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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, 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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Is inflation finally subsiding in Austria?

Statistics Austria released a preliminary estimate showing that the inflation rate in May was 8.8 per cent, a decrease from the previous month's rate of 9.7 per cent. So are prices finally going to go down?

Is inflation finally subsiding in Austria?

Tobias Thomas, the Director General of Statistics Austria, attributes this decline to lower fuel prices and less price pressure on food items.

“In May 2023, inflation in Austria has clearly lost momentum,” he said. “According to a first estimate, inflation is expected to be at 8.8 percent after 9.7 percent in April. This is the lowest value since June 2022. The main reason for this decline is the uninterrupted downward trend in fuel prices. The upward trend in food prices continues to weaken.”

A similar trend was observed in Germany, where the inflation rate for goods and services decreased from 7.2 percent in April to 6.1 percent in May. According to Eurostat, the inflation for the eurozone is estimated to be at 6.1 percent – down from the 7 percent registered in April. 

READ ALSO: What will become more expensive in Austria in June?

However, despite the decline in May, inflation continues to burden many individuals significantly. 

According to calculations by the Momentum Institute, an institute affiliated with the trade union, a single-person household needs to spend an average of €405 more per month this year to maintain their standard of living compared to 2021. The highest cost increases are observed in housing and energy, amounting to an additional €117 per month, followed by transport with €81, and food with an additional cost of €71 per month. 

The challenge lies in the fact that the average increase in income of €260 does not fully offset these additional costs, resulting in a shortfall of €145 per month to maintain the standard of living experienced in 2021.

Final report by mid-June

From a large set of price data, Statistics Austria initially calculates the flash inflation estimate at the beginning of the following month. This estimate includes around 80 to 90 per cent of the prices required for the calculation. Typically, the inflation rate is accurately calculated with a deviation of only 0.1 percentage points. 

READ ALSO: What is driving rising inflation in Austria and will the government act?

The final inflation data, including inflation rates for specific product groups, are released later in the month. In the case of May 2023, this will occur on June 16th.

Statistics Austria experts previously had an indication that a wave of inflation was approaching the country due to indices for import or producer prices, which provide insights a few months ahead of the CPI data. 

However, the current indications are different, as producer prices only rose by 4.6 per cent in April. This suggests that the cost of living pressure on consumers will likely ease in the future.