Lyla Lindsey
Austria has a progressive income tax system, with rates ranging from 0% to 55% based on income level. The first €12,816 of income is tax-free, and rates increase incrementally from 20% to 55% for income above this threshold. Income tax is the most important revenue source for the Austrian government, along with corporate tax, social security contributions, value-added tax (VAT), and tax on goods and services. Austria also levies municipal tax, real estate tax, vehicle insurance tax, property tax, and tobacco tax. Individuals with residence in Austria are taxed on their worldwide income, while non-residents are taxed only on Austrian-sourced income. The country offers various tax deductions and credits, such as allowances for commuting, family, and childcare, as well as deductions for business expenses and special expenses.
| Characteristics | Values |
|---|---|
| Income tax | Progressive rate of 0-55% with the first €620-€1,2816 tax-free. The tax rate depends on the taxable income received in a calendar year. |
| Social insurance contributions | Compulsory and includes health insurance, pension insurance, unemployment insurance, and accident insurance. |
| Value-added tax (VAT) | 10-20% on the purchase of a product or service by the final consumer. |
| Corporation tax | 5% of registered capital for limited liability companies and joint-stock companies. |
| Municipal tax | 3% of monthly gross salaries and wages. |
| Public transportation levy | €2 per week per employee in Vienna. |
| Chamber of Commerce contribution | 0.31-0.40% of monthly gross salaries. |
| Employee pension fund contribution | 1.53% of monthly gross salaries. |
| Excise taxes | Imposed on certain energy products, tobacco products, and alcoholic beverages. |
| CO2 tax | €55 per ton as per 2025. |
| Stamp duty | Imposed on certain legally predefined transactions, such as lease contracts and bills of exchange. |
| Real estate tax | Annual tax of 0.1-0.2% of the assessed value of the real estate, multiplied by the assessment rate determined by the municipality (up to 500%). |
| Capital gains tax | 25% tax rate. |
| Dividends tax | 27.5% tax rate. |
| Real estate transfer tax | Based on the real market value after the 2016 tax reform. |
| Financial support | Commuter allowance, free travel for students, support for further training, family and childcare allowance. |
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Income tax
In addition to income tax, employees and freelance workers in Austria pay 0.5% of their gross income as a Chamber of Labour contribution and 1.00% as a housing construction promotion levy (although freelance workers are exempt from the latter). Employees may also pay trade union and religious community contributions, which are deducted directly from their pay.
Austria's income tax system is progressive, meaning that the more income a person earns, the higher the tax rate they will pay. This is designed to distribute the tax burden fairly across the population, with those who earn more contributing a larger share of their income to the government. The progressive tax system in Austria was introduced in 1988 and has undergone various amendments since then, including a reduction in tax rates in 2016.
Austrian employees benefit from financial support offered by the government and other institutions under certain circumstances. This includes a commuter allowance, free travel for students, funding for further training, and family and childcare allowances. Various expenses can be offset against income tax, and lump sums, allowances, and special expenses are tax-deductible. For example, individuals with one child who are entitled to the family allowance for more than six months can claim a monthly reduction of EUR 50.08, which increases to EUR 67.75 for two children and by EUR 22.33 for each additional child.
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Value-added tax (VAT)
The first reduced VAT rate is 13%. This applies to tickets for sports and cultural events, domestic flights, pet food, and artists' services and products, among others. A second reduced rate of 10% applies to most food products, books, hotel accommodations, rentals for residential purposes, newspapers, magazines, restaurants, passenger transport, pharmaceuticals, and the repair of certain products. A temporary second reduced rate of 5% was introduced in response to the Coronavirus pandemic.
In Austria, sellers of goods and services who are registered for VAT are obligated to collect the correct VAT rate and remit this tax to the Austrian tax authorities through a VAT filing system. The Ministry of Finance and the tax authorities, known as Finanzämter, are responsible for the administration of the Austrian VAT system. They oversee the registration of businesses for VAT, the collection of VAT, and the enforcement of VAT regulations. They also provide guidance and support to businesses to help them comply with VAT requirements and avoid penalties.
Austrian VAT can be deducted as long as it is incurred for business purposes and all formalities are met. Input VAT for the purchase, lease, repair, and fuel for vans, trucks, and certain cars used for business purposes without CO2 emissions is 100% deductible. Input VAT for hotel accommodation, entertainment costs for business partners, books, mobile phone expenses, business gifts, taxis, and other travel expenses is also 100% deductible.
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Corporate tax
Austria has a progressive income tax system, with rates ranging from 0% to 55% based on income levels. The first €12,816 of income is tax-free, followed by a 20% rate on income above this amount, 30% on income over €20,818, and so on, reaching 55% for income exceeding €1,000,000. These rates apply to taxable income after deductions, and various credits are available to help reduce the overall tax burden.
In Austria, corporate income tax is levied on corporations (e.g. limited liability corporations, stock corporations) with their legal seat or effective management in the country. These corporations are subject to unlimited taxation on their entire domestic and foreign income. The corporate income tax rate is a standard rate of 23% of taxable income, regardless of the level of income. This rate was 25% until 2022 and will be 24% in 2023.
