Income tax Austria 2023/2024
Income tax in Austria for foreigners
What is the Austrian income tax system like? © alfexe / iStock
All those who have their regular residence in Austria must pay tax in the country. Scientists and researchers enjoy generous benefits as part of the country’s efforts to attract such experts from abroad to live and work in Austria. This article provides an overview of the Austrian income tax system to prepare newcomers before arrival.
Published: 2023-11-06
By: Gerard Thompson, DACHA Media
Austria’s income tax rate
In Austria, income tax is known as the Einkommensteuer. It is a pay-as-you-earn format, with taxes paid throughout the year. People who have established residency in Austria face unlimited tax liability. Those who work in Austria, but whose official residence is elsewhere, are subject to limited tax liability, meaning they must only pay tax on income earned in Austria and not on income earned elsewhere.
There are three employment models available to researchers:
- stipend/grant/scholarship,
- independent personal service and
- full employment.
Each model is associated with different levels of taxation.
Stipends, grants, scholarships
Stipends for educational purposes are tax-free under certain conditions. One example is a grant received for the writing of a master’s or PhD thesis. It cannot be a substitution of income, and it cannot be any higher than the yearly amount of the Austrian Study Grant (Studienbeihilfe), which is €8,580 in 2023. Should the stipend be higher, it would then be subject to tax.
Independent Personal Service
Independent Personal Service is essentially self-employment, where the individuals come to Austria to complete a specific project as outlined in a contract(Werkvertrag/Arbeitsvertrag). This is the most common form of employment for researchers and scientists coming to Austria from abroad. It is the individual’s responsibility to file a tax return with the tax office (Finanzamt). If regular residence is not established, income earned is subject to tax once the contract is completed. The institution withholds 20 percent of the agreed amount, known as a withholding tax, and forwards it to the tax office.
Full employment
Salaries and wages are subjected to tax liability if a person concludes an employment contract with an employer or host institution. Employers are obliged to deduct income tax and social security contributions from the employee’s salary/wages.
It is also possible to perform work for a host institution on a freelance basis (Freier Dienstvertrag). Decisive for such arrangements is that service providers are able to decide when and where they work. Despite working as freelancers, however, employers are required to pay social insurance contributions for the freelance workers they engage. Freelance workers are, however, responsible for filing their own income tax declarations, since freelance work is seen as a form of self-employment.
Tax brackets for Austria in 2023/2024
| Bracket | Annual income | Rate 2023 (2024) |
|---|---|---|
|
1 |
Up to €11,693 |
0% |
|
2 |
€11,693 – €19,134 |
20% |
|
3 |
€19,134 – €32,075 |
30% |
|
4 |
€32,075 – €62,080 |
41% (40%) |
|
5 |
€62,080 – €93,120 |
48% |
|
6 |
€93,120 – €1,000,000 |
50% |
|
7 |
Over €1,000,000 |
55% |
Special expenses and extrordinary burdens
The Austrian tax system allows for exceptional situations, such as special expenses and extraordinary burdens, and it is therefore possible to receive a tax rebate. Such burdens include for example doctor’s fees and hospital costs, as well as the costs of childbirth and dental treatment. To claim such extraordinary burdens, individuals can file an application known as an ArbeitnehmerInnenveranlagung with the tax office.
Social Security Tax
Austrian social security tax is compulsory. It is comprised of health insurance, pension insurance, unemployment insurance and accident insurance. These figures are determined as a percentage of total monthly earnings, and payment of the tax is shared between employees and employers.
The maximum contribution basis for regular payments is €5,850 per month. Special payments that do not occur monthly, such as bonuses, are also liable for social security tax. The taxation basis for these is capped at €11,700 a year.
Social Security Tax as of June 2023
| Type of insurance | Paid by employer | Paid by employee | Total |
|---|---|---|---|
|
Pension Insurance |
12.55% |
10.25% |
22.80% |
|
Accident Insurance |
1.10% |
0.00% |
1.10% |
|
Health Insurance |
3.78% |
3.87% |
7.65% |
|
Unemployment Insurance |
3.00% |
3.00% |
6.00% |
|
Others |
0.60% |
1.00% |
1.60% |
|
Total |
21.03% |
18.12% |
39.15% |
|
Severance Fund |
1.53% |
0.00% |
1.53% |
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Those coming from outside Austria and whose main place of residence is not in the country may be eligible for unlimited tax liability. If total income from sources outside of Austria does not exceed €11,000, or if 90 percent of earnings originate from Austria, one can opt for an Employee Tax Assessment Declaration (Erklärung zur ArbeitnehmerInnenveranlagung).
The Austrian Tax Ministry (Bundesministerium für Finanzen) offers an income tax calculator, which estimates the percentage of income that will have to be paid.
As is the case with most EU countries, all individuals resident in Austria who are liable to be taxed receive a tax identification number, commonly known as TINs. These are nine-digit numbers that are required to process income tax.
TINs are not official documents of identification. A single, lifelong TIN has been assigned to each person required to pay taxes in Austria since 2021. TINs can be obtained via the local tax office.
Double taxation agreements in Austria
Austria has bilateral arrangements with countries all over the world to prevent double taxation. These treaties are commonly known as Double Taxation Conventions (DTC), and they ensure that taxpayers do not have to pay tax on the same income to two different countries.
Austria has concluded DTCs with well over 80 countries, including Germany, Switzerland, the United States and the United Kingdom.
Tax benefits for researchers
The Austrian government has established generous tax allowances for researchers under a regulation called the Zuzugsbegünstigungsverordnung. This tax deduction (Zuzugsfreibetrag), which is limited to five years on income generated through scientific work, was specifically designed to attract scientists and researchers from abroad.
The benefits aim to offset moving expenses, help compensate for price differences between Austria and the newcomer’s home country and to address other expenses encountered by expatriates, such as running two households, learning German or sending children to private schools. Applications for this benefit must be submitted in writing to the Austrian Tax Authoritywithin six months of arrival in Austria.
Since most scientists and researchers will fall into the independent personal service taxation category, they will be able to take advantage of generous benefits for tax-deductible expenses. Such incurred expenses must be directly related to their work, and include studying fees, work clothes, relevant literature, language courses (if coming from abroad) and the costs of basic and further training. Commuters are also able to deduct transportation costs.
