Austria Payroll and Tax Overview

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.

Registering a Company and Establishing an Entity in Austria

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 30,000.

Sole Trader

This type of company is best suited for an individual setting up business on their own as a sole trader company (also referred to as sole proprietorships) and is the smallest type of company that can operate in Austria. Although there are no share capital requirements, they will need to register the company trade name with the Companies Register and obtain various licences with the authorities.

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 legal 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.

Business Banking in Austria

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 Days and Working Hours in Austria

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

General Information about Austria

Full Name: Republic of Austria

Population: 8.859 million (Eurostat, 2019)

Capital: Vienna

Major Languages: German

Currency: Euro

Main Exports: Machinery, vehicles, pharmaceuticals, chemicals, iron, steel and foodstuffs

GNI per Capita: 59,240 USD (World Bank, 2019)

Internet Domain: .at

International Dialling Code: +43

Income Tax in Austria

In Austria, the tax year is the calendar year.

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.

Corporate Income Tax

Generally, companies in Austria are taxed at the standard rate of 25% and returns are due by 30 June of the following year.

Other Taxes

Value Added Tax (VAT) – 20%

Withholding Tax (dividends) – 25%

Withholding Tax (interests) – 0%/25%

Withholding Tax (royalties) – 20%

Social Security in Austria

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).

New Employees in Austria

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 in Austria

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.

Should an employee choose to terminate their employment, a notice period must be worked depending on their length of service, these are outlined below.

Two years or less = six weeks

Three to five years = two months

Six to 15 years = three months

16 to 25 years = four months

26 or more years = five months

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.

In Austria, payroll reports should be kept for seven years.

Generally, salaries are paid monthly and must be paid by the end of each month.

Many businesses in Austria give their employees a 13th month salary which is divided between two instalments, one in June and the other in November.