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How to prepare for your Austrian tax return if you’re self-employed

Paperwork
It's time to get out the calculator and your expense receipts... and/or hire a tax advisor. Photo: Scott Graham/Unsplash
For self-employed people in Austria, preparing for a tax return can be a daunting process, but a little preparation can help to bring the stress levels down.

Filing a tax return is a necessary part of self-employment and it’s no different in Austria.

Trying to understand the Austrian tax system can be complicated though, and even more so for those without strong German language skills.

To find out more, The Local spoke to Claudia Barton, a bilingual (German and English) tax advisor based in Vienna. 

Start early

Austria’s tax year runs from January to December so self-employed people should start preparing their accounts now to ensure they are ready to be filed in January.

Claudia told The Local: “The best way to prepare for the tax return is to gather all documents in advance, such as invoices that have been charged to clients and expense receipts.

“People should also go through their bank statements to make sure everything in the tax return is recorded, including any charitable donations or medical bills, although adding medical bills to a tax return will depend on the overall income.”

FOR MEMBERS: EXPLAINED: What can I deduct from my tax bill in Austria?

Examples of expenses that can be included in a tax return are office materials, stationary, internet, phone, hardware, software, books, rent (eg. an office or business premises) and even German language lessons.

Other eligible expenses include travel costs for business trips (car mileage and other forms of transportation), ergonomic office furniture up to €150 and costs associated with working from home, although the rules surrounding the latter can be difficult to understand.

Claudia said: “It’s a grey area. For example, electricity costs in your apartment can only be claimed if that is the central area of your business – where the work takes place.”

This means a self-employed writer or a business coach that works from home can claim a percentage of electricity costs as an expense. But a self-employed language teacher that works at a school probably can’t claim home electricity bills as an expense.

Also, SVS payments (social insurance for self-employed people) are tax deductible and Claudia advises that all outstanding SVS bills are paid before the end of the year.

The most common mistakes when filing a tax return

One of the most common mistakes that people make before submitting a tax return is not checking whether it is more favourable to select a lump sum expense deduction or to claim back the amount for every individual expense.

A lump sum deduction (Betriebsausgabenpauschalierung) is a flat rate amount of 6 percent or 12 percent, as long as the annual revenue does not exceed €220,000. SVS contributions can still be deducted on top of the flat rate.

Additionally, since 2020, it has been possible for service providers to apply a 20 percent flat tax rate for expenses, or 45 percent for other businesses. This applies to businesses with an annual revenue up to €35,000.

READ MORE: Everything you need to know about paying tax in Austria

At the beginning of 2021, this rule was then connected to the VAT exemption for small businesses (this is also applicable even if the small business “opts to apply VAT”), and can therefore be applied up to a revenue of €42,000.  

There is an upper limit of €8,400 for expenses which can be deducted for businesses which provide services and an upper limit of €18,900 for other businesses. 

Alternatively, you can go down the traditional expenses route which is to collect all receipts for expenses throughout the year, then subtract the total expense amount from the annual revenue to get your actual profit.

And if all of this makes your head spin, then consider hiring a tax advisor.

How much does it cost to hire a tax advisor for a tax return?

Rates for hiring a tax advisor vary from person to person and mostly depend on the amount of work required to complete and file the tax return.

Claudia said: “For a one-person business, the average cost of hiring a tax accountant for a tax return is between €400 and €900, but the actual cost will depend on the complexity.

“And don’t forget, the cost of hiring an accountant is tax deductible and can be included in your expenses the following year.”

For example, hiring an accountant for the 2021 tax return can be included in expenses for the 2022 tax return because the work will be carried out in 2022.

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Are there any specific new tax laws to consider?

If the topic of tax wasn’t complicated enough already, most years there are also new laws to understand as well.

Thankfully, this year isn’t one of them with most changes related to Covid-19 subsidies for businesses.

Claudia said: “In 2021, changes to tax law were almost non-existent due to Covid regulations but I would still advise people to check if they are eligible for subsidies because some are still open for applications.  

“Most of these applications must be filed by a tax advisor and the subsidies can be hard to understand, so I advise people to seek help from a tax advisor.

“Austrian tax laws are hard to understand and you can’t properly file a tax return without fully understanding the system.”

However, for anyone that does want to file a tax return themselves, this can be done via the FinanzOnline platform.

Useful vocabulary

Tax – Steuer

Steuerberater/ Steuerberaterin – Male tax adviser/ Female tax adviser

Flat tax deduction rate – Betriebsausgabenpauschalierung

Tax-free profit allowance  – Grundfreibetrag

Business assets – Gewinnfreibetrag 

New self-employed – Neue Selbständige


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