Taxing Wages 2018

Austria

Abstract

This chapter includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by their employers. Results reported include the marginal and average tax burden for eight different family types.

Methodological information is available for personal income tax systems, compulsory social security contributions to schemes operated within the government sector, universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

 

 

The Austrian currency is the Euro (EUR). In 2017, EUR 0.89 was equal to USD 1. In that year, the average worker in Austria earned EUR 45 977 (Secretariat estimate).

1. Personal income tax

1.1. Central government income tax

1.1.1. Tax unit

Each person is taxed separately.

1.1.2. Tax allowances

1.1.2.1. Standard tax reliefs

• Work related expenses: a minimum tax allowance of EUR 132 is available to all employees.

• Minimum tax allowance for special expenses of EUR 60.

• Social security contributions and connected contributions (see Section 2).

• Children tax allowance of EUR 440 for one or EUR 300 for both parents per child. The parents have the choice between these opportunities.

1.1.2.2. Non-standard tax reliefs

• Mainly work related expenses (“Werbungskosten”).

• Traffic relief depending on the distance between home/address and working place and the availability of public transport.

The following allowances are deductible from income (EUR per year):

 

	Public transport
	Available	Not available
More than 2 km	0	372
More than 20 km	696	1 476
More than 40 km	1 356	2 568
More than 60 km	2 016	3 672

• Tax-free wage supplements exist for dirty, hard, dangerous, night, weekend and holiday work and overtime. The supplement for 10 hours of overtime up to EUR 86 per month is tax free, the other supplements are tax free up to EUR 360 (EUR 540 for night workers) per month.

• Tax allowances for contributions to state-approved churches up to EUR 400 per year and for donations up to 10% of income to research and humanitarian purposes, environmental protection, fire brigades, civil protection, etc.

1.1.3. Rate Schedule

The tax schedule from 2016 onwards is:

 

Income (EUR) up to	Marginal rate %
11 000	0
18 000	25
31 000	35
60 000	42
90 000	48
1 000 000	50
Above	55* )

* The top marginal tax rate of 55% applies only until 2020.

There is a special taxation other than the normal tax schedule for Christmas and leave bonus to the extent that their sum does not exceed two average monthly payments (1/6 of current income) or EUR 83 333. If these bonuses before deduction of SSC are below EUR 2 100 p.a., no tax is calculated. Otherwise the tax amount is calculated according to the following formula:

 

Income from Christmas and leave bonus (EUR) up to	Marginal rate %
2 000	0
2 345	30
25 000	6
50 000	27
83 333	35.75
Above	50/55

If income for Christmas and leave bonus exceeds EUR 83 333, the exceeding amount is added to current income and taxed accordingly (MTR of 50% or 55%, see above).

1.1.4. Tax credits

The following tax credits exist:

• Traffic (commuting) tax credit of EUR 400. If after overall tax calculation of current income the tax amount is negative a refund of social security contributions applies. The refund amounts to the absolute value of the negative result of the tax calculation for current income, limited to 50% of overall social security contributions paid, respectively EUR 400. For commuters with a traffic allowance (see 1.1.2.2.) the maximum amount is EUR 500.

• Additional traffic tax credit in case of entitlement to traffic relief according to the distance between home/address and working place (see 1.1.2.2.). In this case employees are entitled to an additional traffic tax credit of EUR 2 per km distance from home to working place.

• Sole earner’s and sole parent’s tax credit for families with children. The sole earner’s credit is not given when a spouse’s income exceeds EUR 6 000. This tax credit is EUR 494 for one child and increases by EUR 175 for the second and by EUR 220 for the third and every additional child. This tax credit is non-wastable and can be paid out as a negative income tax (in addition to the refund of social security contributions in respect of the traffic tax credit).

• Children’s tax credit EUR 700.8 (58.40 per month) per child. As this tax credit is paid together with children allowances and not connected with income tax assessment. Therefore it is treated as a transfer in this Report (similar treatment as in Revenue Statistics).

• Tax credit for retired persons. The tax credit amounts to EUR 764 for sole earners with income up to EUR 19 930 and if the spouse’s income does not exceed

• EUR 2 200. Otherwise the tax credit is EUR 400. The tax credit is linearly reduced to 0 between EUR 17 000 (EUR 19 930 for sole earners) and EUR 25 000 of income. If after overall tax calculation on current income the tax amount is negative a refund of social security contributions applies. The refund amounts to is limited to 50% of overall social security contributions paid, respectively to EUR 110.

1.2. State and local income taxes

None.

