INDIVIDUAL TAXES
SIGNIFICANT DEVELOPMENTS
There have been no significant tax or regulatory developments in the past year as regards individual taxation.
TERRITORIALITY AND RESIDENCE
All persons resident in Austria are subject to Austrian income tax on their worldwide income, including income from trade or business, profession, employment, investments, and property. Nonresidents are taxed on income from certain sources in Austria only.
A person is generally regarded as resident with the establishment of an abode or, in any event, after a six-month stay in Austria.
Nationality is not in itself a criterion for determining residence or tax liability. However, it may serve as an indicator of residence in cases of doubt.
GROSS INCOME
Employee gross income/Income from employment includes all benefits in cash or in kind received by an individual from an employer and from third parties. Benefits-in-kind are valued according to specific rules, with some cases of global allocations (mainly cars). Company-provided housing is valued at 75% of the actual gross rent paid by the company;
reimbursement for privately paid housing is fully taxable. Certain minor benefits-in-kind are tax exempt (e.g., free grant of company stock up to an annual limit of AS10,000 per employee). Reimbursement of an employee's actual relocation costs is tax Reimbursement of tax costs is fully taxable.
Bonus payments(e.g.,13th-and 14th-month salaries, i.e., vacation and Christmas pay) up to an annual amount equal to two average monthly salaries are taxed at a flat rate of 6%; the first AS8,500 is tax free. Bonus amounts exceeding this ceiling are taxed at normal rates.
Nonresidents are subject to income tax on Austrian-source income at normal rates.
Special ruling for expatriates/With the aim of reducing taxes and facilitating payroll accounting for the rising number of foreign executives assigned to Austria, a new directive was issued in December 1997 granting expatriates a global allowance to cover foreign service and housing allowances in the current payroll accounting.
For the purposes of the directive, “expatriates” are individuals who have not been resident in Austria for the past ten years and who work temporarily for an Austrian employer(group company or permanent establishment for wage tax purposes)in Austria on behalf of a foreign employer. The work in Austria must not be planned to last more than five years, and employees must keep their residence in the home country.
The purpose of the directive is to facilitate payroll accounting for expatriates. Foreign allowances paid to the expatriate by the employer can be considered tax-free directly in the current payroll accounting.
The following allowances are included.
1. Expenses for moving:
Expenses for moving necessitated by an assignment are tax-free up to 1/15 of the Annual gross salary.
2. Expenses for double household:
Reasonable rental costs for a residence in Austria for the employee and family are tax deductible up to a monthly amount of AS30,000.
3. Expenses for home leaves:
If expatriates visit their foreign employer while on home leave, it is assumed That these costs represent expenses for a business trip and remain tax-free. No Per diem allowance for travel to the parent enterprise and home leave can be Claimed.
In addition, home leave for the maintenance of the permanent residence is tax-free up to a monthly amount of AS2,400.
4. Expenses for education of children(school fees):
If children of expatriates accompany their parents to Austria and must attend a private international school instead of a public school to continue their education, a monthly amount of AS1,500 per child is tax deductible.Additional special expenditures, business expenses and extraordinary financial burdens can be considered in the annual tax
return.
The employer must forward a written notification to the appropriate tax office at the beginning of the assignment and thereafter at the beginning of every calendar year, stating the names of the employees for whom the beneficial tax treatment is claimed, and must inform the tax authorities of their personal data, including addresses in Austria and in the foreign
country.
The directive is applicable as of December 1,1997. For expenses paid before this date, a retrospective payroll accounting can be made for the previous months of the calendar year.
Capital gains and investment income/In general, capital gains arising from non-business activities are not taxed, subject to the following two exceptions.
1. Short-term capital gains-Profits on the sale of both Austrian and non-Austrian assets are considered "speculative" transactions and are subject to income tax at normal
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