Our guide to Payroll in Austria

Doing Business in Austria

Investing in Austria

Austria is one of the richest and most stable countries in the globe, making it a very sought-after location in which to invest in. Located in Central Europe and landlocked between Germany and the Czech Republic to the north, Hungary and Slovakia to the east, Italy and Slovenia to the south and Liechtenstein and Switzerland to the west, Austria is a strategically positioned business hub for many investors. All European capital cities can be reached within less than three hours from Vienna International Airport.

With an investor friendly tax system and very few restrictions on foreign investment, it’s no wonder that over 1,000 international companies benefit from having operations in Austria. The country also boasts a highly educated workforce with its universities ranking among the best in the world, resulting in a very skilled and productive workforce.

Austria is renowned for its high quality of life and in 2019, Vienna was ranked number one in the Mercer Group ‘Quality of Living Survey’ for the 10th year in a row, this is reflected in the low crime rates, a very stable political system and a high level of social security.

Although the Austrian government is very encouraging of foreign investment, it favours investment targeted towards the high-tech sector. Local and foreign investors are treated equally with government investment incentives offered to both, including loans, grants and tax incentives. The Austrian government is so encouraging of foreign investment that foreign investors can also claim government support measures if they have been affected by the COVID-19 pandemic.

General Information

Full Name: Republic of Austria
Population: 8.917 million (Eurostat, 2020)
Capital: Vienna
Major Languages: German
Currency: Euro
Main Exports: Machinery, vehicles, pharmaceuticals, chemicals, iron, steel
GNI per Capita: 59,240 USD (World Bank, 2019)
Internet Domain: .at
International Dialling Code: +43

Common Phrases

Hello: Hallo
Good Morning: Guten Morgen
Good Evening: Guten Abend
Do you speak English? Sprechen Sie Englisch?
Goodbye: Auf Wiedersehen
Thank you: Danke
See you later: Bis später

Registrations and Establishing an Payroll Entity

Provided an expatriate is a citizen of the EU, the EEA, Switzerland or they hold a residence permit for Austria, they can set up a company in the country with relative ease, however they must apply for a trade licence before proceeding. Personal details, business name, location and type of business must all be provided to the local district authority in order to obtain a trade licence. In addition, expatriates will also have to register with the Commercial Register. It takes approximately four weeks to complete the company registration process.

When setting up a company in Austria, the expatriate must decide which legal entity is most suitable and there is a wide variety of legal entities to choose from, these include:

Limited Liability Company

This type of company is the most common type of legal entity in Austria and is referred to locally as GmbH. The company must consist of at least one shareholder and one director and they can be of any nationality or residency, however the company must have a legally registered address in Austria. A minimum share capital of EUR 35,000 is required and the company will be subject to Value Added Tax (VAT) if annual turnover is expected to be above EUR 35,000.

General Partnership

This type of company (also referred to as OG) is one of the non-corporate company forms in Austria and the only formal requirement to set one up is a trading licence and registration in the Austrian Commercial Register. No minimum capital stock is required and two or more natural persons are required in order to set up. These persons must take personal liability for the company’s debts and obligations.

Limited Partnership

This type of company (also referred to as KG) does not differ from the General Partnership when it comes to the formal requirements for setting up, however the rights and duties are different. At least two partners must be involved, one is liable with a chosen amount of capital (also referred to as a silent partner) and the other assumes unlimited liability.

Banking

Banks in Austria operate Monday to Friday from 08:00 to 12:30 then from 13:30 to 15:00, depending on the bank or branch, they may remind open over lunchtime. Most banks are open until 17:00 on a Thursday. Banks are not open on a Saturday, Sunday or on holidays.

Working Week

The working week in Austria is Monday to Friday and a normal work week consists of eight hours per day and up to 40 hours per week (unless otherwise stated). Most offices operate from 08:00 to 17:00 with one hour for lunch.

Employment Law

Holiday Accrual

Employees with fewer than 25 years of service are entitled to 25 days of paid annual leave. Employees who have been with the same company for 25 years or more are entitled to 30 days of paid annual leave.

Each employee, regardless of service length, is entitled to 13 paid public holidays each year. By law, employers must pay their employees their holiday pay before the holiday period begins.

Maternity Leave

Employed women in Austria, regardless of nationality or residence, receive a cash benefit (also known as Wochengeld) of their average earnings as maternity leave benefit. Women who have been employed for three months or more are insured under the social security system to receive 100% of their average salary during maternity leave.

