60,000th Euro earned, the marginal tax rate is 42%,
  • from the 60,001st to the 90,000th Euro earned, the marginal tax rate is 48%,
  • from the 90,001st Euro earned, the marginal tax rate is 50%,
  • part of the earnings which exceeds 1 mio. Euros is taxed with 55%.

Concerning capital gains, a 27.5% tax rate is applied to all capital income from both Austrian and foreign sources.

In Austria a statutory compulsory social security system is in use. All employees are subject to this system. The two most important schemes are the Austrian General Social Insurance Act (“ASVG”), which is used for dependent employees (blue and white-collar workers) and the Austrian Commercial Social Insurance Act (“GSVG”) which is used for the self-employed.

  1. Salaried employees:
    Social security contributions are partly paid by the employee and partly paid by the employer. The base is the monthly gross salary and special payments. Generally, a maximum contribution base is in use (2019: EUR 5,220 per month, EUR 10,440 per year for special payments.) Based on the maximum contribution base the social security contribution amounts to 39.50% (18.12% employee and 21.38% employer). Additionally employers are obliged to pay various other payroll-related costs such as a contribution of 1.53% to the employee pension provision fund (“BVK”), a contribution of 3,9% to the family allowance fund (“DB”), a surcharge of approx. 0.40% to contribute to the family allowance fund (“DZ”), and a municipal tax of 3%.
  2. Self-employed persons:
    For self-employed persons also a maximum contribution base is in use (2019: EUR 6,090 per month and EUR 73,080 per year). Based on the maximum contribution base the social security contribution amounts to 26.15%. This insurance covers health insurance, pension insurance and accident insurance. For the first 3 years lower contributions can be paid.

Minimum wages depend on the sector’s collective agreement. Therefore, no standard minimum wage exists.

Wage related taxes in Austria Minimum wage Average wage in private sector
  in EUR   in EUR  
  1 806,7*   1 806,7*  
TOTAL WAGE COST 2746 130,27% 3487 130,24%
Employer's SS and other contributions*** 638 30,27% 810 30,24%
GROSS SALARY 2108 100,00% 2678 100,00%
Personal income tax 41 1,95% 256 17,98%
Employees' contributions 379 917,98% 481 17,98%
NET SALARY 1688 80,07% 1941 72,48%

* Payroll accountant in Austria, 2nd professional year

** Average monthly salary of full time employed persons in Austria in 2017.

*** In addition to SSC contribution to family equalization fund, surcharge, severance pay and community tax is also payable

**** Monthly gross salary (12 months)

Austria
MAZARS GMBH
Am Heumarkt 10
1030 Vienna
Austria
Günther MAYRLEITNER
Partner - Tax Advisor - CPA