2. Compulsory social security contributions to schemes operated within the government sector

2.1. Employee and employer social security contributions

 

	Ceilings (EUR)		Rates (%)
	Regular wage per month	Christmas and leave bonus	Employee2	Employer3
Health insurance	4 980	9960	3.87	3.78
Unemployment insurance	4 980	9960	4	3.00
Pension insurance	4 980	9960	10.25	12.55
Accident insurance	4 980	9960	–	1.30
Contribution to the labour chamber	4 980	1	0.50	–
Contribution for the promotion of residential building	4 980	1	0.50	0.50
Addition to secure wage payments in the case of bankruptcy	4 980	9960	–	0.35

1. No contributions on Christmas and leave bonus. In Revenue Statistics, the contribution to the labour chamber is accounted under Taxes on Income of Individuals (1110) the total of the contribution for the promotion of residential buildings is included in Taxes on payroll (3000).

2. There is a threshold for employee contributions of EUR 425.70 per month.

3. A new program has been introduced as of 1st January, 2004 for severance payments. Employers are required to pay 1.53% of gross wages for those whose employment starts after 1st January, 2003 or where the employer and employee opt to participate in the new program. This contribution is seen as a non-tax compulsory wage-related payment.

4. Employees’ unemployment insurance rate is reduced for low earnings. In 2017, it is zero for monthly earnings up to EUR 1 342, 1% up to EUR 1 464, 2% up to EUR 1 648 and 3% above.

2.2. Payroll taxes

There are two payroll taxes which are levied on employers for all private sector employees with a monthly gross wage total of more than EUR 1 095: the contribution to the Family Burden Equalisation Fund (4.1%) and the Community Tax (3%). The wage-dependent part of the contribution to the Austrian Economic Chamber (listed under heading 1000, taxes on profits, in the Revenue Statistics) which is levied, together with the contributions to the Family Burden Equalisation Fund, at different rates depending upon the Länder Chamber (the average rate is approximately 0.4%) is not taken into account. The contribution for the promotion of residential buildings (listed under heading 3000, taxes on payroll, in Revenue Statistics) is included in the social security contributions shown above as it is levied by the Health Insurance Companies on monthly income (current) along with the other social security contribution amounts.

3. Universal cash transfers

3.1. Transfers related to marital status

No recurrent payments.

3.2. Transfers for dependent children

A family allowance is granted for each child. The monthly payment is EUR 111.80 for the first child, EUR 125.60 for the second, EUR 149.00 for the third and EUR 164.80 for each subsequent child. It is increased by EUR 7.80 for children above 3 years, EUR 27.00 for children above 10 years of age and by EUR 50.20 for students (above 19). In the calculation the weighted average is applied.

Parents of children under the age of 3 years are entitled to a childcare transfer, introduced in 2002. Beginning 2010, the flexibility of the childcare transfer was increased significantly. The entitled parent can choose between following alternatives: EUR 14.53 per day until the 36th month of birth (whereas on parent has to consume at least 6 month), EUR 20.80 (24 months; 20 plus 4), EUR 26.60 (18 months; 15 plus 3) or EUR 33.00 (14 months; 12 plus 2). Additionally instead of the fixed amounts the parents can opt for 80% of the last net-earning, limited to EUR 66 a day (14 months; 12 plus 2).

The children’s tax credit (EUR 50.90 per month, see § 1.14) is paid out together with the family allowance and therefore treated as a transfer.

There is a supplement to the family allowance of EUR 20.00 per month for the third and every additional child, if the family taxable income (i.e. the sum of the tax base for the progressive income tax schedule) of the preceding year did not exceed EUR 55 000. This supplement is paid out on application after an tax assessment of the very year.

An additional family allowance (“13th family allowance”) of EUR 100 is given for children in the age between 6 and 16 every September.

4. Main changes in tax/benefit systems since 2004

In 2004, the first step of a comprehensive tax reform came into force. The general tax credit was increased from EUR 887 to EUR 1 264 and the phasing-out rules were considerably simplified and harmonized for all groups of taxpayers.

The tax reform in 2005 brought a new income tax schedule. Apart from the top rate of 50% for income exceeding EUR 51 000, it shows the average tax rates for two amounts of income. The tax amounts for incomes between these amounts have to be calculated by linear interpolation. The formulas that have to be applied are shown in the tax law. The tax reform included some measures which were made retrospective for 2004. These measures are the increase of the sole earner and the single parent tax credit depending on the number of children (together with a higher earnings limit for the spouse of a single earner) and an increase of the traffic reliefs by about 15%. The maximum deductible amount for church contributions was increased as well. In 2006, the traffic reliefs were again increased by about 10%.

In 2007, the traffic allowances were increased by 10% (effective from 1st July) and the maximum negative tax for employees with traffic allowances was increased from EUR 110 to EUR 240 (for 2008 and 2009). For 2008, the family allowances for the third and subsequent children were increased. In 2008, the unemployment insurance contribution of low‐earning employees was reduced (effective from 1st July). In 2008 up to monthly earnings of EUR 1 100 the rate was zero, for earnings below EUR 1 200 the contribution was 1%, below EUR 1 350 2% and above the current rate of 3%. These income limits are increased according to the increase of the ceiling levels of social security contributions every year.