Expectant employees are not allowed to work beyond the eighth week prior to the expected delivery date. The employee must then take eight weeks off after the baby is born, this is extended up to 12 weeks for multiple, premature or caesarean births.

Paternity Leave

Employees are entitled to take unpaid paternity leave for one month following the birth of a child. The leave must be taken during the period that the mother is legally prohibited from working. The leave is only available to fathers that live in a joint household with the child.

Sickness

If an employee has to miss work due to sickness or injury, by law, they are entitled to sick pay from their employer. Statutory sick pay covers the employee for six to 12 weeks of full pay plus four weeks of half pay, dependent on the employees’ length of service. Should the employee need additional time off once the statutory sick pay period ends, they are then entitled to sickness benefit from the social security system. This sickness benefit is equal to 50% of the employee’s previous pay, this may increase to 75% if the employee has dependents.

Employee Benefits

In addition to a very generous annual leave entitlement, many companies also provide their employees with a 13th month or 14th month bonus. Each bonus is equal to one month’s salary and is a common benefit in Austria, typically paid to employees before the Christmas period and upon the annual leave period (often in summer). Companies are not legally required to pay this bonus, they are however required to pay this bonus if it is stated in the employment contract or collective bargaining agreement upon employment.

Some companies also offer their employees additional benefits such as car allowances, however this varies depending on the company.

Tax, Employee Provident Fund, Social Security & Human Resource Development

Income Tax

The tax year runs from 1 January to 31 December.

Individual Income Tax

All persons residing in Austria are subject to income tax on any worldwide income they earn. All non-residents are taxed on income from sources in Austria alone.

Tax returns are due by 30 April or 30 June if filing electronically; however, they should only be filed if an individual earns over a minimum amount from sources other than their employment or if they are employed by two or more employers at the same time.

The personal income tax rates can be found in the table below:

Social Security

Any individual employed by a company or self-employed in Austria is legally required to contribute a percentage of their wage to social security, up to a maximum income threshold. The other percentage is paid by the employer. Social security includes health insurance, pension insurance, accident insurance, unemployment insurance and other (this normally includes things such as housing).

Social security contributions are as follows:

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

Unlike many other countries, a written contract of employment between employer and employee is not necessary when taking on a new job in Austria, instead many employers will choose to finalise the employment contract verbally or through a collective agreement. If no written employment contract exists, the employer must provide the employee with a written statement which outlines their rights and responsibilities. There is often a one-month probationary period for new employees, both employee or employer can terminate the contract of employment without explanation during this time.

Leavers

An employee can have their employment terminated immediately if the employer has good reason for the dismissal, this would normally involve any form of gross misconduct. Similar to the hiring of employees, the termination can be carried out verbally or in writing.

Upon resignation, the employer should provide the employee with a certificate of employment, employment papers of salary statement, deregistration from the health insurance fund, confirmation of work and remuneration, payslip and a testimonial. The employer must also pay any outstanding payments to the employee.

Employee Benefits

In addition to a very generous annual leave entitlement, many companies also provide their employees with a 13th month or 14th month bonus. Each bonus is equal to one month’s salary and is a common benefit in Austria, typically paid to employees before the Christmas period and upon the annual leave period (often in summer). Companies are not legally required to pay this bonus, they are however required to pay this bonus if it is stated in the employment contract or collective bargaining agreement upon employment.

Some companies also offer their employees additional benefits such as car allowances, however this varies depending on the company.

Visas & Work Permits

Anyone who is not a national of Austria and wishes to work in the country must obtain a visa, the only exception is for nationals of the European Union (EU) and European Economic Area (EEA). To apply for a visa, a foreigner must physically visit the closest Austrian embassy or consulate general.

Austria is one of the 26 European countries within the Schengen area and all foreigners who are not exempt from applying for a visa must apply for a Schengen visa. Depending on the foreigner’s situation, there are various categories in which they can fall under.

RED-WHITE-RED CARD

This type of visa is issued for a period of 24 months and enables foreigners to live and work in Austria, however employees can only work for the employer stated in the application.

SIX-MONTH RESIDENCE VISA

This type of visa is for those who want to move to Austria temporarily to find a job.

BUSINESS VISA

This visa is for individuals visiting the country for business activities for less than six months and need a visa to stay compliant.

• 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 Austrian 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.