Accountancy in Austria

>> Taxation in Austria

Corporation tax

Corporations which have their registered office or management in Austria are subject to unlimited tax liability (resident corporations). The following are deemed to be corporations:

  • Legal entities incorporated under private law (AG, GmbH).
  • Public corporations (i.e. corporations incorporated under public law) operating on a commercial basis.
  • Unincorporated associations, foundations, trusts and other estates.

The tax rate is 25%.

Corporations subject to unlimited tax liability must pay a minimum corporate income tax of € 1,750 annually. Should this minimum tax in one fiscal year exceed the actual amount of corporate income tax payable, then this excess is treated as a tax prepayment and can be carried forward against future corporate income tax liabilities, if these future tax payments exceed € 1,750.

The loss carried forward is limited to 75% of the tax profit. The rest of the loss can  be carried forward in later years without  a time limitation.

Group taxation in Austria

The group taxation for groups of corporations came into effect in 2005 and substituted the so called Organschaft. The group taxation is optional. The members of a group have to file an application for group-taxation with the tax authorities. The consequence of group membership is that profit or loss of a group member as computed for purposes of corporation tax shall be attributed to the group member which directly or indirectly controls the group member. Group members can be also abroad. Foreign losses, as determined by Austrian rules, which cannot be offset against income in the foreign tax assessment, will be offset against the income of the taxpayer in Austria. If in a later tax period the loss is offset against income in the foreign country, this loss will have to be recovered and will increase taxable income in Austria.

Dividend payments

Distributed profits are subject to a withholding tax, generally in the amount of 27,5%, payable at the latest, at the time the distributions are made. This withholding tax is often credited against corporation taxes payable by the parent company in the country in which it is domiciled. Further, under most double tax treaties concluded with Austria, the withholding tax is reduced to 5-10% if the parent is a corporation and retains a substantial holding of the shares of the subsidiary. There is no withholding on dividends paid to an EU parent corporation according to the EC Parent/Subsidiary Directive of 1990.

Affiliation privilege

There is an exemption from corporation tax for profit resulting from shares and investments in domestic corporations and co-operatives, and for profit from shares and investments in foreign corporations as well as gains from the sale of such investments (international affiliation privilege). The prerequisites for the application of the i.a.p. are that the corporation in Austria has to hold a share in a foreign corporation of at least 10%  and for at least 1 year, direct or indirect.

Interest

A 25% withholding tax is imposed on interest income from bank deposits and securities. For individuals and partnerships, it is a final taxation. However, it is possible to apply for regular taxation. In this case, the withholding tax is credited against income tax. Other interest paid to foreign individuals is subject to 27,5% withholding tax.

Interest paid to non-resident companies and individuals resident in another state with automatic exchange of information are exempted from withholding tax if the recipient provides a residence certificate issued by the relevant tax office of the country of residence.

Branch profit tax

The profits are subject to 25% corporation tax.

Personal income tax (Einkommensteuer)

Taxable income can be derived from the following seven sources:

  1. Agriculture and forestry
  2. Independent (professional) services (including scientific, artistic, literary, educational, or other professional services)
  3. Trade or business
  4. Employment
  5. Invested capital (dividends and interest)
  6. Rents and royalties
  7. Annuities and other income of a recurring nature, speculative gains, and income from special services.

Total amount of income  (loss compensation) subtract    – Special expenses

  • extraordinary expenses
  • relief, allowances and

deductions (depending on status and personal conditions)

= Total taxable income

The income tax is computed as follows:

Income in € Tax rate in %
up to 11,000.00 0
more than 11,000.00  to 18,000.00 25
more than 18,000.00  to 31,000.00 35
more than 31,000.00  to 60,000.00 42
more than 60,000.00  to 90,000.00 48
more than 90,000.00 50
more than 1,000,000.00  (only for fiscal years between 2016 and 2020) 55

The tax payable is reduced by certain tax credits depending on status and personal conditions. For non-residents, special regulations and rates apply.

