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Austrian tax season: What deductions and claims can help you get your money back?

Austria's high taxes and compulsory contributions help pay for its renowned public services and healthcare - but that doesn't mean you can't use legal deductions and claims to get some money back come tax season.

Tax season can be complicated. Photo: Elisa Ventur / Unsplash

If you are employed in Austria, expect a chunk of your gross salary to be deducted immediately from your payslip. 

The most considerable deduction is almost certainly Sozialversicherungsbeiträge or social insurance contributions. It can be broken down into Pensionsversicherung (pension insurance — you pay 10.25 percent of your salary for this), Krankenversicherung (sickness insurance — 3.87 percent of your salary), Arbeitslosenversicherung (unemployment insurance — 3 percent of your salary). 

After that, you’ll have to pay income tax on anything that surpasses € 11,693 in a year. It can add up to a substantial amount of your gross income, and contributions are taken automatically from your paycheck if you are a salaried worker.

You can read more about how to file your taxes in Austria HERE.  

However, you can add many tax deductions to your tax return filing to help you get some of your overpaid taxes back.

Tax-reducing expenses

Certain expenses can reduce your taxable income as long as they are directly connected to the revenue, also known as business expenses. This could include training costs, office supplies, and others. 

There are particular circumstances and regulations for some items, especially working from home, training and transportation costs, so it is worth checking your specific case with a tax advisor. 

Every employee can also use a lump sum of €132 per year or calculate each item individually.

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

Tax deductions

There are also several tax deductions that you can claim (some, like the pensioner or transportation deduction, will come automatically with your payments and wage). Here are the tax deductions for 2023:

  • Family Bonus Plus up to 18 years: €166.68/month and Family Bonus Plus from 18 years: €54.18/month

Parents whose child is entitled to family allowance are entitled to the Family Bonus Plus.

  • Transportation deduction: €421/year

All employees are entitled to the transportation deduction, which is automatically considered by the employer and settled by a lump sum. 

  • Pensioner deduction: up to €868/year

The agency paying out your pension settles the pensioner deduction automatically.

  • Increased pensioner deduction: up to €1,278/year

This applies if the current pension income does not exceed €19,930 during the calendar year, the person lives in a marriage or registered partnership with someone who earns no more than €2,200 per year and has no entitlement to the single-earner tax credit.

  • Cost of living tax credit: up to €500/year

This year, low-income employees will receive a cost of living tax credit which is automatically taken into account in the employee tax assessment if the requirements are met.

  • Single-earner tax credit: €520/year (in case of one child, more if there are more children)

The single-earner tax credit is due if a taxpayer with at least one child is, for more than six months in the calendar year, married or a registered partner to a spouse subject to unlimited tax liability, or the spouse receives income in 2022 of no more than €6,000 in the calendar year.

  • Support money deduction: up to €62 per month and per child

This tax deduction is for parents who pay child support for a child not living in the household.

READ ALSO: EXPLAINED: What is Austria’s church tax and how do I avoid paying it?


Other deductions

  • Special expenses

Certain private expenses can be claimed in your tax return, including church tax payments (up to €400), tax-consultancy costs to an unlimited amount, insurance coverage, donations to recognised organisations (deductible only to the extent that they do not exceed 10 percent of the total amount of income of the relevant year of assessment).

  • Environmental expenses

Certain expenses to improve the energy and heat efficiency of a building (such as insulation of external walls, roofs or replacement of windows) are also tax-deductible.

  • Extraordinary burdens

Certain expenses may be considered extraordinary if they are inevitable and if they considerably affect your economic performance capacity. This is often the case with medical expenses, which can be deducted up to a certain amount, depending on income. Prescribed medication is fully deductible; you can also deduct expenses for therapeutic aids, childbirth costs, disabilities and more.

Certain diseases with dietary requirements prescribed by a physician have separate lump sums. For example, people diagnosed with diabetes have a monthly tax allowance of €70.

Extraordinary expenses for dependants can also be deducted in the same way.

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How Austria wants to incentivise new startups in the country

Austria is a great country to live in, but the bureaucratic steps and hurdles make it difficult for new startups to grow. Here's what the federal government wants to do to incentivise new companies.

How Austria wants to incentivise new startups in the country

The federal government is proposing tax breaks to facilitate the foundation of start-ups in Austria, according to broadcaster ORF.

The proposed measures aim to make it easier for these companies to offer employees a stake in the company and introduce a new corporate form that allows for a lower minimum tax. The bill was presented by Finance Minister Magnus Brunner (ÖVP) and Justice Minister Alma Zadic (Greens) on Friday and will now undergo a review process.

READ ALSO: How entrepreneurs can get Austria‘s ‘Red-White-Red’ card for skilled non-EU workers

Currently, start-ups face challenges when granting shares to employees, as payroll tax is immediately due upon transfer. However, in the early stages of building up a company, remuneration is often low or nonexistent, making it difficult for beneficiaries to pay the tax from their income.

Under the proposed changes, taxation would be deferred until the shares are actually sold. This means that taxes will be paid when there is actual monetary gain for startups.

New legal form

Additionally, under the new proposal, 75 percent of the proceeds from the sale of shares would be subject to a flat tax rate of 27.5 percent, similar to capital gains, while the remaining portion would be taxed at the income tax rate.

This recognises that the value increase of shares over time serves as an incentive for stakeholders and treats this increase as 75 percent income from capital assets, the federal government stated. Furthermore, start-ups would be spared the time-consuming process of determining the company’s value at the beginning, simplifying the taxation of share transfers.

READ ALSO: What is a regulated business licence in Austria and who needs one?

To support start-ups in their initial phase, a new legal form called “Flexible Capital Company” (FlexKap) is being introduced. This legal form reduces the minimum share capital requirement to €10,000, compared to €35,000 for a limited liability company.

Consequently, the minimum corporate income tax, which is calculated as five percent of the share capital annually, would be reduced by approximately two-thirds, resulting in savings of around €1,250 per year.

The Ministry of Finance estimates that collectively, start-ups would save €50 million annually as a result of these changes.