Taxes in Austria: What Entrepreneurs Should Know

The decision to start a business in Austria can be tempting – the country is stable, offers high-quality infrastructure, and a fair legal environment. Nevertheless, one of the most common stumbling blocks for Czech entrepreneurs is the tax system, which might seem similar at first glance but has numerous differences in reality.

This is precisely why it pays to address tax matters before the business even starts. A correctly set-up tax regime can save considerable sums and prevent issues with Austrian authorities. Those who rely solely on Czech customs often run into trouble – whether during VAT registration, social security contributions, or income reporting.

Arguably, the most common misconception among Czech entrepreneurs is the assumption that they can maintain the same accounting and tax habits as they do at home. If you underestimate this issue, you might soon face a fine or a subsequent tax assessment. The taxes in Austria are simply different from those in the Czech Republic.

A Basic Overview of the Austrian Tax System

Austria has a tax system that is considered relatively stable, transparent, and well-enforceable. Tax administration is managed by the Austrian Ministry of Finance (Bundesministerium für Finanzen – BMF), under which the financial offices (Finanzamt) fall. These offices oversee tax collection, accounting control, and adherence to tax regulations for both natural and legal persons.

Main Types of Taxes in Austria

• Personal Income Tax (Einkommensteuer): Applies to the self-employed, employees, and sole traders. The rate is progressive, ranging from 20% to 55% depending on the income level.
• Corporate Income Tax (Körperschaftsteuer): Paid by companies (e.g.: GmbH). As of 2024, the rate is 23%.
• VAT (Umsatzsteuer): The standard rate is 20%, with reduced rates of 10% and 13% applying to items such as food, books, and accommodation services.
• SVS Contributions for Sole Traders (Self-Employed): These include health insurance (14.6%), pension insurance (18.6%), long-term care insurance (Pflegeversicherung) (3.6%), and unemployment insurance (Arbeitslosenversicherung) (2.6%).
• Local Taxes and Fees: Examples include real estate tax (Grundsteuer) or the local tourism fee (Ortstaxe), paid by the accommodation provider per guest per night.

Resident vs. Non-Resident: What Does It Mean for Taxes?

“The distinction between resident and non-resident is absolutely crucial in Austria – it determines whether you are taxed only on Austrian income or also on income from abroad,” emphasises Ulrich Paugger of the company auditorea.

• Tax Resident (Inländer): Taxes worldwide income in Austria. A double taxation treaty must be applied if relevant.
• Tax Non-Resident (Ausländer): Has a limited tax liability. Only taxes income sourced within Austria (e.g., from business, property, or employment here).

TIP: An entrepreneur is mainly considered an Austrian tax resident if their centre of vital interests is in Austria.

Personal Income Tax (Einkommensteuer)

This tax applies to all individuals with taxable income in Austria, whether from employment, self-employment (sole trader), rent, or capital gains.

Income tax is paid by:

• Austrian Tax Residents – they tax all their income (including that from abroad).
• Tax Non-Residents – they tax only income sourced in Austria (e.g., from business, work, or rental on Austrian territory).

The Austrian tax system is progressive, meaning the higher the income, the higher the tax rate. Lower incomes are therefore taxed more moderately, while higher incomes are subject to a higher percentage burden.

The current tax brackets for 2025 are as follows:

Annual Income (€)	Tax Rate
up to 13 308 €	0 %
from 13 308 € to 21 617 €	20 %
from 21 617 € to 35 836 €	30 %
from 35 836 € to 69 166 €	40 %
from 69 166 € to 103 072 €	48 %
from 103 072 € to 1 000 000 €	50 %
over 1 000 000 €	55 %

Applicable Deductions and Allowances

The Austrian system allows for a wide range of tax deductions and allowances that reduce the final tax liability. The most common ones include:

• Basic tax credit for the taxpayer (Verkehrsabsetzbetrag),
• Child tax credit (Kinderabsetzbetrag),
• Tax credit for a spouse without income (Alleinverdienerabsetzbetrag),
• Commuter lump sum (Pendlerpauschale),
• Deduction for insurance and private pension provision.