Capital gain tax

Income tax

Capital gains according to § 24 Income Tax Act are subject to personal income tax if they exceed € 7,300 (tax-free allowance). Capital gains are:

  • disposal of the entire business or a segment thereof,
  • the share of a partner viewed as an entrepreneur in the business or
  • discontinuation of a business or a segment thereof.

Capital gains shall be taxed at half of the average tax rate applicable to the entire taxable income (but without a tax-free allowance of € 7,300) if:

  • seven years have passed since the establishment of the business
  • upon the taxpayer’s
    • death or
    • disablement or
    • retirement after age 60.

Capital gains are also income from the disposal of participations. This gain shall be taxed with 25% withholding tax.

Corporation tax

Capital gains (participation gains) or losses from international holding compaines are exempt from corporation tax unless the entity opts in.

Income tax on gains from sales of financial assets and private real estate

These taxes were introduced in 2012. The tax rates are 27,5% for gains on sales of financial assets and 30% for gains on sales of private real estate. It is a final taxation unless you apply for a regular taxation.

Land tax (Grundsteuer)

The taxable object is real estate owned in Austria (agricultural land and woodland, real property, business property). The assessment basis is the assessed value, but the levy rates for taxation vary according to district (approx. 0.8 %).

Value added tax (Umsatzsteuer); Nova

The following transactions are subject  to VAT:

  • Taxable supplies of goods and services, which an entrepreneur has delivered within the scope of activity of his/her enterprise in Austria for a consideration.
  • The entrepreneur’s own consumption in Austria, particularly the consumption of goods used personally by the taxpayer for purposes other than for his/her enterprise, and expenses which are not income tax deductible.
  • The importation of goods into the customs territory (import VAT).

The VAT is payable within one month and

15 days of the end of each calendar month (or calendar quarter if the turnover for the preceding year was not in excess of  € 30,000). The current standard rate of VAT is 20%; although reduced rates of 10% and 13% are applied to certain goods and services and some goods and services carry no VAT (such as exports outside  the EU).

Deadlines for quarterly VAT returns and prepayments:

1st quarter: 15th May

2nd quarter: 15th August

3rd quarter: 15th November

4th quarter: 15th February

Deliveries as well as the rental of cars which have not yet been registered in Austria, and the first-time registration of cars in Austria, are subject to NOVA (Normverbrauchsabgabe). Deliveries to other car dealers, cars purchased by leasing companies, taxis, rental cars and cars used by driving schools are exempt.

Used cars (unless imported) are not subject to NOVA. The NOVA is calculated based on the standard fuel consumption according to the MVEG-Zyklus (regulated by an EU-directive) and reaches approx. 6 – 16% of the acquisition costs. The NOVA is part of the VAT-assessment base.

Tax treaties / avoidance of double taxation

There exist around 90 tax agreements, see appendix 1 for list of countries.

Austria’s double tax treaties follow the

OECD Model Tax Convention, i.e. in most DTTs concluded between Austria and other countries, the exemption with progression method is used, but there are also some DTTs with a tax credit method.

Under the exemption with progression method, income taxable by the source country in accordance with the relevant DTT will be exempted from taxation in the state of residence. This usually entails a progression clause, i.e. that such income is used to calculate the tax rate applicable to the taxation of income in the state of residence. However, in most DTTs this exemption scheme is not applied to income derived from dividend and interest payments.

However, if there is no DTT between Austria and the relevant country, double taxation can be avoided by applying the exemption with progression method according to national law if the following conditions are met:

  • the income tax of the taxable income in the source country is more than 15%
  • relevant taxable income for which the exemption with progression method can be applied:
    • income from immovable property situated abroad
    • business income and income from independent personal services derived from a foreign permanent establishment
    • income derived from a construction or assembly carried out abroad
    • income from a lecture or teaching activity abroad
    • income from a participation in an entertainment performance abroad
    • income from employment carried out abroad

If the above-mentioned conditions are not met, double taxation can only be avoided by applying the tax credit method. If this method is applied, the deductible tax may not exceed the amount by which the foreign income is taxed in Austria. Therefore, the credit method can still lead to real double taxation if the foreign income is taxed at a higher rate in the source country than in Austria.


Latest version updated 13th October 2017

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