Taxation in Austria

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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. There exists no property tax. The gift tax and inheritance tax were cancelled in 2008. Furthermore, self-employed persons can use a tax allowance of €3,900 per year. The tax period is set for a calendar year. However, there is a possibility of having an exception but a permission of the tax authority must be received. The Financial Secrecy Index ranks Austria as the 35th safest tax haven in the world. [3]

Contents

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]

Marginal tax rate from 2016Marginal tax rate from 2009 to 2015Salary range
0%0%0 - €11,000
25%36,5%€11,001 - €18,000
35%36,5%€18,001 - €25,000
35%43,2143%€25,001 - €31,000
42%43,2143%€31,001 - €60,000
48%50%€60,001 - €90,000
50%50%€90,001 - €1,000,000
55%50%Over €1,000,000

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]

There also exists a minimum tax (Mindestkörperschaftssteuer) for both limited liability companies (LLC) and joint-stock companies that is equal to 5% of their registered capital. i.e. €1,750 and €3,500 annually. Banks and insurance companies are subject to a different amount - €5,452. For new firms, there is a decreased tax of €1,092 in the first year of their existence.

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]

Type of insurancePaid by employerPaid by employeeTotal
Pension insurance12.55%10.25%22.80%
Accident insurance1.30%0.00%1.30%
Health insurance3.78%3.87%7.65%
Unemployment insurance*3.00%3.00%*6.00%
Others.85%1.00%1.85%
Total21.48%18.12%39.60%
Severance fund1.53%0.00%1.53%

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]

Income tax on non-residents

Individuals that do not have their place of abode nor their normal residence are only charged a tax for their Austria-sourced income. Companies with neither their management nor their site in Austria are only liable for their income coming from Austria. However, they can deduct their allowable expenses economically related to Austria. Rates for them are the same as for normal residents, although €9,000 must be added to their tax base for computation. [10]

Withholding tax rates On the following categories, tax can be withheld at a 20% rate.

Other Taxes

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

Tax reform 2016

In 2016, there was a tax reform in Austria changing e.g. income tax rates (see table in the article). Interesting fact is that the tax rate for the highest level of income is 55% which is the 4th highest in EU after Sweden, Portugal and Denmark. Furthermore, companies with an annual profit higher than €15,000 have to install and use electronic records of sales and moreover, they are supposed to provide a receipt for every sale. Almost 150 thousand Austrian enterprises are involved. Value added tax rate (Mehrwertsteuer) increased from 10% to 13% which might affect, for instance, culture, hoteliers etc. In contrast, VAT rate for drugs, rents and food remained unchanged. Capital gains tax rate experienced an increase from 25% to 27,5%. This reform was considered to be a starting point for a longterm large reforming process in Austria. Further reforms in education and labour market are expected to occur in near future. [12]

Related Research Articles

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<span class="mw-page-title-main">Taxation in the United Kingdom</span>

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<span class="mw-page-title-main">Taxation in the Republic of Ireland</span> Irish tax code

Taxation in Ireland in 2017 came from Personal Income taxes, and Consumption taxes, being VAT and Excise and Customs duties. Corporation taxes represents most of the balance, but Ireland's Corporate Tax System (CT) is a central part of Ireland's economic model. Ireland summarises its taxation policy using the OECD's Hierarchy of Taxes pyramid, which emphasises high corporate tax rates as the most harmful types of taxes where economic growth is the objective. The balance of Ireland's taxes are Property taxes and Capital taxes.

In France, taxation is determined by the yearly budget vote by the French Parliament, which determines which kinds of taxes can be levied and which rates can be applied.

This is a list of the maximum potential tax rates around Europe for certain income brackets. It is focused on three types of taxes: corporate, individual, and value added taxes (VAT). It is not intended to represent the true tax burden to either the corporation or the individual in the listed country.

Taxes in Switzerland are levied by the Swiss Confederation, the cantons and the municipalities.

Due to the absence of the tax code in Argentina, the tax regulation takes place in accordance with separate laws, which, in turn, are supplemented by provisions of normative acts adopted by the executive authorities. The powers of the executive authority include levying a tax on profits, property and added value throughout the national territory. In Argentina, the tax policy is implemented by the Federal Administration of Public Revenue, which is subordinate to the Ministry of Economy. The Federal Administration of Public Revenues (AFIP) is an independent service, which includes: the General Tax Administration, the General Customs Office and the General Directorate for Social Security. AFIP establishes the relevant legal norms for the calculation, payment and administration of taxes:

Taxation in Denmark consists of a comprehensive system of direct and indirect taxes. Ever since the income tax was introduced in Denmark via a fundamental tax reform in 1903, it has been a fundamental pillar in the Danish tax system. Today various personal and corporate income taxes yield around two thirds of the total Danish tax revenues, indirect taxes being responsible for the last third. The state personal income tax is a progressive tax while the municipal income tax is a proportional tax above a certain income level.

Taxation in Norway is levied by the central government, the county municipality and the municipality. In 2012 the total tax revenue was 42.2% of the gross domestic product (GDP). Many direct and indirect taxes exist. The most important taxes – in terms of revenue – are VAT, income tax in the petroleum sector, employers' social security contributions and tax on "ordinary income" for persons. Most direct taxes are collected by the Norwegian Tax Administration and most indirect taxes are collected by the Norwegian Customs and Excise Authorities.

