Once income is earned, tax will always be imposed. The government has the right to collect taxes since these are what keeps the country going. There are also ways that you can lighten this burden. Tax minimization in Austria is actually allowed by the government and local laws. An admissible and effective tax planning is permitted by authorities in Austria in order to lessen the load of paying taxes. But there is a fine line between a legal and allowable tax minimization and committing tax avoidance or evasion, which are prohibited tax practices. Our experts in company formation in Austria can advise you on how to legally minimize your tax payments.
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Tax minimization for individuals in Austria
Individuals are taxed in Austria for income gained from employment and other sources. The residents are charged for their worldwide income, while non-residents are taxed for income gained within Austria. Currently, individuals are taxed based on a progressive system ranging from 0% to 55%, depending on their income.
In order to minimize the tax burden in Austria, the law provides for deductions as well as allowances. Sole wage earners are allowed to deduct from their income tax an amount of 494 euros. Pensioners can deduct 400 euros and a commuter deduction of 2 euros per kilometer is also given for those who travel from their homes to work. Some allowances given are for:
– traffic – 400 euros,
– profit – 3,900 euros per year for self-employed individuals,
– for profits obtained from investments made on movable assets and shares or bonds – 13%.
Corporate tax minimization in Austria
Corporations in Austria are taxed at a rate of 25 percent on their income. Like resident individuals, domestic corporations are taxed for income from worldwide sources, while foreign companies are taxed only on income from sources within Austria. There are also legal methods available to corporations to minimize the taxes in Austria. One such scheme is the group taxation.
Under this scheme, corporations can group together and profits and losses from domestic and foreign members are offset which results to a lower tax base for purposes of calculating corporate income tax. Corporations are also given a research allowance which can be claimed when the company invests in research and development. A premium of 12% on research expenditures is given for certain research and experiment activities and is credited to the company’s account. If you set up a company in Austria and you engage in research and development, you can avail of this premium.
There are also other legal methods of minimizing your tax burdens. Our specialists in company formation in Austria can guide you on the application of these methods.