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TAXES

EXPLAINED: The main Austrian ‘tax traps’ foreigners should be aware of

Moving to a new country results in a series of adaptations, and getting used to a different tax system is definitely one of them. Here's what you need to know.

A person completes their income tax return
Filing taxes in a new country can be a burdensome task. Photo: Firmbee / Pixabay

When you move into a new country, there are many things to learn and get used to.

But, unfortunately, there are also many “traps”, those differences in systems and cultures that can catch a foreigner entirely off guard while seeming normal to all native or long-time residents of a country.

In Austria, there are many particularities, not only when it comes to culture – how many times are immigrants surprised with Freikörperkultur, for example? – but also with bureaucratic and day-to-day issues.

For example, foreigners are often surprised to learn that the alpine country has a mandatory public health system with several insurers, and each person is legally required to be insured by one of them.

Which one? It depends mainly on your profession.

READ ALSO: Everything foreigners need to know about the Austrian healthcare system

When it comes to taxes, several specificities could be confusing to non-Austrians or people who have recently moved to the country. The Local spoke with Dr Rainer Kratochwill, a tax adviser, owner and CEO of steuerexperten.at, to help foreigners avoid the typical “tax traps” one may find when moving to Austria.

Documentation is key

In some countries, it may be common practice to call tax authorities directly or send letters to them trying to explain or rectify issues they might have had.

“We sometimes have to overcome the expats’ desire to explain something to the tax office over the phone or appeal to common sense. In Austria, this will probably not work.”, says Dr Kratochwill.

Austria is a very formal country in many ways. Titles and official papers (literal papers, mailed and stamped, not emails) matter.

In many circumstances, expats end up needing to draw up a cover letter with the help of a tax advisor to follow specific Austrian standards.

READ ALSO: Will inflation force tax changes in Austria from 2023?

Documentation is also absolutely essential to support the origin of funds, Kratochwill highlights.

One thing many immigrants are surprised to learn is that large gifted sums or properties need to be registered with the tax office – and it is mandatory to provide the documentation of the origin of the funds from the giver.

“This point has to be further explained to expats because they often do not understand why the donor has to be verified and what documents can be provided”, he says.

So, don’t fall into the trap of taking a laissez-faire approach to Austrian authorities and documentation.

Taxes are high – but so is the standard of living

Kratochwill noted how many of their immigrant clients are used to paying fewer taxes in their home countries. That is another trap incomers might set up for themselves: “be prepared to pay high taxes in Austria”, he says.

“But for this, you have a lot: security, good public transport, good schools and universities and much more”, he added.

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

Austria works with a bracket system for income tax. So the higher you earn, the higher the taxes – up to 55 per cent for those making a whopping €1 million after expenses.

Up to €11,000 annual income, there is no income tax. However, whatever surpasses that falls into the next bracket (from €11,000 to €18,000) and is taxed at 20 per cent.

This means that if you earn, for example, €12,000 a year netto (after expenses and deductions), € 11,000 would be tax-free, and the remaining €1,000 would be taxed at 20 per cent – you’d pay € 200 income tax for the year.

The income tax is after other social contributions that pay for compulsory health insurance, social payments, and pension funds.

Many Austrians have tax advisors

A tax advisor is not the same as an accountant. For many people, the thought of paying someone to assist with their tax return may be strange – it might seem like something only millionaires do.

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

But it is relatively common practice in Austria, as advisors support their clients to pay according to the law, but no more than what they need to.

“An important rule is to consult in advance so that there is time to make adjustments. It is often too late, but even in these situations, we help reduce the tax burden a bit through, for example, tax refunds.” Kratochwill says.

Taxes can be filed in three years

And audited even later than that.

In Austria, you have from one to five years to file your income tax (longer if you do it through a tax advisor or in exceptional cases like during the pandemic), depending on your case. However, Dr Kratochwill advises against taking advantage of the long filing periods.

“The main thing an expat should keep in mind is to do it the right way from the beginning on and not start thinking about it after three years”.

In a country with a complex tax system, knowing your earnings and expenses, having your finances documented, and storing those files is crucial. And because tax audits can happen up to seven years after the filing (tax advisors will tell you to keep your documents for at least that long), Austrians know to keep their files for a very long time.

READ ALSO: Five things you will find in (almost) every Austrian home

This is why you will often see shelves full of binders in your local friend’s house – they are storing that receipt for that English class they took five years ago.

Do as your Austrian friend and save yourself some trouble in future years by saving your papers now.

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For members

POLITICS

How much do Austrian politicians earn as a monthly salary?

Politicians in Austria are getting a 5.3 percent salary increase in 2023 as inflation rises in the country. So how much will they earn?

How much do Austrian politicians earn as a monthly salary?

The rising inflation rate, which is expected to be at 10.6 percent in November, is reflected in the salaries of politicians in Austria, according to the official gazette of the Wiener Zeitung.

According to Austrian law, all salaries are calculated based on the income of the members of the National Council, the Austrian Parliament. Next year, they will receive €9,873 gross per month – €497 more than their salaries in 2022. The values were rounded to the whole euro amount. 

READ ALSO: How much do you need to earn for a good life in Austria?

So, how much are the leading politicians going to earn as a monthly gross salary in 2023?

  • Bundespräsident: the head of the Austrian State (Federal President) will earn €26,701 per month. Alexander Van der Bellen was reelected to the position and should stay in the job for six more years
  • Bundeskanzler: the head of the Austrian government (Chancellor) will earn €23,840 per month. That’s the salary of Karl Nehammer (ÖVP), who is expected to run for reelection in the next national elections set for 2024
  • Vizekanzler: the current vice-chancellor is Werner Kögler (Greens), and he is set to earn €20,979 from 2023
  • NR-Präsident: this refers to the leader of the National Council (Nationalrat, in German), who earns €20,026. Wolfgang Sobotka (ÖVP) holds the position
  • Landeshauptleute: this German word literally means “main persons of the province”. (Land means country, but it actually refers to the bundesländer, the country’s states or provinces). These are the current governors of the Austrian provinces, such as Michael Ludwig (SPÖ), mayor of the city-state of Vienna. They’ll earn €19,072 per month
  • Ministerin/Minister: Ministers of the federal government, including Health and Social Minister Johannes Rauch (Greens), will earn €19,072 every month
  • Landesrätin/-rat: the provincial councillors should earn €17,771 every month from 2023
  • Staatssekretärin/-sekretär: State secretaries, who play the part of Ministers in the provincial level, will earn €17,165
  • Bundesratsmitglieder: a “member of the Bundesrat”, which is the upper house in the Austrian parliament, will earn €4,936 per month

READ ALSO: Explained: How to understand your payslip in Austria

In Austria, hired employees are paid 14 times per year, with extra salaries ahead of summer holidays and Christmas.

Unless the National Council decides against the pay rise, the increase will come into effect on January 1st 2023.

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