Extended business travelers are likely to be taxed on employment income relating to their Austrian workdays.
Liability for income tax
A person’s liability to Austrian tax is determined by residence status. A person has unlimited liability to taxation (is a “tax resident”) if that person’s residence (that is, any home readily available for the resident’s use) or habitual place of abode (which is automatically assigned once the stay exceeds six months) is in Austria. The general rule is that such a person is assessable on worldwide income. If neither of these conditions is fulfilled, the person has only limited liability to taxation (is a “nonresident”) in Austria, in other words, is generally assessable only on income derived directly or indirectly from sources in Austria. Extended business travelers are likely to be considered nonresidents of Austria for tax purposes unless they enter Austria with the intention to remain in Austria on a permanent basis.
Definition of source
Employment income is generally treated as Austrian-sourced compensation where the work is performed or used in Austria.
Tax trigger points
Technically, there is no threshold/minimum number of days that exempts the employee from the requirements to file and pay tax in Austria. To the extent that the individual qualifies for relief in terms of the dependent personal services article of the applicable double tax treaty, there will be no tax liability. The treaty exemption will not apply if the Austrian entity is the individual’s economic employer.
Types of taxable income
For extended business travelers, the types of income that are generally taxed are employment income, Austrian-sourced income, and gains from taxable Austrian assets (such as real estate).
Tax rates – 2014
Taxable income is subject to progressive tax rates of up to 50 percent, starting at an annual income of EUR11,000:
||((income – 11,000) * 5,110) / 14,000|
||((income – 25,000) * 15,125) / 35,000|
Source: Income Tax Act, 2014
Austrian tax law distinguishes between regular payments, which recur every month, and special (nonrecurring) payments. For special payments up to one-sixth of all regular payments earned within the same tax year, the special flat tax rate of 6 percent applies. For the years 2013 – 2016 a so called solidarity surcharge was implemented with tax rates for special payments from 0% - 50% depending on the amount of special payments and the total employment income.
For the assessment of an individual who is subject to limited tax liability in Austria, the amount of EUR9,000 is added automatically by the tax authorities to the taxable income in order to reduce the tax-free amount to EUR2,000.
Liability for social security
The Austrian social insurance scheme, which is a statutory system, includes insurance for health, accident, unemployment, and pension. In principle, employment in Austria is the criterion for being included. As a result, Austrian nationals and others working within the territory of Austria are treated equally.
The contributions consist of an employee’s element and an employer’s element: The employee’s element amounts to 18.07 percent. This rate applies for regular payments (those that recur every month, such as the monthly base salary).
In addition, there is a maximum contribution basis of EUR4,530 per month for regular payments. The rates for special payments (those that do not occur on a monthly basis, such as a bonus) amount to 17.07 percent; the maximum contribution basis for special payments is EUR9,060 per year.
The employer’s rates on regular payments amount to 21.83 percent and on special payments, 21.33 percent. The same maximum contribution bases apply.
Due to the EU regulation 883/2004 (respectively, 1408/71 in some cases) and a number of social security totalization agreements, extended business travelers are usually exempt from Austrian social security.
Employee compliance obligations
Tax returns are due by April 30 of the following year or by June 30 if filed electronically. If the taxpayer is represented by a tax advisor, the deadline is automatically extended until March 31 of the next following year.
Generally, a tax return must be filed only if the individual’s taxable income exceeds EUR12,000 (in case of wage tax withholding) and EUR11,000 (in all other cases). Income tax on employment income is withheld at the source (wage tax). Nevertheless, a tax return is required if the individual has additional annual income in excess of EUR730 not previously subject to employer withholding or more than one form of employment. A threshold of only EUR22 applies for foreign income from investments.
Employer reporting and withholding requirements
If the remuneration is paid by an Austrian employer, the employer is obliged to calculate wage tax on the employee’s behalf and remit it by the 15th of the following month to the tax authorities. The employer is responsible for the correct remittance.
Payroll-related employer taxes include municipal tax (3 percent of gross compensation), contribution to the Family Burden Equalization Fund (4.5 percent of gross compensation), and surcharge for Chamber of Commerce (approximately 0.4 percent of gross compensation). Depending on the social security status in Austria, exemptions are available.
Work permit/visa requirements
In general, there are no visa requirements for moves within the EU (although there can be visa requirements for arrivals from new member states). A visa must be applied for before individuals from outside the EU enter Austria. The type of visa required will depend on the purpose of the individual’s entry into Austria.
Other immigration considerations
In case neither a work permit nor a visa have to be obtained there may still be the employer’s obligation to perform certain registrations, e.g. with the competent Labour Market authorities. A foreign national being assigned by a company with place of business in another EEA member state for the purpose of temporary work performance does not need any permits provided the foreign national is duly employed at the employer’s place of business at least during the assignment and the applicable Austrian regulations concerning wages and Social Security are maintained. The employer has to observe mandatory reporting requirements though with the competent authorities and faces administrative penalties in case of non-compliance.
The intended or actual duration of the stay of the extended business traveler is a decisive factor for the question if and which permits have to be obtained or if and which reporting requirements have to be observed. Citizens of the European Union can move within the EU according to the regulations of the Schengen Agreement basically without further permit requirements. Holders of a non-restricted Schengen-visa for a short–term stay (category „C“) may move during its period of validity within the territory of the Schengen member states. Third country nationals in possession of a national visa of a Schengen member state may move during its period of validity within the territory of the Schengen member states up to a limited duration of 90 days within a 180 days-period. Registration requirements (e.g. with the competent Labour Market authorities) are omitted in case the work performance does not exceed a few days and no domestic employees would be used with respect to the particular nature of the work.
Immigration related compliance regulations for extended business travelers and their employers are found in various legal areas. Penalties for non-compliance may – depending on the importance of the violated regulation – also be imposed in a considerable amount (for instance according to the Employment of Foreign Nationals Act). Usually there is a legal liability of the employer, depending on the penalty there may in certain cases also be a liability of the employee or of both (employer and employee) though.
Apart from the most commonly applicable legal provisions in the areas of taxation, residence, employment and social security, immigration related compliance regulations may also be found in domestic registration law, anti-discrimination law (immigration-related discrimination) or health law. Depending on the particular case further legal regulations may have to be observed by the extended business traveler and/or employer, e.g. in the field of export control or technology transfer.
Double taxation treaties
In addition to Austria’s domestic arrangements that provide relief from international double taxation, Austria has entered into double taxation treaties with about 90 countries to prevent double taxation and allow cooperation between Austria and foreign tax authorities in enforcing their respective tax laws.
Permanent establishment implications
There is the potential that a permanent establishment could be created as a result of extended business travel, but this would depend on the type of services performed and the level of authority the employee has.
Value-added tax (VAT) is applicable at 20 or 10 percent on taxable supplies. VAT registration may be required in some circumstances.
Austria has a transfer pricing regime. A transfer pricing implication could arise to the extent that an employee is being paid by an entity in one jurisdiction but performing services for the benefit of the entity in another jurisdiction, in other words, a cross-border benefit is being provided. This would also be dependent on the nature and complexity of the services performed.
Local data privacy requirements
There are data privacy laws in force in Austria.
Foreign currencies can be exchanged at the daily exchange rates. Travelers’ checks can be cashed easily in Austria, and credit cards are accepted almost everywhere. There are no restrictions on the import and export of either the euro or other foreign currencies.
Nondeductible costs for assignees
Nondeductible costs for assignees include, for example, payments by an employer that have already been treated tax-free on the Austrian payroll.