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Austria's income tax system, known as Einkommensteuer, 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 reside elsewhere are subject to limited tax liability, meaning they pay tax only on income earned in Austria. Austria's income tax rates vary, with the highest marginal tax rate being 55% for individuals earning over €1,000,000 annually. The first €620 of income is tax-exempt, and tax is withheld at a graduated rate between 6% and 55% for the remaining amount.
| Characteristics | Values |
|---|---|
| Income tax rate for people earning over €1,000,000 annually | 55% |
| Income tax rate for people earning under €11,000 annually | 0% |
| Capital gains tax rate | 25% |
| Dividend income tax rate | 27.5% |
| Corporation tax rate | 24% |
| Minimum tax for LLCs and joint-stock companies | 5% of registered capital |
| Value-added tax rate | 10-20% |
| VAT for hostel rooms | 13% |
| VAT for basic foods and printed material | 10% |
| Sickness insurance for manual workers, white-collar workers, freelance workers, and new self-employed | 7.65% |
| Accident insurance for manual workers, white-collar workers, and freelance workers | 1.1% |
| Unemployment insurance for manual workers, white-collar workers, and freelance workers | 5.9% |
| Pension insurance for manual workers, white-collar workers, and freelance workers | 22.8% |
| Pension insurance for new self-employed | 18.5% |
| Chamber of Labour contribution | 0.5% of gross income |
| Housing construction promotion levy | 1% of gross income |
| Stipend tax exemption | Up to €8,580 annually |
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What You'll Learn
Income tax rates
Austria's income tax system is known as Einkommensteuer, and taxes are levied by the state. Those who have established residency in Austria face unlimited tax liability. Those who work in Austria but are officially residents elsewhere are subject to limited tax liability, meaning they pay tax only on income earned in Austria.
In 2024, the income tax rates in Austria were as follows:
- 20% on the first tax rate
- 30% on the second tax rate
- 40% on the third tax rate
- 55% on the highest tax rate, for people whose yearly income exceeds 1,000,000 euros.
The tax is paid monthly, and individuals earning less than 11,000 euros annually are exempt from paying any tax. Austria's income tax system allows for deductions and rebates for exceptional situations, such as special expenses and extraordinary burdens. For example, individuals can claim doctor's fees, hospital costs, childbirth costs, and dental treatment fees as extraordinary burdens.
In addition to income tax, Austria has a corporate tax rate of 24% to 27.5%, a municipal tax, and a value-added tax (VAT) ranging from 10% to 20%. Austria also imposes taxes on capital gains (25%), dividends (27.5%), and real estate transfers (3.5% to 15%). Social security contributions are also deducted from employees' salaries, including sickness insurance (7.65%), accident insurance (1.1%), unemployment insurance (5.9%), and pension insurance (up to 22.8%).
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Income tax exemptions
- Primary Residence Exemption: The sale of a primary residence, including homes, commonhold properties, and land, is tax-exempt if specific conditions are met, such as the duration of ownership and continuous residence.
- Low-Income Threshold: Individuals earning less than €11,000 annually are exempt from paying any income tax.
- Special Payments: The first €620 of 13th and 14th-month salaries are tax-exempt, with the remaining amount taxed at a graduated rate.
- Expatriate Expenses: Expatriate employees can claim a lump sum for income-related expenses, amounting to 20% of their gross salary, up to a limit of €10,000 per year.
- Relocation Expenses: Payments for relocation expenses by the employer are exempt from tax if the employee is assigned to another location.
- Insurance Relationships: Certain insurance relationships are exempt from tax, such as old age, disability, and health insurance with specific providers.
- Student Benefits: Students are entitled to free travel, which can be considered an indirect tax exemption for individuals supporting their education.
Corporate Income Tax Exemptions:
- Exports and Foreign Services: Exports and certain services provided to foreign customers are exempt from value-added tax (VAT).
- Tax Credits for Investments: Businesses can benefit from capital allowances, which directly impact business incentives for new investments.
- Tax Exemptions for Specific Industries: Certain industries may have specific tax exemptions or reduced rates, such as the cultural sector, which was affected by the increase in VAT from 10% to 13%.
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Tax residency
In Austria, taxes are levied by the state, and the tax revenue was 42.7% of GDP in 2016, according to the World Bank. The most important sources of revenue for the Austrian government are income tax, corporate tax, social security contributions, value-added tax, and tax on goods and services.
