Appointment of directors
A significant advantage of the legal form of a limited liability companyGerman text is that you can be appointed a director of your own company. The allocation of director remuneration for tax purposes depends on the amount of share capital held:
These rules apply to all entrepreneurs from EU Member States in Austria.
- If the holding is no more than 25 per cent, revenue subject to income tax is generated.
- For a holding over 25 per cent, the director’s salary is by contrast classified as income from independent work (Section 22 (2) Einkommensteuergesetz 1988 – EStG 1988). This means that you cannot claim tax benefits for special paymentsGerman text (13th and 14th salary) and that the revenues are subject to assessment. In any case, 6 per cent of the salary can be deducted as flat-rate business expenses, alongside compulsory contributions to the statutory social security funds. In addition, for a profit of 30,000 Euro, you are entitled to a tax-free profit allowance of 13 per cent (this would be a tax-free amount of 3,900 Euro). For profits in excess of that, an investment guarantee is required to claim a tax-free profit allowance.
In limited liability companies, director remunerations constitute business expenses, provided that these are determined at arm’s length and do not exceed 500,000 Euro. They thus reduce the profit subject to corporation tax, while the managing shareholders are subject to wage or income tax.
For a limited liability company, there are two different levels: that of the company and that of the shareholder. As long as the profits remain in the limited liability company, only 25 per cent corporation tax is payable. If all or some of the profits are distributed to the shareholders, a withholding tax of 27.5 per cent is withheld from the distribution amount (Section 93 paragraph 2 (1) EStG 1988 in conjunction with Section 95 paragraph 1 EStG 1988) and paid to the tax office responsible for the limited liability company (local tax officeGerman text). In this way, income tax is paid by the recipient shareholder. The overall tax burden on profit distribution in this case totals 45.625 per cent from 1 January 2016 (for dividends up to the end of 2015, this is 43.75 per cent). However, it is also possible to apply for progressive taxation as part of the recipient shareholder’s income tax declaration. But this is generally only sensible if the shareholder’s overall income (including dividends) is low.
It is explicitly set out in the Abgabenänderungsgesetz 2015 that earnings from work as a management representative of a company ( e.g. Director of a limited liability company) and from highly personal work by a natural person providing a service are to be included where the service is invoiced by a corporation under the influence of this person and which has no independent business separate from this work. Highly personal work refers only to that of artists, writers, academics, athletes and lecturers.
responsible for content: Federal Ministry of Finance