For companies with share capital subject to unlimited tax liability, there is a minimum tax of 5% of one-quarter of the statutory minimum level of nominal or share capital for each full calendar quarter. Corporate income tax is assessed and paid similarly to income tax, including advance payments due on 15 February, 15 May, 15 August, and 15 November. A corporate income tax return must be submitted for the previous calendar year or financial year, and the tax office assesses the tax based on the corporation's income during that period.
Austria has implemented eco-social tax reforms that provide tangible tax relief for companies. The country has also concluded double taxation conventions with numerous countries based on the OECD Model Tax Convention to avoid double taxation on the same income in multiple countries.
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Excise taxes
Austria levies excise taxes on certain luxury and consumer goods, such as tobacco, alcoholic beverages, and certain energy products like petroleum. Excise taxes are imposed on specific products, with rates depending on the type of product. For instance, tobacco products are taxed at a rate of 13% to 47% of the price, while the tax rate for alcoholic beverages varies based on the type of alcohol. Petroleum is taxed at approximately €40 to €600 per 1,000 litres.
In addition to excise taxes, Austria has a value-added tax (VAT) that ranges from 10% to 20%, depending on the goods and services. Entrepreneurs or businesses providing goods and services are responsible for charging and collecting this VAT. Certain goods and services are taxed at a reduced rate of 10%, such as books, food, restaurants, passenger transportation, medicine, and hotel accommodation. Other goods and services, like animals, seeds, plants, cultural services, museums, zoos, film screenings, wood, and domestic air travel, are taxed at a rate of 13%.
It is important to note that there are specific areas in Austria, namely Jungholz and Mittelberg, where a reduced VAT rate of 19% is applied. Additionally, certain transactions are exempt from Austrian VAT, such as export transactions and cross-border passenger transport by air or sea. Entrepreneurs can deduct input VAT on goods and services purchased, as long as they are not directly linked to VAT-exempt sales. To be eligible for this deduction, entrepreneurs must obtain invoices from suppliers that meet specific requirements and file VAT returns monthly or quarterly.
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Real estate tax
Austria's tax system includes a variety of taxes, one of which is the real estate tax. Here is a detailed overview of real estate-related taxes in Austria:
Property Tax
Property tax in Austria is levied on the assessed value of real property, which is typically lower than the prevailing market value. The tax is calculated by multiplying the basic federal rate, generally set at 0.20%, by a municipal coefficient that can range up to 500%. This means that the final property tax rate can vary significantly depending on the municipality.
Real Estate Transfer Tax
The Real Estate Transfer Tax, known as "Grunderwerbsteuer," applies when property ownership is transferred. After the 2016 tax reform, the tax base changed from a triple unified land value to the property's real market value. The tax rate for this transfer tax is progressive, with rates ranging from 0.8% to 2%.
Capital Gains Tax
Capital gains realised from the sale of properties are subject to taxation in Austria. Properties acquired before March 31, 2002, are taxed at different rates, either a flat rate of 15% on the sales price or a flat rate of 3.5% on the sales price, depending on specific conditions. Sellers can also opt to be taxed at a flat rate of 25% on capital gains. For properties acquired after this date, capital gains are taxed at a flat rate of 30%.
Rental Income Tax
Rental income from real estate is taxable in Austria. The taxable amount is calculated as the excess of receipts over income-related expenses (werbungskoten). Expenses such as maintenance, repairs, depreciation, administrative expenses, interest payments, and real estate tax are deductible when calculating taxable rental income. Non-residents are taxed on their Austrian-sourced rental income, and they face special penalties, with their tax base notionally increased by €8,000.
Stamp Duty
Stamp duty is levied on various transactions in Austria, including lease contracts. The rates for stamp duty range from 0.8% to 2%, similar to the real estate transfer tax rates.
It is important to note that tax laws and rates may change over time, and this information may not be the most up-to-date. For the most accurate and current information, it is advisable to refer to official Austrian government sources or seek professional tax advice.
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Frequently asked questions
Income tax rates in Austria are progressive, ranging from 0% to 55% based on income level. The first €12,816 of income is tax-free, followed by a 20% rate on income above this amount, 30% on income over €20,818, and so on, reaching 55% for income exceeding €1,000,000.
Yes, other taxes in Austria include corporate tax, social security contributions, value-added tax (VAT), tax on goods and services, municipal tax, real estate tax, vehicle insurance tax, property tax, and tobacco tax.
Yes, various expenses can be deducted from taxable income in Austria. These include lump sums, allowances, and special expenses, and business or professional expenses. Additionally, certain benefits in kind, such as commuter allowances and student travel, are tax-free or partially tax-free.
Taxes in Austria are levied by the state. Employers are responsible for deducting income tax from employees' wages and transferring it to the Inland Revenue Office on a monthly basis. Employees generally do not need to file an income tax return if they have no other sources of income.