Most Common Tax Reliefs Used by Sole Traders (Self-Employed)

Entrepreneurs and sole traders in Austria have the opportunity to use several specific tax advantages:

• Lump-sum Expenses (Pauschalierung): Allows a fixed percentage of expenses to be applied based on the type of business, instead of keeping detailed records. Lump-sum expenses can be 6%, 12%, or 20% of revenue.
• Investment Allowance (Investitionsfreibetrag): Sole traders can deduct up to 10% of the value of new investments in long-term assets (e.g., computer, vehicle, office equipment).
• Insurance Credits (Sozialversicherungsbonus): Allow the tax base to be reduced by paid social and health insurance contributions.
• Tax Relief for Small Businesses (Kleinunternehmerregelung): If annual revenue does not exceed €55,000.

Corporate Income Tax (Körperschaftsteuer)

Corporate Income Tax (in Austria referred to as KSt) applies to companies with legal personality, particularly the GmbH (limited liability company) and AG (joint-stock company). As of 2024, the tax rate is 23%.

How to File a Tax  Return

Every legal entity registered in Austria is obligated to file a Corporate Income Tax return (Körperschaftsteuererklärung) via the online system FinanzOnline.

The basic steps are as follows:

1. Close the Accounting Period – usually on 31st December (a different fiscal year can be chosen).
2. Prepare the Annual Financial Statements (Jahresabschluss) – must include the balance sheet, profit and loss account, and notes.
3. File the Return – no later than 30th April of the second following year. For example, the return for 2025 must be filed by 30th April 2027. Filing and publishing the financial statements with the commercial court is mandatory within nine months of the end of the accounting period.
4. Tax Payment – the tax is paid based on preliminary quarterly prepayments (Vorauszahlungen), which are adjusted at the end of the year according to the actual result.

Obligations of an GmbH to the Financial Office After Establishment

• Tax Registration: After registration in the commercial register (Firmenbuch), an application for Corporate Income Tax and, where applicable, VAT registration must be submitted within a few days.
• Setting up a FinanzOnline Account: The electronic portal for communication with the office, filing returns, and paying taxes.
• Tax Prepayments (Vorauszahlungen): Amount to €500 annually and are paid even if the company does not make a profit.
• Accounting According to Austrian Standards (UGB): Accounting must be complete, verifiable, and maintained in an official language of the European Union.
• Document Archiving: Tax documents and financial statements must be kept for the legally prescribed period.
• Communication with the Finanzamt: All changes (e.g., registered address, managing directors, change of bank account) must be reported without delay.

VAT (Umsatzsteuer)

Value Added Tax, called Umsatzsteuer (USt) in Austria, is one of the key taxes affecting most entrepreneurs and companies. It functions similarly to Czech VAT but with several differences in rates, registration thresholds, and rules for cross-border invoicing.

Tax conditions for businesses in Austria vary according to the type of goods or service. Generally, three VAT rates apply here:

• Standard Rate (20%): Applies to most goods and services.
• Reduced Rate (10%): Applies to food, medicines, books, transport, housing rent, restaurants, cultural events, accommodation services, plants, animals, and wine from vintners.

Every entrepreneur who provides taxable services in Austria is obliged to monitor their annual turnover. If it exceeds the set limit, they must register for VAT with the Austrian financial office (Finanzamt).

The limit for mandatory registration is €55,000 annually (the so-called Kleinunternehmergrenze, or small business threshold). If an entrepreneur does not exceed this limit, they can use the Small Business Exemption (Kleinunternehmerregelung) – in this case, they do not charge VAT and do not remit it to the state, but they also cannot claim a VAT deduction on purchases.

Once the limit is exceeded, the entrepreneur must obtain an Austrian VAT ID (USt-IdNr.), start charging VAT on invoices, and regularly file tax returns (monthly or quarterly, depending on turnover).

