If you are looking at expanding into a European country with great trade laws, Austria should be one of your top picks. Many U.S. employers have set up shop in Austria. Payroll rules and regulations needs to be considered when expanding internationally. For Multinationals who have Austria on their list for expansion, here is a helpful guide from a payroll perspective.
Ease of Doing Business in Austria: An Overview
Austria is a completely landlocked, German-speaking country. Companies that desire to do business in Austria may either choose to acquire a license or formally register their business in Austria. Most companies choosing to register desire to manage their payroll responsibilities internally. But this is a bit expensive.It is usually much simpler for foreign businesses to license and then outsource their payroll to a Global Employment Organization (GEO) in order to remain compliant.Income tax rates are somewhat on the high side, but there are no local income taxes except a small 3% municipality tax.
Many economists consider Austria a gateway to doing business in Southeast Europe. Hundreds of U.S.-based businesses have already established regional headquarters in Austria. There are also many similarities to the way the United States does business. Trade tariffs and export barriers are relatively low compared to other European countries.
Recent Developments in Austria Payroll Laws
The most significant developments for payroll in Austria occurred in 2015. The government lowered tax rates on employment income but raised withholdings on dividends and capital gains.
Basic Facts about Payroll in Austria
Even after some income tax reform in 2015, income taxes for employees are significant. As noted above, licensed businesses within Austria are advised to outsource their payroll needs to an experienced GEO.
Aside from corporate taxes, income taxes are withheld from an employee’s paycheck. There are several minor taxes that contribute to municipalities, local chambers of commerce, pension funds, and insurance contracts.
Rates and Thresholds
Income tax rates range from 25-55% of an employee’s gross income. Those making €11,000 or less are not required to pay income taxes (this is usually because that employee was not employed for a full year). Municipality taxes are 3%.
How Withholding Works
Employers withhold employee taxes from each paycheck and send those payments directly to the government. So long as that employee only worked for one employer that year, there is no need for that employee to file a return unless they qualify for tax credits.
Returns and Tax Credits
If an Austrian worker has only one employer, that employer will assume responsibility to file returns. However, if an employee has more than one employer or wants to claim tax credits, they will need to file their own tax return. Employees can claim tax credits based upon deductible expenses (business or special). They are also entitled to a partial refund if they were not employed for the entire year.
In the case where an employee must file their own tax return, they are required to do so by April 30 of the following year.
Employee Stock/Share Plans
Interestingly, most Austrian employers do not provide stock or share plans for their employees. Of the companies that do, only a percentage of employees choose to participate. It is estimated that 36% of employers have some kind of stock or share plans, but employee participation lands somewhere between 9-19%.
Late tax return filings or payments generally receive a penalty starting at 10% of taxes owed. More serious tax infractions, to include refusing to pay or fraud, can result in more serious penalties, including incarceration.
Tax Rate Chart
|USD Comparison||Income Range||Tax Rate||Pre-Tax Social Security (Monthly)||Payroll Withholding (Monthly)|
* Withholding begins at an annual salary of €29,000.
Compensation and Benefits
General compensation, work hours, and benefits are somewhat similar to the United States. However, Austria takes family and paid leave very seriously, starting at a minimum 5 weeks of paid leave each year.
While Austria does not technically have a government enforced minimum wage, employers generally agree with employees that an acceptable minimum salary be at least €1,500 a month (€18,000 a year) before taxes.
Labour laws in Austria allow employees to work up to 50 hours per week, or 10 hours in a day. Overtime begins after 40 hours a week. While the government does not specify overtime extra pay, work contracts usually set an overtime rate above the normal pay rate.
Hours of Work
Standard work hours differ among industries, particularly in retail and government work. Office work hours are 8am-5pm with an hour lunch break. On Fridays, work hours are 8am-3pm, and offices are closed for the weekend.
Holiday & Sick Leave
Austrian employers are usually quick to allow their employees flexible work hours or significant amounts of time off in order to be with their families. All employees are permitted a minimum 5 weeks of paid leave each year. If an employee has worked for a company for 25 years, they are entitled to 6 weeks of annual paid leave.
Annual paid leave does not take away from sick or maternity leave which are usually outlined in an employee contract.
National holidays are also observed by employers. There are 15 in all:
- New Year’s
- Epiphany (January 6)
- Easter Sunday
- Easter Monday
- Labour Day (May 1)
- Ascension (May)
- Pentecost (May)
- Whit Monday (May)
- Corpus Christie (May or June)
- Assumption of the Blessed Virgin Mary (August 15)
- National Day (October 26)
- All Saints Day (November 1)
- Immaculate Inception (December 8)
- Christmas Day (December 25)
- Boxing Day (December 26)
How Employees File Taxes at the End of the Year
Employees do not have to file taxes if they worked for one employer for the whole year. If they have multiple income sources or qualify for tax credits, they must file their return by April 30 of the following year.
Citizens of European Union countries may live in Austria for 3 months without any visas or permits. If they intend to remain in Austria for longer than 3 months, they must apply for a certificate of registration. Foreign residents that have used their certificate of registration for 5 years must acquire a long-term certificate of registration to remain living in Austria.
For citizens of third countries (that is, a non-EU country) must acquire a formal visa in order to remain and work within Austria. Requirements for a work visa are very similar to requirements for a work visa in the United States. Recipients must either be attending an Austrian college/university or demonstrate somehow that they are a notable expert in their industry.
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