Taxes

Taxation of companies

Corporate Income Tax

In Austria, companies - especially stock corporations and limited liability companies - are subject to corporate income tax on their entire income and their profits at a standard tax rate of 25%. Levies such as trade tax and net worth tax, which are common in other countries, do not exist in Austria.

Regarding the effective tax burden of companies, Austria is one of the top ranked countries in Europe. Compared to other EU nations, Austria offers one of the lowest tax rates for companies - on the same level as the Eastern European neighbour countries.

Group taxation is a big plus for headquarters

In the view of the tax experts at the global accounting firm KPMG, companies benefit most from the new group taxation provisions included in the 2005 tax reform package. Both international companies but also smaller foreign firms with subsidiaries can reap enormous advantages from the new rules in relocating operations to Austria, especially in establishing headquarters for the Eastern European region.

Under group taxation provisions, the profits and losses of domestic group members, along with the losses of foreign subsidiaries, are offset, reducing the basis for calculating corporate tax. Companies can capitalize on group taxation with an equity share of 50% plus one share in a subsidiary.
In the case of an acquisition, goodwill can be written off over a period of 15 years, a further advantage not currently available in other countries.

Tax deductions

A range of tax deductions lower the effective tax burden to 23%.

The effective tax burden of limited liability companies in Austria is at a level of 23.1%, according to a recent study published by the Center for European Economic Research, located in Germany. This advantage is attributable to numerous available tax writeoffs, including the investment exclusion of 9%. Also providing for significant tax reductions are research and training exemptions, exemptions for apprentices, deductions for losses and the carryover of silent reserves. All of these provisions bring the corporate tax burden in Austria about 40% below the level in Germany.

Research allowance

The research allowance: up to 35% of research expenditures are excludable if applied to the development or improvement of inventions with macroeconomic value. This provision makes Austria’s tax system the most attractive in Europe in the area of research and development. Companies not making a profit in the year they make the research expenditures are granted a bonus of 8% of their expenditures.

Education allowance

The training allowance: allows for exclusion of up to 20% of employee training and retraining expenditures. As alternative an education bonus of 6% of the expenditures can be claimed.

Capital Gains Tax

Interest earnings, bank interest and interest from securities held in Austrian deposit accounts and derived by an individual resident in Austria are subject to the 25% withholding tax. With this withholding tax deduction income tax is frequently deemed to be satisfied (final or definitive taxation).

Taxation of Individuals

Individuals maintaining residence or habitual abode in Austria are subject to personal income tax. Unlimited tax liability is extended to all domestic and foreign sources of income (worldwide income). Otherwise individuals are subject to limited tax liability for Austrian source income. An individual has his habitual abode in Austria if he is not just staying in the country temporarily. Where the stay in Austria does exceed six months (183 days), then in any case unlimited tax liability in Austria is applicable.

Income tax is based on such income as the taxpayer has earned within a calendar year from the seven types of income listed in the Income Tax Act:

Sources of income not included in these seven types of income are thus not taxable. 
 
The tax rates for the income of individuals range betweem 0% and 50%, according to the level of income.

Source:

ABA-Invest in Austria