In September 2008, the parliament decided some measures to compensate for the strong increase of food and energy prices: inter alia, the tax exemption of overtime supplements was increased and the 13th children allowances was introduced.

The tax reform 2009 (effective from 1st January) brought an increase of the zero bracket (from EUR 10 000 to EUR 11 000), a reduction of the income tax rates (except the top rate), an upward shift of the top rate bracket (from EUR 51 000 to EUR 60 000) and several measures for families with children: children allowance (EUR 220 or EUR 132 each parent p.a.), deductibility of cost for child care (up to EUR 2 300 p.a. per child), tax-free payments (up to EUR 500 p.a.) from employers to their employees for child care and an increase of the children tax credit.

Starting with 2013 a progressive rate schedule is applied to Christmas and leave bonus instead of a flat rate regime of 6% (see 1.1.3.)

The tax reform 2016 decreased all marginal tax rates significantly, notably the marginal tax rate of the first tax bracket which was reduced by 11.5 percentage points from 36.5% to 25%. Limited to the years 2016 to 2020 the top marginal tax rate is increased by 5% points to 55% temporarily. These 55% apply to parts of income exceeding EUR 1 million a year.

The tax credit for employees was increased from EUR 345 to EUR 400. The non wastable tax credit (reimbursement of social security contributions) for low earnings was extended. For employees the non wastable tax credit was increased to a maximum of 50% of social security contributions up to a ceiling of EUR 400 a year. For commuters eligible for the commuter tax allowance the maximum amount of the non wastable tax credit is EUR 500. This system of a non wastable tax credit was extended to pensioners too, limited to EUR 110.

Besides the already existing broad financial support for families (payable tax credit and transfers as well as deductibility of cost for child care) the tax reform 2016 increased the tax allowances for children from EUR 220 to EUR 440 per child. If both parents claim for this tax allowance, it increases to EUR 600 (two times EUR 300).

Tax expenditures (tax allowances) for private insurances (e.g. health and pension insurances) and mortgages were abolished for new contracts beginning with 2016. For existing contracts these tax allowances are maintained for a transitional period of five years.

5. Memorandum items

5.1. Calculation of earnings data

• Sector used: All private employees except apprentices employed full-time for the whole year

• Geographical coverage: Whole country

• Sex: Male and Female

• Earnings base:

  • Items excluded: Unemployment compensation

    Sickness compensation

  • Items included: Vacation payments

    Overtime payments

    Recurring cash payments

    Fringe benefits (taxable value)

• Basic method of calculation used: Average annual earnings

• Income tax year ends: 31 December

Period to which the earnings calculation refers to: one year.

Austria

2017 parameter values

Average earnings/yr	Ave_earn	45 977	Secretariat estimate
Non current income as %	non_cur_pc	14.286%
Tax schedule for nci	nci_sch	0	2 000
		0.3	2 345
		0.06	25 000
		0.27	50 000
Maximum non-current income tax base	nci_base_max	0.3575	83 333
Work related	work_rel	132
Allowance f."Special expenses"	Basic_al	60
Children allowance for 2 earning parents	Child_al_2	300
Children allowance for sole earner/parent	Child_al_1	440
Positve tax threshold	pos_tax_th	12600
Tax free inc.	tax_free	0%
Basic tax credit	basic_cr
Employee’s tax credit	wage_cr	0
Max. neg. employee’s tax credit	neg_wage_cr	400
Max. neg. employee’s tax credit rate	neg_wage_cr_rate	50%
Traffic (commuting) tax credit	traffic_cr	400
Sole earner’s (parent’s) tax credit	sole_cr	0
Children suppl.to SETC: 1st child	dsole1_cr	494
2nd child	dsole2_cr	175
3rd+ child	dsole3_cr	220
Spouse income not more than	sole_lim0	0
Spouse with children	sole_lim1	6 000
Income tax schedule	Tax_sch	0	11 000
		0.25	18 000
		0.35	31 000
		0.42	60 000
		0.48	90 000
		0.50	1 000 000
		0.55
Ceiling f. soc. security contributions	SSC_ceil	4 980
lower limit	SSC_low	425.7
Employees’ contr. rates	health_rate	3.87%
	unemp_rate	0.00%	1 342
		1.00%	1 464
		2.00%	1 648
		3.00%
	pension_rate	10.25%
sum without unempl. and others	empl_14	14.12%
	others_rate	1.00%
Employers’ contr.rates	health_empr	3.78%
	unemp_empr	3.00%
	pension_empr	12.55%
	accident_empr	1.30%
	payinsur_empr	0.35%
sum without others	empr_14	20.98%
	others_empr	0.50%
Payroll taxes	payroll_rate	7.10%
Child benefit: 1st child	CB_1	1 341.6
2nd child	CB_2	1 507.2
3rd child	CB_3	1 788.0
4th+ child	CB_4	1 977.6
suppl.>3years	CB03sppl	93.6
suppl.>10years	CB10sppl	324.0
suppl >19years	CB19sppl	602.4
5<suppl<17	CB5to17	100
Child tax credit	child_cr_1	700.8

