The salient features of the tax system
Persons fiscally resident in Austria are subject to tax on all income generated on a worldwide basis; non-resident subjects are instead required to pay the tax only for income earned in Austria . For the purposes of applying income tax (Einkommensteuer ), a natural person is considered to be fiscally resident in Austria when he has his domicile or habitually resides within the territory of the State.  Depending on cases, the non-resident must file a tax return or is taxed at source by withholding. In particular, according to the Austrian legal provisions, domicile is the place where a person occupies a property, the conditions of which, together with other circumstances, objectively lead to the presumption that it is his main residence. In any case, natural persons who appear to have spent in the country, on a continuous basis, a period of at least six months over the course of a year , are considered resident in Austria, without prejudice to the various applicable clauses contained in the treaties against double taxation.

In 2015 the Austrian Parliament (Nationalrat ) approved the tax reform for 2015-2016.

The 2015 tax reform
The main innovations contained in the reform project include the reshaping of income brackets for individuals, an increase in the tax on investment income which goes from 25% to 27.5%, a taxation in brackets for real estate transfers that it replaces the single taxation of 3.5%, some innovations in the field of VAT with an increase in the level of taxation for some goods.

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The calculation of the tax base and the types of income

The tax base is given by the sum of the individual income that falls into the following categories:

• land income;

• income from self-employment;

• income from commercial activity;

• income from employment;

• capital gains;

• rental income;

• various income (including some types of capital gains and annuities).

 

Taxation on individuals 

The tax on individuals is progressive with rates. After deducting the expenses directly incurred for the production of the  income, the calculation of the tax due takes place through the application of progressive rates for income brackets which, from 1 January 2016, range from 0 to 55% . In any case, the current legislation allows further deductions related to the personal situation of the taxpayer, such as particular deductions for employees, pensioners, family burdens and single-income families. From 2013 then some expenses for family assistance services for children up to 10 years of age raised to 16 years of age if disabled are included among the deductible expenses of extraordinary value and up to a maximum of 2,300 euros per year.

 

Individual rates (since 2016)

 

Taxable income                                    Rate

From 0 euro             to  12.465 euro               0%

From 12.465 euro    to  20.397 euro             20%

From 18.001 euro    to  34.192 euro             30%

From 34.192 euro    to  66.168 euro             40%

From 66.168 euro    to  99.266 euro             48%

From 99.266 euro    to  1 million euro           50%

Above 1 million euro                                     55%

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Categories exempt from taxation
The types of salaries and services not subject to taxation include:

• family allowances;

• maternity allowances and the like;

• social security cheques;

• allowances for parental leave, parental assistance and childcare;

• disability allowances;

• contributions for nursing care and support for expenses.

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The income tax of legal persons
In 2005, the corporate tax rate fell from 34% to 25%, in 2024 it will be 23%. A choice partially financed by expanding the tax base and abolishing the 10% subsidy for increasing investments in machinery and equipment. In recent years, the tax incentives for research and development have increased steadily and today provide a tax credit of 12%.
Resident companies, which have their registered or administrative office in Austria, are subject to a tax of 23% on income wherever they arise. In this case, the tax base is determined according to the comparative net asset value method. The amount of the taxable profit or loss is obtained, in fact, by calculating the difference between the net assets resulting at the beginning of the year and that resulting at the end of the year, adjusted on the basis of tax legislation. Foreign companies, on the other hand, are taxed only in relation to business income attributable to a permanent establishment located on Austrian territory; in the absence of a permanent establishment, the taxable income is determined on the basis of the same income categories envisaged for individuals. Expenses are generally considered deductible if directly related to the production of income. The legal system then provides for the payment of an alternative minimum tax of 1,750 euros each year for limited liability companies and 3,500 euros for joint-stock companies.

The value added tax
The Austrian legislation on value added tax is governed by Law No. 663 of 1994 (Umsatzsteuergesetz ), with which Austria conformed to European legislation, implementing the sixth EU directive on the subject. Those who carry out an independent commercial or professional activity are required to pay the tax. There is no distinction between resident and non-resident entities. The tax base is represented by the agreed fees for all supplies of goods or services performed within the Austrian territory. The 2015 tax reform provided for the introduction of cash registers for activities with a turnover exceeding 15 thousand euros. 

More precisely, the Austrian tax legislation provides:

• 20% standard rate ;

• 13% cultural services, museums, zoos, internal flights, public swimming pools, animals, seeds and plants;

• 10% rate that applies to the sale of foodstuffs considered essential, such as milk, fish, eggs, fruit and vegetables, coffee, sugar, oil, as well as books, newspapers and magazines, hotel services, public transport services, the rental of properties for private use, the supply of electricity, pharmaceutical products, agricultural production;

• exemption for banking transactions and zero tax rate that applies to exports.

Other taxes

Investment Income Tax
The tax rate on investment income is 27.5% while the capital gains tax applied to the sale of real estate is 30%.

Real estate transfer tax
The tax includes the sale of shares in real estate companies held by a single shareholder and the transfer of properties into companies. The taxation is in income brackets (three different types) and has replaced the single tax of 3.5%.