Cross-Border Invoicing

As a member of the European Union, Austria adheres to uniform rules for invoicing between member states. The status of the customer (business vs. end consumer) and the place of supply are decisive.

Supply of Goods to Businesses (B2B) within the EU

If the buyer is a VAT payer in another EU country and provides their valid VAT ID, the supply is exempt from tax in the supplier’s country. In Austria, the recipient taxes it under the reverse-charge mechanism.

Sale of Goods to End Customers (B2C)

If an Austrian entrepreneur sells to customers in another EU country (e.g., an e-shop), the One Stop Shop (OSS) scheme applies. VAT is remitted in the customer’s country according to its rate, and the return is filed via the unified OSS portal.

Provision of Services to Other EU Countries

For services, the place of taxation is governed by the “place of recipient” principle. For B2B invoicing, reverse charge is again applied; for B2C invoicing, VAT is generally remitted in Austria.

Other Taxes and Obligations

In addition to income tax and VAT, the Austrian tax system also includes other mandatory contributions and local fees.

Wage Tax (Lohnsteuer)

Wage tax in Austria is the equivalent of income tax for employees, which is directly paid by the employer on behalf of their workers.

• The tax is calculated according to the same progressive table as Personal Income Tax (Einkommensteuer).
• The employer deducts it monthly from the employee’s gross wage and remits it to the financial office.

Social and Health Contributions (Sozialversicherungsbeiträge)

In Austria, contributions are split between the employee and the employer. The employer is obliged not only to calculate the contributions but also to register the employee with the social security system (ÖGK – Österreichische Gesundheitskasse) and remit payments regularly every month.
Total contributions from the gross wage are around 39%, of which approximately 21% is paid by the employer and 18% by the employee.

Employer contributions for employees are as follows:

• Health Insurance: approx. 3.78%
• Pension Insurance: approx. 12.55%
• Unemployment Insurance: approx. 3%
• Accident Insurance: 1.2% (fixed rate)
• Other contributions: approx. 1% (family fund, education, etc.)
• Contribution to the Employee Provision Fund (Mitarbeiter Vorsorgekasse): 1.83% of the gross wage (once the employee is eligible for retirement, they can have the entire amount paid out).

Local Taxes and Fees (Kommunalabgaben)

Austrian municipalities have the right to levy certain local taxes, which may differ by region. The most significant of these are:

• Local Payroll Tax (Kommunalsteuer): At a rate of 3% of the gross wages of all employees. It is remitted directly to the municipality where the company has its establishment.
• Real Estate Tax (Grundsteuer): Paid on owned land and buildings. The amount varies by municipality, typically 0.2-0.5% of the property value.
• Waste, Water, and Sewage Fee: Mandatory for all businesses with an establishment. The amount depends on the size of the operation, consumption, and location.
• Tourist and Cultural Fees (Ortstaxe,Nächtigungsabgabe): Primarily affect entrepreneurs in hospitality, accommodation, and tourist services.

Concluding Tips and Recommendations

Doing business in Austria offers many opportunities but also a certain degree of administrative complexity – especially in the area of taxes. Therefore, it pays to work systematically from the start and be clear about which taxes to pay, when, and how.

Collaboration with a tax advisor (Steuerberater) is common practice in Austria. Not only for large companies but also for sole traders and start-up entrepreneurs. As Ulrich Paugger of auditorea points out: “Many Czech entrepreneurs underestimate the differences in the Austrian tax system. The correct setting of the tax regime right at the start can determine whether a business in Austria will be successful or problematic.” A tax advisor should definitely be used when establishing a company, for cross-border business, or for the annual tax settlement. Thanks to their expert knowledge, the advisor can find legal ways to reduce the tax burden and prevent fines, which often results in many times the saving in time and money.

If you are considering doing business in Austria or need advice on tax and accounting matters, contact the Czech-Austrian Chamber of Commerce and Industry or the company auditorea, which operates in Austria, the Czech Republic, and Slovakia and helps entrepreneurs correctly set up tax and accounting processes from the very beginning.