2017 tax equations

The equations for the Austrian system are, in principle, on an individual basis. The only variable which is dependent on the marital status is the head of family (sole earner) tax credit which is also given to single people with children. For the Christmas and leave bonus (both amounting to one monthly wage or salary) there are special rules for the calculation of social security contributions (separate ceilings and slightly lower rate) and wage tax (reduced flat rate). The income tax schedule and the tax credits are applied only for “current pays”. The children tax credit is in principle given to the mother (as a negative tax together with “family allowances” = transfer for children). The sole earner and the employee tax credit are connected with negative income tax rules. Therefore, the tax finally paid may be different from tax liability minus tax credits.

 

Bn	Variable	code for docn equations	Excel-Function
3	earnings (%AW)	percent	0, 33%, 67%, 1 or 167% in Taxing Wages output tables (but model can be applied to all earnings levels)
4	number of children	child	0 or 2 in Taxing Wages output tables
5	Gross earnings	earn	=Ave_earn*percent
6	Current income	cearn	=(1-non_cur_pc)*earn
7	Basic allowance	allow	=(earn>14*SSC_low)*Basic_al
8	SSC on curr.inc.	SSCc	=’(empl_14+unemp(earn,unemp_rate)+others_rate)*’ MIN(12*SSC_ceil;cearn)* (cearn>12*SSC_low)
9	Work related expenses	work_rel	=(earn>14*SSC_low)*work_rel
10	Tax-free income	taxfrinc	=tax_free*earn
11	Child allowance	Child_al_princ Child_al_spouse	IF(cearn_spouse-allow_spouse-SSCc_spouse-work_rel_spouse-taxfrinc_spouse-12600<0,Child_al_1, Child_al_2)*child IF(Child_al_princ=’child*Child_al_2,’ Child_al_2, 0)*Child
12	Tax base for schedule	ctbase	=’(cearn-allow-Child_al_princ-’ SSCc-work_rel-taxfrinc)+max(0;ncearn-SSCnc-nci_base_max)
13	Gross tax on current income	gtaxcur	=Tax(ctbase;tax_sch)
14	Basic tax credit	btaxcr	=0
15	Married or head of family	headcr	=(earn_sp<IF(child>0;sole_lim1;sole_lim0))*(sole_cr+(child>0)*dsole1_cr+(child>1)*dsole2_cr+(child>2)*(child-2)*dsole3_cr
16	Other	othcr	=(earn>14*SSC_low)*(wage_cr+traffic_cr)
17	Interm. tax on current income	itcur	=gtaxcur-btaxcr-headcr-othcr
18	Net tax on current income	ntaxcur	=max(gtaxcur-btaxcr-other;-neg_wage_cr_rate*SSC;-neg-wage_cr)-child>0)-headcr
19	Non current income	ncearn	=earn-cearn
20	SSC on non-curr. inc.	SSCnc	=’(health_rate+unemp(earn,unemp_rate)+pension_rate)*’ MIN(2*SSC_ceil; ncearn)*(ncearn>2*SSC_low)
21	Non current income-SSC	ncearn_adj1	=min(ncearn-SSCnc;nci_base_max)
22	Tax schedule for nci exc. 25000	nci_sch	=min(ncearn-SSCnc;nci_base_max)
23	Taxable income	taxinc	=ctbase+ncearn_adj1
24	Tax liability excl. tax credits	inctax_ex	=gtaxcur+taxnc
25	Income tax finally paid	inctax	=ntaxcur+taxnc
26	Employee’s SSC	SSC	=SSCc+SSCnc
27	Employer’s SSC	SSCf	=’IF(earn’/14>=SSC_low;((empr_14+others_empr)*MINA(12*SSC_ceil;cearn)+ empr_14*MINA(2*SSC_ceil;ncearn));earn*accident_empr)
28	Pay-roll taxes	payroll	=payroll_rate*earn
29	Cash transfers	cash	=IF(child=0;0;IF(child=2;CB_1+CB_2+child*CB10sppl+child*(child_cr_1+CB5to17)))
30	Take-home pay		=earn-inctax-SSC+cash
31	Wage cost		=earn+SSCf+payroll

unemp is a Visual Basic Function which chooses lower unemployment SSC rates for low earnings

Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse calculation) J calculated once only on a joint basis.