Corporate Taxes in Austria
Companies operating in Austria have to pay taxes on profits earned directly from Austria. The rules for the implementation of taxation of the Corporate tax system in Austria differ between resident businesses and foreign subsidiaries.
The amount of tax is determined by the net earnings, firms make when they conduct business usually in one calendar year. Eventually, Austria corporate taxes is a great source of income for the state.
The resident firms pay taxes on their worldwide income and non-resident businesses pay tax only on earnings derived from sources located in Austria. It has an average company income tax of 25% on all earnings made by companies within the country.
In this article, we will be discussing more in-depth the various corporate taxes in Austria imposed on residents and nonresidents. So let’s get started without further ado.
Corporate principles of taxation in Austria
If you register a company in Austria, you will have to pay the various business taxes. The average corporate taxes in Austria is imposed on income at 25% on all earnings made by companies within the country. This includes trading and business income as well as passive income and capital gains.
A different corporate tax rate in Austria on income applies to limited liability corporations and Joint stock corporations. For joint stock companies, this alternative tax is more substantial.
Resident firms located in Austria pay tax on their worldwide earnings and non-resident businesses only pay tax on the income they earn in the nation. However, their branches located in Austria have to pay corporate tax rate in Austria at 25%.
Corporate taxes in Austria for foreigners
In essence, you’re tax-resident when you reside in Austria and you spend at least 180 consecutive days living in Austria. They are put implemented to make sure that citizens and residents are not taxed at the same time for the same earnings.
A comprehensive list of countries that have double taxation agreements is available on the website of Austria’s Federal Ministry of Finance website. The Qualifying Recognized Overseas Pension Scheme (QROPS) is another option available in Austria. This is an international pension plan that permits individuals to sell their UK right to a pension.
It allows you to transfer the remainder of your pension to your heirs, without deduction of UK taxes on the death of your loved ones. For non-EU nations, there are many countries with which Austria has social insurance agreements.
Austria is an Automatic Exchange of Information (AEOI) member and has signed agreements that permit the exchange of tax authorities from different nations to prevent tax evasion and avoidance. This information contains information on financial accounts and investments.
Income tax in Austria
In Austria, the income tax is calculated in a proportional manner determined by your income per year. Income tax applies to capital assets, employment trade, craft, and sales.
In addition, it applies to the income generated from rental properties. The rates are subject to annual adjustments. At present, they range between 20 to 55%.
There’s also a tax-free threshold and those earning less than the limit does not have to pay the tax if they meet the conditions. Taxpayers who are residents of Austria are required to submit an income tax report if their annual income is greater than EUR 10,000.
Exemptions from Taxes & Tax Allowances available in Austria
Since the year 2019, the childcare deduction as well as the tax-free amount for children has been combined into one plan. It is a bonus for families, plus a tax credit. It reduces taxes to be paid.
The tax credit for the year is 1500 euros per child, which is up to the age of those who, reside in Austria. In addition, If both parents apply for their family bonuses, then each taxpayer gets 50% of the tax-free amount, which amounts to EUR750 each year. In addition, for children between 19-24, you are still eligible to receive a bonus of up to EUR500 per year.
In July 2022, the government planned to raise the family bonus to EUR 2,000 for each child.
In Austria, there is an allowance for childcare available to each father and mother. The Family Burdens Equalization Fund (FLAF) provides the funding, which is distributed by the tax office.
Tax relief is also available for specific expenses, such as the construction of a house or the voluntary contribution towards a pension scheme or life insurance. The relief can be claimed against an income tax if the annual earnings do not exceed EUR 60,000.
A good thing is that any resident who is a victim of extraordinary expenses can get some tax relief. Unavoidable expenses are funeral costs, hospital stays in Austrian hospitals as well as medical treatment.
The different corporate tax rate in Austria
The Corporate tax rate in Austria was lowered to 25% in conjunction with the government’s announced further cuts in the future. Essentially, it is because of this that Austria is one of the most business-friendly nations.
All Austrian companies are required to contribute value-added tax (VAT) which is usually 20% of the revenue. However, sole traders that earn less than EUR 30,000 per year do not require a tax obligation for VAT. Instead, they have to pay business taxes in Austria on income, which can range from 23% up to 50%.
Along with this, corporations need to pay a quarterly tax of 25% on their corporation. A minimum of EUR 1,750 is required for legally-independent corporations or EUR3,500 for limited liability corporations. Companies in Austria are also required to pay a 25% profit tax.
Other business taxes in Austria
There are additional taxes that are imposed in Austria corporate tax rates which you should keep in mind as a foreigner, such as:
1. Real estate transfer tax
Locally referred to in Austria as Grunderwerbsteuer is usually a flat rate of 3.5% of the value of the property, however, usually the rate is 2% when transferring property between family members.
2. Municipal tax
For business taxes in Austria, companies have to pay municipal taxes to the municipality in which the company is located.
3. Vehicle tax
Tax on vehicles is an acronym for engine-related insurance tax. This tax is complex and is calculated based on the engine’s power (kW). In essence, the higher the kilowatts you have, the higher the tax you pay. These corporate taxes in Austria are paid by your automobile insurance that is passed on to the tax authorities.
4. Corporation tax
Companies operating in Austria don’t have to pay corporate taxes in Austria on income, however, they pay corporate taxes in Austria at 25%.
According to plans released in October 2021 outlining various tax reforms, corporations’ tax rates could be reduced to 24% by 2023, and then to 23% by 2024.
5. Taxes on Capital Gains
Capital gains from the investment are subject to a 27.5% tax on capital gains and real estate-related capital gains are taxed at a rate of 30%.
Austria is also considered to be a tax haven due to the banks’ secrecy, or due to the establishment of foundations that were private in the year 1993.
To secure capital and work in Austria the legal form was introduced, which came with many tax advantages. Exemption from inheritance tax and gift tax, as well as from capital gains were a few of the benefits.
If you have any queries regarding Austria corporate tax rate feel free to get in touch with our professional experts at Odint Consultancy. Our experts will help you by providing complete details about corporate taxes in Austria.
Non-residents are subject to income tax on income from Austria at the standard rates (including the fictitious increase of EUR 9000).
Austria has one of the highest standards of living in the economies around the globe and is ranked highly in terms of gross domestic product per capita.
A recent study from CEOWORLD Magazine ranked Austria as the 18th-highest-cost country to live in. The neighboring country of Switzerland was named the most expensive.
All Austrian companies must be liable for value-added tax (VAT) which is usually at 20% of revenue. Instead, they have to pay taxes on income, which can range from 23% up to a whopping 50%.
The primary sector of Austria’s economy includes service that contributes approximately 63% of its gross domestic product and employs over 70% of the active population.