Contractor’s guide to contracting in Austria
UK contractors don’t have to go as far afield as Malaysia or Dubai to find a vibrant economy and attractive standard of living.
These reasons and more -- such as its accessible geographical location, make Austria a stylish melting pot for businesses and expatriates alike, writes Kevin Austin, managing director of contracting overseas consultancy Access Financial.
The quality of life in Austria is renowned: its capital Vienna has been named as the capital with the highest quality of living in the world -- for the ninth consecutive year:
What are the benefits of working in Austria?
According to contractors we speak to, the top three benefits of working in Austria are:
- It has one of the strongest economies in the world and is the 16th least corrupt country in the world.
- It promotes a transparent regulatory framework, which encourages entrepreneurial activity and innovation.
- Austria is ranked 22nd out of 190 in the World Bank’s Ease of Doing Business Index, with an increasingly lower rate of taxes in recent years.
How can you work in Austria?
Self-employment
Most contractors choose and do work as self-employed in Austria. This is an accepted method although it is becoming increasingly subject to checks on the status of the contractor to ensure that this is not 'disguised employment.'
The retentions that can be expected from working in Austria as a self-employed person are in the region of 57 to 66%.
Employment
In this case, the contractor will be locally employed and will pay social security and salary taxes in the country. In Austria, employment needs to follow the AUG law, although no AUG licence is required.
It is essential that the local payroll partner contracts directly with the end-client and that the contractor/ employee is subject to equal treatment, i.e. receives the same salary levels and benefits as any permanent employee of the end-client working in a similar capacity.
Payments to foreign labour leasing companies are subject to Austrian taxation, either by deducting a wage tax by a foreign employer or end-client, or by foreign employer paying 20% withholding tax to the Austrian tax office.
The retentions that can be expected from working in Austria under AUG are in the region of 46 to 54%.
Personal Service Company
It is possible to use your own Personal Service Company in Austria and it is a perfectly valid method for an Austrian contractor to use his or her own Austrian company. However, the strict practice of creating a permanent establishment by a foreign PSC and the Austrian tax authority’s resistance to this method of working by foreign workers means that for most foreigners, this is a bureaucratic and not very financially-rewarding route to take compared to self-employment as a sole trader.
The retentions that can be expected from working in Austria using a PSC are in the region of 58 to 66%.
What about my take-home pay?
You are legally obliged to pay taxes from the first day of your professional activity in Austria. The net retention depends on the solution that you opt for, the income level and the tax credits/reliefs.
Taxation
Like most EU countries, income in Austria is taxed progressively. The tax rates for 2018 are as follows:
| Taxable Income (EUR) | To | Rate |
|---|---|---|
| 0 | 11,000 | 0% |
| 11,001 | 18,000 | 25% |
| 18,001 | 31,000 | 35% |
| 31,001 | 60,000 | 42% |
| 60,001 | 90,000 | 48% |
| 90,001 | 1,000,000 | 50% |
| 1,000,000 | Above | 55% |
Can I pay my taxes back at home because my stay in less than 183 days?
In Austria, the contractor will form a fixed base if he/she carries on professional activities in the country for a period of at least 183 days. Thus, self-employed contractors will be liable to pay taxes in Austria on their worldwide income, if their stay exceeds 183 days.
Social Security
The social security contribution rate for self-employed individuals in Austria is 27.68% of annual profit (income minus expenses), of up to EUR 71,820. Accident Insurance of EUR 960 per month is also mandatory.
Earnings beyond EUR 71,820 are social security-free. Unlike in the UK, social security contributions are deductible for income tax purposes. Alternatively, if a contractor has been contributing to the social security system of his/her home EU country, he/she can request an A1 certificate, which will entitle the person to continue paying social security in the country of origin for up to two years.
Registering locally in Austria
Nationals of the following EU/EFTA Member States can enter Austria with an identity card or valid passport. All other nationals do require a work permit. They must register at the local commune if they plan to stay for longer than 90 days.
Belgium, Bulgaria, Croatia (work permit required), Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, United Kingdom.
Non-EU nationals must obtain a valid work permit before they can begin the residence registration process.
What about expenses?
Certain expenses may be deducted from the Austrian-generated income, if supported with receipts.
Contractors can deduct the cost of their Austrian rent for six months if they are single, for two years if they are married, or for the duration of the contract (no longer than five years) if the contract is limited (it does not matter if you are single or married).
Childcare
Expenses for childcare are tax-deductible for children until the age of 10 (for disabled children until 16). The maximum amount which can be deducted is EUR 2,300 per year. The tax deduction will be treated as an extraordinary burden.
Before attendance at an elemantary school all expenses will be regarded as expenses for childcare. As soon as a child attends elemantary school, the expenses must be divided into expenses for school fees and expenses for childcare, as expenses for school fees are not tax-deductible.
It is important that the childcare is provided by an accredited private or public child care institution or a person who has teaching qualifications.
Know before you go...
While Austria has one of the heaviest tax burdens of European countries, it is also among the highest paying and the cost of living, particularly rent, is very competitive compared with the UK (depending on the contractor's usual address in the UK and their place of residence in Austria).
Generally-speaking, the standard of living in Austria is higher than the UK, and public services, such as the healthcare system, are among the very best in the world. So it's much more than just its central Europe location that makes Austria a must-consider for UK contractors, especially given that Austrians usually speak very good English, meaning adapting to business and life in the country as a whole is reliably straightforward.
