Austria

Registrations and Establishing an Entity

Establishing a legal entity in Austria involves choosing from common structures such as the GmbH (limited liability company), OG (general partnership), or KG (limited partnership). The GmbH is the most popular format for foreign investors, requiring at least one shareholder and one managing director, with a minimum capital of EUR 35,000 (half payable at incorporation). Foreign owners are treated equally but must appoint an Austrian resident public officer for tax purposes.

Key registration steps include:

• Trade licence application via the local district authority
• Registration with the Commercial Register
  
• Notification to the Social Security Authority and Tax Office
  
• Opening an Austrian bank account for capital and operational use

The entire process typically takes around 4 weeks.

Banking

Although not mandatory, having an in-country bank account is essential for handling employee payments, tax obligations, and trade transactions. Most banks are open Monday to Friday, generally from 08:00–12:30 and 13:30–15:00, and often until 17:00 on Thursdays.

Working Week

The standard working week in Austria runs Monday to Friday, with a statutory maximum of 40 hours per week. Office hours usually fall between 08:00 and 17:00. Lunch breaks are typically one hour, though flexible arrangements are possible under collective or individual agreements.

Employment Law

Holiday Accrual

Employees with fewer than 25 years of service are entitled to 25 working days of annual leave. After 25 years, entitlement increases to 30 days. Additionally, employees benefit from 13 paid public holidays per year. Annual leave is paid in advance, with employees receiving their full salary prior to their leave commencing.

Maternity Leave

Pregnant employees must begin maternity leave 8 weeks before the expected delivery date and take another 8 weeks after childbirth (extended to 12 weeks for complications). During this time, employees receive 100% of their average earnings via the social security fund, assuming they’ve completed at least 3 months of employment.

Paternity Leave

Fathers are entitled to one month of unpaid paternity leave, provided they live in the same household as the newborn. This leave must be taken during the period of the mother’s maternity leave.

Sick Leave

Employees are entitled to 6–12 weeks of full sick pay (depending on service length), followed by 4 weeks of half-pay. If additional time off is needed, the state provides a sickness allowance based on 50%–75% of the employee’s pay.

National Service

Austria previously operated mandatory military service but it is no longer compulsory. There are no mandatory civilian service requirements currently applicable to employees.

Tax & Social Security

The Austrian tax year runs from 1 January to 31 December. Individuals who reside in Austria are subject to tax on worldwide income. Non-residents are taxed only on Austrian-sourced income.

Income Tax

Tax is applied on a progressive basis:

• 0%: Up to EUR 13,308
  
  
• 20%: EUR 13,309–21,617
  
  
• 30%: EUR 21,618–35,836
  
  
• 40%: EUR 35,837–69,166
  
  
• 48%: EUR 69,167–103,072
  
  
• 50%: EUR 103,073–1,000,000
  
  
• 55%: Above EUR 1,000,000
  
  

Employees are taxed at source through payroll withholding. Annual tax returns are required only if the employee has more than one employer or additional income sources.

Social Security

Austria’s system covers pensions, health, accident, and unemployment insurance. Contributions are split between employer and employee. The combined rate is approximately 39.35%:

Contributions are capped at a maximum monthly income threshold set annually.

Payroll

Payroll in Austria is run monthly. Employers are responsible for calculating and withholding all taxes and contributions before issuing net pay. Payments are typically made by the end of each calendar month.

Reports

Employers must retain payroll records for at least 7 years. These must include payslips, contract terms, time sheets, and any changes in employment status.

Payslip Example

Austrian payslips are required to include gross salary, deductions (tax, social contributions), net salary, vacation accruals, and any bonuses or additional payments. Employees typically sign these electronically or in person.

Reporting

Monthly tax and social contribution declarations must be submitted to the relevant authorities. Annual employee earnings certificates must be provided to employees and the tax office each year.

New Employees

Employers are not legally required to issue written contracts, but must provide a written statement outlining employment terms. New hires must be registered with the social security authority before they begin work.

Probation periods are typically one month. Employers must provide:

• Name and address
• Social Security number
• Start date and role
• Salary terms
• Tax ID or equivalent

Leavers

Employment can be terminated without cause during the probation period. Beyond this, proper notice and, where applicable, severance or redundancy payments are required. Final payments must include unused holiday and must be settled promptly. Employers must deregister employees from all authorities and issue a final salary certificate.

Employee Benefits

In addition to mandatory benefits, many Austrian employers offer:

• 13th and 14th month salary (commonly paid in summer and before Christmas)
• Private health insurance
• Meal vouchers
• Subsidised transport
• Flexible work hours

These may be governed by collective labour agreements. Employers are not obliged to provide bonuses, unless outlined in employment contracts or union agreements.

Expenses

Business-related expenses such as travel, accommodation, and meals can be reimbursed through payroll or finance departments. Personal-use benefits (e.g. company cars) may be subject to tax and must be declared for social security purposes.

Austria is part of the Schengen area. EU/EEA citizens can work without a visa. Non-EU nationals require a work permit, typically under the Red-White-Red Card system. This residence and work permit is valid for 24 months and ties the employee to a specific employer.

Other visa types include:

• Residence Visa (6 months) – for job seekers
• Business Visa – short-term commercial visits under 6 months

Visa applications must be submitted in person at an Austrian consulate, with documentation such as employment contracts, medical insurance, and proof of qualifications.

• The GmbH structure is the preferred model for foreign investors
• Austria has one of the highest income tax rates at upper income levels (up to 55%)
• The social security system is robust and comprehensive but comes with high contributions
• Double salary payments (13th/14th month) are standard under many collective agreements
• Sick pay and maternity allowances are state-funded after statutory employer periods
  
  

Further Information

For more information, or assistance with Austria Tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.