Lyla Lindsey
Austria has a progressive rate of income tax, ranging from 0-50%. The level of income tax depends on the taxable income received in a calendar year. Income tax is deducted from employees' wages or salaries and is paid throughout the year. Both employers and employees are subject to mandatory contributions towards social security in Austria, and various expenses can be offset against income tax. For example, social insurance contributions, which are paid by both employees and employers, are tax-deductible. Additionally, employees and freelance workers pay a Chamber of Labour contribution and a housing construction promotion levy. Austria also levies value-added tax (VAT) on the purchase of products or services, corporation tax, and municipal tax. The country offers tax benefits to scientists and researchers from outside Austria to attract them to live and work in the country.
| Characteristics | Values |
|---|---|
| Tax Identification Number (TIN) | Nine-digit number assigned to individuals required to pay taxes in Austria |
| Income Tax | Progressive rate of 0-50% depending on taxable income received in a calendar year |
| Social Security Tax | Mandatory contribution by both employers and employees |
| Chamber of Labour Contribution | 0.5% of gross income paid by employees and freelance workers |
| Housing Construction Promotion Levy | 1.00% paid by employees (freelance workers are exempt) |
| Trade Union Contributions | Deducted directly from pay |
| Religious Contributions | Deducted directly from pay |
| Value-Added Tax (VAT) | 10-20% paid as an indirect tax on the purchase of a product or service by the final consumer |
| Corporation Tax | 27.5% |
| Municipal Tax | Paid by businesses to the municipality in which they are located |
| Tax Benefits | Generous benefits offered to scientists and researchers from outside the country |
| Stipends for Educational Purposes | Tax-free under certain conditions, e.g. for a master's or PhD thesis |
| Salary Calculators | iCalculator offers free tax calculators for Austria since 2019 |
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Income tax calculation
Austria's income tax system is progressive, with rates for the 2025 tax year ranging from 0% to 55% based on income level. The first €620 to €1,281 of income is tax-free, and various credits are available to help reduce the overall tax burden. The tax rates for income above the tax-free allowance are as follows: 20% on income up to €20,818, 30% on income up to €31,000, and so on, reaching 55% for income exceeding €1,000,000. These rates apply to taxable income after deductions.
There are several allowances and deductions that can reduce the amount of income tax owed. For example, various expenses can be offset against income tax, and lump sums, allowances, and special expenses are tax-deductible. Social insurance contributions, which are mandatory for both employers and employees, are also deductible. These include sickness insurance (7.65% for manual workers, white-collar workers, and freelancers), accident insurance (1.1% for manual workers, white-collar workers, and freelancers, and paid only by employers), unemployment insurance (5.9% for manual workers, white-collar workers, and freelancers), pension insurance (22.8% for manual workers, white-collar workers, and freelancers, and 18.5% for new self-employed), and the Chamber of Labour contribution (0.5% of gross income for employees and freelance workers). Additionally, employees can deduct a lump sum for income-related expenses amounting to 20% of their gross salary, up to €10,000 per year, without providing proof of actual expenses.
Commuter allowances, free travel for students, funding for further training, and family and childcare allowances are also available. Capital gains from the disposal of immovable assets (investments) are taxed at a flat rate of 27.5%, while capital gains from real estate are taxed at 30%. Realized capital losses on assets may be offset against capital gains earned within the same calendar year, with certain exceptions.
To calculate your income tax in Austria, you can use an online tax calculator. These calculators will estimate your take-home pay and how much tax you can expect to pay based on your gross annual salary or income.
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Tax on employment
Income tax in Austria is known as Einkommensteuer, and it is a pay-as-you-earn system. The level of income tax depends on the taxable income received in a calendar year. The calendar year is the same as the business year and comprises a period of twelve months. Income tax on employment is also called earnings tax (Lohnsteuer). The tax withheld is a prepayment on the annual tax due, which is only finally settled with the annual tax assessment (Arbeitnehmerveranlagung) corresponding to the taxpayer's declaration.
The average annual gross earnings of employed workers in full employment in Austria in 2021 amounted to €31,407 (arithmetical mean). The average income is lowest in Vienna and highest in Lower Austria. In Austria, there is a progressive rate of income tax (0-50%). Along with social insurance contributions, income tax is deducted from employees' wages or salaries at the source and is transferred to the competent authority by the employer.
Social insurance contributions have to be paid by both employees and employers (except for accident insurance, which is only paid by employers). 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.
Employees and freelance workers also pay 0.5% of their gross income as a Chamber of Labour contribution and 1.0% as the housing construction promotion levy (freelance workers are exempt from the housing levy). Employees also pay trade union contributions and contributions to religious communities (e.g. church tax), which are deducted directly from their pay.
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Tax allowances
In Austria, taxes are levied by the state, and the tax revenue was 42.7% of GDP in 2016. The most important sources of revenue for the government are income tax, corporate tax, social security contributions, value-added tax, and tax on goods and services.
Austria has a progressive rate of income tax, ranging from 0-50%. The level of income tax depends on the taxable income received in a calendar year. The calendar year is the same as the business year and comprises a period of twelve months. Income tax is deducted from employees' wages or salaries at source and is transferred to the competent authority by the employer. This is known as earnings tax (Lohnsteuer). The tax withheld is a prepayment on the annual tax due, which is only finally settled with the annual tax assessment (Arbeitnehmerveranlagung), corresponding to the taxpayer's declaration. Various expenses can be offset against income tax, and lump sums, allowances, and special expenses are tax-deductible. For example, social insurance contributions are paid by both employees and employers, except for accident insurance, which is only paid by employers.