Taxes in Germany are levied by the federal government, the states (Länder) as well as the municipalities (Städte/Gemeinden). Many direct and indirect taxes exist in Germany; income tax and VAT are the most significant.

<span class="mw-page-title-main">Taxation in South Africa</span>

Taxation may involve payments to a minimum of two different levels of government: central government through SARS or to local government. Prior to 2001 the South African tax system was "source-based", where in income is taxed in the country where it originates. Since January 2001, the tax system was changed to "residence-based" wherein taxpayers residing in South Africa are taxed on their income irrespective of its source. Non residents are only subject to domestic taxes.

Taxation in Estonia consists of state and local taxes. A relatively high proportion of government revenue comes from consumption taxes whilst revenue from capital taxes is one of the lowest in the European Union.

In Slovakia, taxes are levied by the state and local governments. Tax revenue stood at 18.732% of the country's gross domestic product in 2019. The tax-to-GDP ratio in the Slovakia increased by 0.4 percentage points from 34.3% in 2018 to 34.7% in 2019. The most important revenue sources for the state government are income tax, social security, value-added tax and corporate tax.

Czech Republic's current tax system was put into administration on 1 January 1993. Since then, an updated VAT act was introduced on 1 May 2004 when Czech Republic joined the EU and the act had to correspond to EU law. In 2008, the administration also introduced Energy Taxation. Changes to tax laws are quite frequent and common in the Czech Republic due to a dynamic economy. The highest levels of revenue are generated from income tax, social security contributions, value-added tax and corporate tax. In 2015, total revenue stood at CZK 670.216 billion which was 36.3% of GDP. The tax quota of the Czech Republic is lower than the EU average. Compared to the averages of the OECD countries, revenues generated from taxes on social security contributions, corporate income and gains and value added taxes account for higher proportions of total taxation revenue. Personal income tax lies on the other end of the spectrum where the revenue is proportionally much lower than the OECD average. Taxes on property also account for lower levels of revenue.

Taxes in Poland are levied by both the central and local governments. Tax revenue in Poland is 33.9% of the country's GDP in 2017. The most important revenue sources include the income tax, Social Security, corporate tax and the value added tax, which are all applied on the national level.

<span class="mw-page-title-main">Taxation in Hungary</span>

Taxation in Hungary is levied by both national and local governments. Tax revenue in Hungary stood at 38.4% of GDP in 2017. The most important revenue sources include the income tax, Social security, corporate tax and the value added tax, which are all applied at the national level. Among the total tax income the ratio of local taxes is solely 5% while the EU average is 30%.

Taxation in Belgium consists of taxes that are collected on both state and local level. The most important taxes are collected on federal level, these taxes include an income tax, social security, corporate taxes and value added tax. At the local level, property taxes as well as communal taxes are collected. Tax revenue stood at 48% of GDP in 2012.

Taxes in Cyprus are levied by both the central and local governments. Tax revenue stood at 39.2% of GDP in 2012. The most important revenue sources are the income tax, social security, value-added tax and corporate tax, and are all collected by the central government.

Taxation in Malta is levied by the State and it is administered by the Commissioner for Revenue. The total tax revenues in 2014 amounted to €2.747 Billion, which represents 34.6% of the Maltese GDP. The main sources of tax revenue were value-added tax, income tax, and social security contributions.

Taxation is an important part in the Turkish economy. Turkey has a 25.5% tax to GDP ratio. Most of the taxes are levied by central government. However some specific taxes are levied by municipalities, with the amount determined by centrally issued legislation. Municipalities have no authority to make their own tax laws.

References

  1. ↑ "Revenue statictics - 2017" (PDF).
  2. ↑ "Revenue statistics - Austria" (PDF).
  3. ↑ "View 2018 Results". www.financialsecrecyindex.com. Retrieved 2018-05-02.
  4. ↑ "BMF - Einkommensteuer". www.bmf.gv.at (in German). Retrieved 2018-05-02.
  5. ↑ "Austria - Income Tax". KPMG. 2017-05-05. Retrieved 2018-05-02.
  6. ↑ "Austria - Taxes on corporate income". taxsummaries.pwc.com. Retrieved 2018-05-02.
  7. ↑ "Austria - Taxes on general income".
  8. ↑ "Other taxes and levies". KPMG. 2017-05-05. Retrieved 2018-05-02.
  9. ↑ "The austrian tax system - Steuerberatung Casapicola & Gross, 1010 Wien". Steuerberatung Casapicola & Gross, 1010 Wien. Retrieved 6 June 2018.
  10. ↑ GmbH, Casapicola & Gross Wirtschaftsprüfungs-und Steuerberatungs. "Tax Consultant Vienna: Austrian Tax System". www.taxes.at. Retrieved 2019-04-23.
  11. ↑ "Daňový systém v Rakousku 2018: míra zdanění příjmů, DPH | Finance.cz". www.finance.cz. Retrieved 2019-04-23.
  12. ↑ "Rakousko: Základní charakteristika teritoria, ekonomický přehled | BusinessInfo.cz". www.businessinfo.cz. Retrieved 2019-04-23.
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