Duties of Austrian companies employing foreign workers in Austria
The regulations regarding wage tax apply irrespective of whether the employee is resident in Austria or not. The same provisions apply in respect of short-term employment (for example, for seasonal work). Double tax conventions (DTC) only prevent an employee from being taxed in Austria under taxation law if they carry out their work outside Austria.
Wage tax deduction
Wage tax should be deducted for employees resident outside Austria in the same way as for Austrian-based staff, except for the single-earner tax credit (Alleinverdienerabzug) and the single-parent tax credit (Alleinerzieherabsetzbetrag).
The only situation in which wage tax according to tariff levels is not deducted is when an employee resident outside Austria carries out work that would trigger special withholding tax if they were working on a self-employed basis. Here, a fixed-rate wage tax deduction is applied, amounting to 20 per cent or 25 per cent.
You can find further information about levels of taxation (both gross and net) and activities that trigger the application of special withholding taxes on our "Obligations on Austrian traders regarding activities in Austria by foreign traders" page, in the section headed 'Special withholding tax under section 99 of the Einkommensteuergesetz (Income Tax Act)'.
Provision of workers by third parties
Even if the Austrian employer of workers provided by a third party qualifies as an (economic) employer from an inter-governmental point of view (i.e. for the purposes of applying a double tax convention), this does not affect the applicability of domestic law. Under domestic law, employers employing workers provided by third parties often do not qualify as employers for tax purposes. If they do not qualify as employers, no wage tax deduction should be made. However, workers provided in this manner can still be taxed in Austria. There are two ways to meet the requirement to tax these workers within Austria:
1. Withholding tax pursuant to Section 99 of the Income Tax Act (Einkommensteuergesetz – EStG)
The fee paid by the Austrian employer to the labour provider based outside Austria is subject to a withholding tax obligation pursuant to Section 99 EStG. From an economic point of view, withholding tax covers the tax due on the wages of these temporary staff. If the labour provider is based outside Austria and does not have its own premises in Austria, they can generally apply for a refund of any withholding tax paid due to an applicable double taxation agreement. The refund is granted at a flat rate of 30 percent of the 20 percent withholding tax. 70 percent of the 20 percent withholding tax on the fee represents a lump-sum wage taxation.
2. Voluntary/flat-rate wage tax deduction (exemption notice)
The other way of meeting the taxation requirement is to enrol for voluntary or flat-rate wage tax deduction. Under this system, a convention can be applied for formal discharge from the withholding tax that would otherwise be due on the fee for providing the temporary staff, pursuant to the Arbeitskräftegestellungsverordnung. The following two options are open:
- The labour provider or – alternatively – the domestic employer withholds wage tax for the temporary workers. No withholding tax is to be withheld and paid on the fee for the temporary employment.
- 70 percent of the 20 percent withholding tax is withheld and paid on the fee for the temporary employment pursuant to § 1 AKGest-VO, so that the taxation of the income from employment of the temporary workers is ensured in a flat-rate manner. For the remaining 30 percent, relief from tax at source is permitted.
This relief is provided by means of an exemption notice from tax at source. Applications for such exemptions must be submitted to the Tax Authority for Large Traders (Finanzamt für Großbetriebe – FAG) using the web form (known as BEFBESCH). In the case of intra-group transfers of employees, relief from tax at source is not conditional on the application for an exemption notice.
- Refund of Austrian withholding tax (→ BMF)German text
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