Corporate Income Tax in 2011
Corporate income tax in Austria is levied at a rate of 25% in 2011. Capital gains of companies are taxed at the same rate. There is a minimum tax on companies who would otherwise be paying little or no corporate income tax, amounting to EUR 3,500 for an AG (public company) and EUR 1,750 for a GmbH (private company). Losses may be carried forward without limit for tax purposes and offset against future profits.
Dividends paid to resident companies are subject to a withholding tax of 25%, however no withholding tax is due if the recipient company has a shareholding of at least 25% in the paying company.
A withholding tax of 25% applies to most payments of interest in Austria, except where interest is paid on a loan between two companies. The withholding tax applies to interest on deposits and debt claims with certain banks; interest on some securities; and interest on participations in investment funds. No withholding tax applies in relation to royalties paid to resident companies. Where tax has been withheld at source on income received by Austrian companies, this can be offset against the corporate income tax liability.
Royalty payments made to a non-resident company are subject to a final withholding tax of 20%, but no withholding applies where one company has at least a 25% shareholding in the other. Interest paid to non-resident companies is normally not subject to a withholding tax, except in certain defined situations, but dividends paid to non-residents are subject to a 25% withholding tax. These rates may be reduced by the provisions of a relevant double tax treaty.
Austria has concluded a network of double taxation treaties which allocate taxing rights between Austria and its treaty partners. The treaties provide for maximum withholding tax rates on dividends, interest and royalties and provide for the elimination of double taxation where possible by means of a credit or exemption for foreign tax. The treaties also provide a dispute resolution mechanism, the mutual agreement procedure, whereby a taxpayer may request the competent authority in its country to negotiate with the other country in a situation where double taxation could arise. Taxpayers from other EU countries may also use the EU Arbitration Convention which provides for the resolution of transfer pricing disputes through negotiation between the competent authorities and for an arbitration process if they cannot reach agreement.
The personal taxation rates for 2011 are as follows:
- To EUR 11,000 - 0%
- From EUR 11,001 to EUR 25,000 - 36.50%
- From EUR 25,001 to EUR 60,000 - 43.21%
- Over EUR 60,000 - 50%
Non-residents are subject to the normal income tax rules and must file an Austrian tax return if their taxable income is more than EUR 2,000. Their income is taxed at the progressive income tax rates above, as for residents, but with an additional fictitious income amount of EUR 9,000 which is added to their taxable income so as to cancel out the effect of the EUR 11,000 nil tax bracket to which non-residents are not entitled. Nationals of a European Economic Area (EEA) country may be treated as deemed residents for Austrian tax purposes if they derive at least 90% of their worldwide income from Austrian sources or if their income not subject to Austrian taxation is less than EUR 11,000.
Employment income of persons working in Austria for a foreign employer is subject to a final withholding tax of 20%, subject to the provisions of any relevant double taxation treaty.
Value Added Tax
The standard rate of value added tax (VAT) in Austria is 20%. A lower rate of 10% applies to tourism services, food and agriculture. Some types of service are exempt from VAT. Exports, including the processing of goods for export, are zero rated (i.e. no VAT is charged on the supply but the supplier can reclaim VAT paid in relation to that supply).
Health services, banking and insurance services are exempt from VAT. Sales of real estate are also exempt, but with an option to waive exemption (if the vendor prefers to charge VAT on the sale and reclaim VAT paid in connection with the sale). The same applies to the leasing of immovable property (apart from the leasing of accommodation which is subject to VAT at 10%).
Insurance Premium or Policy Taxes
Austria is most unusual in Europe in levying a premium tax on life, health and pension products. Premiums and contributions are paid by the insured and are taxed at the following rates:
- Life insurance – 4%
- Pensions – 2.5%
- Health insurance – 1%
Single premium life contracts with a term of less than 10 years are taxed at the higher rate of 11%.
Contracts qualifying for a government bonus within the so-called “1,000 Euro Model” pension framework are taxed at 2.5%.
Although the insured is subject to the tax, the insurer or the agent is liable. The tax must be paid on behalf of the insured. Policies bought from non-domestic, non-EEA insurers are subject to an increased premium tax of five times the normal rate, subject to a limit of 50% of the premium. If the insurer has neither domicile nor agent responsible for collecting premiums in the EEA, the tax must be paid by the insured.
Insurance companies established in another EEA member state insuring risks by way of freedom of services must designate a tax agent in Austria. Upon request, foreign insurers writing business in Austria must provide the tax authority with a complete list of insurance contracts including any information required for calculating the tax.
Benefits are paid free of tax for all regular premium life policies. In theory, private pensions/annuities are only tax-free for the period during which the original capital is used up. In practice, this provision does not appear to be enforced strictly.
Benefits from single premium policies with a period of less than 10 years are taxable on the difference between the premium and the benefit, if this is not taken in the form of an annuity.
Stamp duty applies to various legal transactions including leases, loan agreements, mortgage deeds and guarantees. The rates of stamp duty range between 0.8% and 2%.
Real Estate Transfer Tax
Transfers of property in Austria are subject to real estate transfer tax at a rate of 3.5% on the consideration given for the transfer. Transfers between a husband and wife or between parents and children are subject to a lower 2% rate.
Real Estate Tax
Real estate tax is charged on the assessed standard value of real estate, which is generally lower than the market value. The rate of tax is levied at a basic federal rate multiplied by a municipal coefficient. The basic federal rate is 0.2%, and the municipal coefficients range up to 500%. The real estate tax can be deducted in computing corporate income tax.
This post is part of the series: European Taxation Guide 2010
Succinct oveview of taxation in European countries. The series will gradually increase each month and will also eventually cover Asia and Australasia. Articles will be updated as and when taxation changes occur.