Taxation in Austria

In Austria, taxes are levied by the state and the tax revenue in Austria was 42.7% of GDP in 2016 according to the World Bank^[1] The most important revenue source for the government is the income tax, corporate tax, social security contributions, value added tax and tax on goods and services.^[2] Another important taxes are municipal tax, real-estate tax, vehicle insurance tax, property tax, tobacco tax. The Financial Secrecy Index ranks Austria as the 35th safest tax haven in the world.^[3]

Income tax (Einkommensteuer)

Persons, who have residence or habitual residence in Austria are subject to unlimited taxation. Unlimited because all of the income (inside or outside Austria) has to be taxed. Besides that, even some income can be taxed even if the person does not have residence or habitual residence in Austria.^[4]

The income tax in Austria was set progressively in 1988. There were many amendments since then. In the last one from 2016, the tax rates were reduced (see the table). There are seven fare zones. People who earn annually less than 11 000 € do not pay any tax. The highest marginal tax rate is 55% for people, whose yearly income exceeds 1 000 000 €. The tax is paid monthly.^[5]

Taxation
An aspect of fiscal policy
Policies Government revenue Tax revenue Non-tax revenue Tax law Tax bracket Tax threshold Exemption Credit Deduction Tax shift Tax cut Tax holiday Tax advantage Tax incentive Tax reform Tax harmonization Tax competition Double taxation Representation Unions Medical savings account Tax, tariff and trade
Economics General Theory Price effect Excess burden Tax incidence Laffer curve Optimal tax Theory Optimal capital income taxation Distribution of Tax Tax rate Flat Progressive Regressive Proportional
Collection Revenue service Revenue stamp Tax assessment Taxable income Tax lien Tax refund Tax shield Tax residence Tax preparation Tax investigation Tax shelter Private tax collection Tax farming
Noncompliance General Tax avoidance Tax evasion Tax resistance Tax shelter Smuggling Black market Unreported employment Corporate Tax inversion Transfer mispricing Base erosion and profit shifting (BEPS) Double Irish Dutch Sandwich Single Malt Irish Green Jersey Locations Tax havens Corporate tax havens Offshore financial centres (OFCs) Offshore magic circle Conduit and Sink OFCs Financial centres Financial Secrecy Index Examples Apple €13 billion EU fine Luxembourg Leaks Leprechaun economics Paradise Papers Panama Papers Ireland as a tax haven United States as a tax haven Panama as a tax haven
Types Direct Indirect Per unit Ad valorem In rem Capital gains Carbon Consumption Dividend Ecotax Excise Fuel Georgist Gift Gross receipts Income Inheritance (estate) Land value Payroll Pigovian Property Sales Sin Single Stamp Steering Turnover Value-added (VAT) Corporate profit Excess profits Windfall profits Negative (income) Wealth
International Financial transaction tax Currency transaction tax European Union Common Consolidated Corporate Tax Base (CCCTB) Tobin tax Spahn tax Tax equalization Tax treaty Permanent establishment Transfer pricing European Union FTT Foreign revenue rule
Trade Custom Duty Tariff Import Export Tariff war Free trade Free trade zone Trade agreement ATA Carnet
Research Academic Mihir A. Desai Dhammika Dharmapala James R. Hines Jr. Joel Slemrod Gabriel Zucman Advocacy Groups Tax Justice Network (TJN) Institute on Taxation and Economic Policy (ITEP) Oxfam (UK) Tax Foundation (US) Tax Policy Center (US)
Religious Church tax Eight per thousand Teind Tithe Fiscus Judaicus Leibzoll Temple tax Tolerance tax Jizya Kharaj Khums Nisab Zakat
By country All Countries List of countries by tax rates Tax revenues as % of GDP Tax rates in Europe Individual Countries Albania Algeria Argentina Australia Azerbaijan Bangladesh Bhutan Brazil Bulgaria BVI Canada China Colombia Croatia Denmark Finland France Germany Greece Hong Kong Iceland India Indonesia Iran Ireland Israel Italy Japan Kazakhstan Lithuania Malta Namibia Netherlands New Zealand Norway Pakistan Palestine Peru Philippines Poland Russia Singapore South Africa Sweden Switzerland Taiwan Tanzania United Kingdom United States Uruguay

Corporate tax (Körperschaftssteuer)

Corporations are subject to unlimited taxation in Austria of their entire income if they have their legal seat or place of effective management in Austria^[6]

Corporations are qualified as independent tax subjects, a distinction must always be made between tax ramifications at the level of the company and those at the shareholder level. At the level of the company, profits are taxed at the standard corporate income tax rate of 25%. At the shareholder level, the profit distributions are usually subject to withholding tax of 25% for corporations and 27.5% for other recipients.^[7]

Social security contributions

Austrian social insurance is compulsory and comprises health insurance, pension insurance, unemployment insurance, and accident insurance.

The contributions are determined as percentage of the total monthly earnings (but only up to specified maximum amounts) and are paid partly by the employee and partly by the employer.

The maximum contribution basis for regular payments amount to EUR 4,980 per month. The maximum contribution base for special payments (those that do not occur on a monthly basis, such as a bonus) amounts to EUR 9,960 per year.

From 1 January 2017, the percentages are as follows.^[8]

Value added tax (VAT)

An Austrian customer must pay the net sales plus 20% value added tax, which is listed separately on the supplier’s invoice. The customer, in effect, pays the supplier’s tax burden. The amount is thereafter deductible from the customer’s own value added tax burden.

The ultimate retail consumer absorbs the final burden. Among others, exports and certain services for foreign customers are exempt from value added tax. Import transactions from non-EC countries are subject to an import turnover tax at the same rate as sales tax.

Value added tax is reduced to 10% on certain products, this applies to basic foods and printed material, for example. Additionally, there is a VAT of 13% for hostel rooms.^[9]

Other Taxes

Austria has a number of other types of taxation, these include the following:

• Real estate transfer tax (Grunderwerbsteuer)

• Vehicle tax (Kfz-Steuer) - This is levied on all Austrian vehicles and on all foreign vehicles registered in Austria. The basis of taxation is cylinder capacity for motorcycles and horsepower for all other vehicles.

• Municipal tax: Businesses pay municipal tax to the municipality in which the business is located

• Land transfer tax

References