Individuals who are not residents of Austria are only charged tax on their income sourced from Austria. They can deduct allowable expenses related to their economic activity in the country. The rates for them are the same as for normal residents, but €9,000 must be added to their tax base for computation. Withholding tax rates of 20% apply to the following categories:
- Income derived from commercial or technical advice or from practising a sport or art.
- Income obtained for the right to use patents, copyrights, know-how, and licensing fees.
Capital gains tax (Kapitalertragsteuer) is levied at a rate of 25%. Following the 2016 tax reform, the tax rate on dividends increased to 27.5%, while the tax rate on savings remained at 25%.
Self-employed persons can claim a tax allowance of €3,900 per year. Additionally, there is a minimum tax (Mindestkörperschaftssteuer) for limited liability companies (LLCs) and joint-stock companies, set at 5% of their registered capital. For banks and insurance companies, the amount is €5,452, while new firms pay a reduced tax of €1,092 in their first year.
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Tax deductions
In Austria, there is a progressive rate of income tax ranging from 0-50%. The level of income tax depends on the taxable income received in a calendar year. Income tax is deducted from employees' wages or salaries and is paid to the competent authority by the employer.
Austria offers several tax deductions and incentives to its residents. Here are some key areas where tax deductions are applicable:
- Standard Allowance: All employees are entitled to a standard allowance of EUR 132. Expenses exceeding this amount may be deductible if supported by receipts.
- Social Security and Insurance Contributions: Employee portions of mandatory contributions to Austrian and/or foreign social security are tax-deductible. This includes pension insurance contributions.
- Commuting Expenses: Commuting expenses between an individual's residence and their place of work are deductible, with the amount depending on the distance and the availability of public transportation.
- Membership Fees: Membership fees to certain organizations, such as the Chamber of Labour or workers' councils, are deductible.
- Church Tax: Church tax is deductible up to EUR 600 annually.
- Charitable Contributions: Donations to certain charitable institutions are deductible up to 10% of the current year's taxable income.
- Tax Adviser Fees: Austrian tax adviser fees are fully deductible.
- Extraordinary Expenses: Individuals incurring extraordinary expenses, such as funeral costs or medical expenses not covered by health insurance, may be eligible for tax relief.
- Family Bonus Plus: A tax credit of EUR 2,000 per child can be claimed for children up to 18 years of age who live in Austria and are entitled to family allowance. This amount can be granted up to EUR 700 per annum for children between 19 and 24 (or in some cases, up to 25).
- Business and Rental Losses: Business or rental losses can be offset with other categories of income.
- Expatriate Expenses: Expatriates can claim a lump sum for income-related expenses, amounting to 20% of their gross salary after the deduction of tax-free and preferentially taxed special payments. This is limited to EUR 10,000 per year, and no proof of actual expenses is required.
- Relocation Expenses: Payments for relocation expenses by the employer are exempt from tax if they are granted to an employee upon assignment to another location.
- Commuter Allowance: Employees may be eligible for a commuter allowance, which provides a partial or comprehensive allowance for commuting distances of more than 20 km or more than 2 km if using public transportation.
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Tax liability
The level of income tax in Austria depends on the taxable income received in a calendar year. The tax rates are progressive, ranging from 0% to 50%. Along with social insurance contributions, income tax is typically deducted from employees' wages or salaries by their employer and remitted to the competent tax authority. This is known as pay-as-you-earn, with taxes paid throughout the year. The tax withheld is a prepayment towards the annual tax liability, which is settled through an annual tax assessment corresponding to the taxpayer's declaration.
Individuals with income exceeding the non-taxable threshold are generally required to file an Austrian tax return. The deadline for filing is typically the end of April or the end of June of the following year for electronic submissions. Austria also offers tax benefits and exemptions to certain groups, such as researchers and scientists, to attract talent from abroad. Stipends for educational purposes, such as grants for master's or PhD theses, are tax-exempt up to the amount of the Austrian Study Grant (8,580 EUR in 2023).
In addition to income tax, employees and freelance workers in Austria contribute a portion of their gross income to the Chamber of Labour (0.5%) and the housing construction promotion levy (1.00%, excluding freelance workers). Employees may also have trade union contributions and religious community contributions (e.g. church tax) deducted directly from their pay. Value-added tax (VAT) is levied on the purchase of goods and services by consumers, with rates ranging from 10% to 20%.
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Frequently asked questions
Income tax in Austria is progressive, ranging from 0-50%. The level of income tax depends on the taxable income received in a calendar year.
All those who have their regular residence in Austria must pay tax in the country. Those who work in Austria but are officially residents elsewhere only need to pay tax on income earned in Austria.
If your total income from sources outside of Austria does not exceed €11,000, or if 90% of your earnings originate from Austria, you can opt for an Employee Tax Assessment Declaration.
The minimum base salary for tech professionals such as software developers and QA testers is €45,000 per year. Leading roles such as software architects can expect a gross annual income of €85,000.
You can use online tax calculators such as iCalculator, which is based on the latest tax rates published by the Tax Administration in Austria. Simply enter your salary and the calculator will automatically produce an estimate of your salary after tax.