Individuals who are tax residents of Austria, i.e., those who have their residence or habitual abode in Austria, are subject to unlimited taxation on their worldwide income. The income tax rates in Austria are progressive, meaning that the rate at which an individual's income is taxed increases as the individual earns more income. The highest marginal tax rate is 55% for individuals with a yearly income exceeding €1,000,000. However, individuals who do not have their place of abode or normal residence in Austria are only charged tax on their Austria-sourced income. For them, the tax rates are the same as for normal residents, but an additional €9,000 must be added to their tax base for computation.
Corporations are subject to unlimited taxation in Austria on their entire income if they have their legal seat or place of effective management in the country. They are considered independent tax subjects, and a distinction is made between tax ramifications at the company and shareholder levels. At the company level, profits are taxed at the standard corporate income tax rate of 25%. At the shareholder level, profit distributions are usually subject to a withholding tax of 25% for corporations and 27.5% for other recipients.
Austria ranks 15th overall on the 2024 International Tax Competitiveness Index. The country also has a capital gains tax (Kapitalertragsteuer) of 25%. Additionally, there is a real estate transfer tax (Grunderwerbsteuer), which is levied at a rate of 3.5% when the transfer occurs within a family. A vehicle tax (Kfz-Steuer) is also levied on all Austrian vehicles and all foreign vehicles registered in Austria, with the basis of taxation depending on the vehicle type.
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Social security contributions
The social security system in Austria covers a comprehensive range of areas, including prevention, sickness, incapacity for work or invalidity, maternity, unemployment, old age, death of a person liable to provide maintenance, survivors' pensions, nursing care, and social needs. It is designed based on the principle of solidarity, where those with higher incomes contribute more to support those with lower incomes.
For employees, the social security contribution covers payments to health insurance, pension insurance, and accident insurance. Notably, accident insurance contributions are fully covered by the employer and are not deducted from the employee's wages. The employer's and employee's contributions are typically transferred to the health insurance provider, which then distributes the funds to the relevant bodies.
Special payments, such as 13th and 14th-month salaries, are also subject to social security deductions. The first €620 is tax-exempt, and the tax is withheld at a graduated rate between 6% and 55% for the remaining amount. Additionally, employers are liable for the Family Burdens Equalisation Levy at a rate of 3.7%, a municipal tax on payroll of 3% of monthly gross salaries, and a public transportation levy of €2 per week per employee in Vienna.
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Corporate tax
In Austria, corporations with their legal headquarters or effective management in the country are subject to unlimited taxation on their entire income, including domestic and foreign profits. This means that the company profits are taxed at the standard corporate income tax rate of 25%. However, this rate has been changing over the years, and in 2023, it was 24%, and until 2022, it was 25%.
At the shareholder level, profit distributions are generally taxed at a withholding tax rate of 25% for corporations and 27.5% for other recipients. Additionally, there is a minimum tax, called the "Mindestkörperschaftssteuer," for limited liability companies and joint-stock companies, which is 5% of their registered capital.
Austria also has a global minimum tax rate of 15% ensured through the Income Inclusion Rule (IIR) and, from 2025 onwards, the Undertaxed Profits Rule (UTPR). These rules are designed to prevent the outflow of tax revenue from the country to lower-tax jurisdictions.
The corporate tax system in Austria is part of a broader taxation framework that includes individual income taxes, payroll taxes, value-added tax (VAT), and other consumption taxes. These taxes contribute significantly to the country's revenue, with tax revenue reaching 42.7% of GDP in 2016, according to the World Bank.
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Frequently asked questions
The income tax rate in Austria depends on the individual's income. The tax rate is progressive, meaning that the rate at which an individual's income is taxed increases as the individual earns more income. The first €620 is tax-exempt, and from the remaining amount, tax is withheld at a graduated rate between 6% and 55%. The highest marginal tax rate is 55% for people with a yearly income of over €1,000,000.
Those who work in Austria but are not official residents are subject to limited tax liability. This means they only pay tax on the income they earn in Austria and not on income earned elsewhere.
Yes, Austria offers generous tax benefits to scientists and researchers from outside the country to attract them to live and work in Austria.
Other than income tax, Austria levies corporate tax, social security contributions, value-added tax, and tax on goods and services. There is also municipal tax, real-estate tax, vehicle insurance tax, property tax, and tobacco tax.
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