Taxation in Austria, Austria Business Income and Rates - Allo' Expat Austria
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Taxation in Austria
 
 
 
 
 

Business Taxation

Reductions in the corporate tax rate in recent years have made Austria an attractive place to invest and have ensured that it remains broadly competitive compared with low-tax jurisdictions in central and eastern Europe.

Corporations also pay municipal and real-estate tax but no excess-profits tax. To qualify as a group, application must be made to the tax authorities and a tax allocation agreement must be in place between the group members. Only entities in which the parent company holds a stake of at least 50% and voting rights of at least 50% can form part of a group.

Taxable Income and Rates

Taxable Income Defined
A company is considered resident in Austria if its effective management is in Austria or if it is incorporated in Austria. Non-resident companies (branches) are liable for taxes only on Austrian-source income. Resident corporations pay tax on worldwide income, but the liability for tax may be restricted or reduced by double taxation treaties. Therefore, foreign income may be exempt or taxes paid on foreign income may be credited against Austrian taxes, as stipulated under tax treaties or as approved by the tax authorities.

The corporate tax rate is 25%. There is a minimum tax payment of €1,750 for a limited liability company and €3,500 for a joint stock company. These rates apply from the second year of operation; the minimum tax level in the first year is €1,092. Minimum tax is paid quarterly on the date that normal advance tax payments are due, only in this case there is no refund in the event of over-payment. In the case of groups, these minima apply to each taxpaying entity within the group.

Taxable income is broadly defined as the difference between net assets at the beginning and the end of the financial year, after allowing for dividend payments received and any losses being carried forward. Transactions are accounted for in most cases on an accruals basis.

Intercorporate dividends received from other Austrian companies (tax-free) and capital contributions by shareholders are tax-exempt. Dividends received from outside Austria from corporations comparable to Austrian corporations may be tax-exempt if at least 10% of the shares are held for a minimum period of one year.

Deductions
Despite a general tightening of tax-free benefits, all normal operating expenses and extraordinary expenses are allowed as deductions against gross income. Operating expenses include all the normal expenses of operating a business, such as raw materials, wages, maintenance costs, travel expenses, Chamber of Commerce dues (membership is compulsory), statutory social insurance contributions and normal depreciation.

Deductible direct expenses include those for the following purposes: maintaining earnings and obtaining services; materials and equipment required for work; research and development (R&D); outlays on business vehicles; expenses connected with the formation of companies and the issuance of shares; interest on loans and debts to third parties; royalties; and service fees. Special expenses, such as contributions and premiums for life and health insurance, fees for certified public accountants, housing expenses and some repair costs, may also be deducted. Tax payments, except for corporate income and real estate acquisition taxes, may also be deducted. Fringe benefits to employees are deductible only within low limits. Only 50% of entertainment expenses are tax-deductible as is remuneration of the supervisory board.

In addition to deductions for compulsory contributions to social insurance and public-relief funds, and to severance pay investment funds, companies may reduce their taxable income by setting up occupational pension funds.

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