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TAXES

EXPLAINED: The main Austrian ‘tax traps’ foreigners should be aware of

Moving to a new country results in a series of adaptations, and getting used to a different tax system is definitely one of them. Here's what you need to know.

A person completes their income tax return
Filing taxes in a new country can be a burdensome task. Photo: Firmbee / Pixabay

When you move into a new country, there are many things to learn and get used to.

But, unfortunately, there are also many “traps”, those differences in systems and cultures that can catch a foreigner entirely off guard while seeming normal to all native or long-time residents of a country.

In Austria, there are many particularities, not only when it comes to culture – how many times are immigrants surprised with Freikörperkultur, for example? – but also with bureaucratic and day-to-day issues.

For example, foreigners are often surprised to learn that the alpine country has a mandatory public health system with several insurers, and each person is legally required to be insured by one of them.

Which one? It depends mainly on your profession.

READ ALSO: Everything foreigners need to know about the Austrian healthcare system

When it comes to taxes, several specificities could be confusing to non-Austrians or people who have recently moved to the country. The Local spoke with Dr Rainer Kratochwill, a tax adviser, owner and CEO of steuerexperten.at, to help foreigners avoid the typical “tax traps” one may find when moving to Austria.

Documentation is key

In some countries, it may be common practice to call tax authorities directly or send letters to them trying to explain or rectify issues they might have had.

“We sometimes have to overcome the expats’ desire to explain something to the tax office over the phone or appeal to common sense. In Austria, this will probably not work.”, says Dr Kratochwill.

Austria is a very formal country in many ways. Titles and official papers (literal papers, mailed and stamped, not emails) matter.

In many circumstances, expats end up needing to draw up a cover letter with the help of a tax advisor to follow specific Austrian standards.

READ ALSO: Will inflation force tax changes in Austria from 2023?

Documentation is also absolutely essential to support the origin of funds, Kratochwill highlights.

One thing many immigrants are surprised to learn is that large gifted sums or properties need to be registered with the tax office – and it is mandatory to provide the documentation of the origin of the funds from the giver.

“This point has to be further explained to expats because they often do not understand why the donor has to be verified and what documents can be provided”, he says.

So, don’t fall into the trap of taking a laissez-faire approach to Austrian authorities and documentation.

Taxes are high – but so is the standard of living

Kratochwill noted how many of their immigrant clients are used to paying fewer taxes in their home countries. That is another trap incomers might set up for themselves: “be prepared to pay high taxes in Austria”, he says.

“But for this, you have a lot: security, good public transport, good schools and universities and much more”, he added.

READ ALSO: How to prepare for your Austrian tax return if you’re self-employed

Austria works with a bracket system for income tax. So the higher you earn, the higher the taxes – up to 55 per cent for those making a whopping €1 million after expenses.

Up to €11,000 annual income, there is no income tax. However, whatever surpasses that falls into the next bracket (from €11,000 to €18,000) and is taxed at 20 per cent.

This means that if you earn, for example, €12,000 a year netto (after expenses and deductions), € 11,000 would be tax-free, and the remaining €1,000 would be taxed at 20 per cent – you’d pay € 200 income tax for the year.

The income tax is after other social contributions that pay for compulsory health insurance, social payments, and pension funds.

Many Austrians have tax advisors

A tax advisor is not the same as an accountant. For many people, the thought of paying someone to assist with their tax return may be strange – it might seem like something only millionaires do.

READ ALSO: Everything you need to know about paying tax in Austria

But it is relatively common practice in Austria, as advisors support their clients to pay according to the law, but no more than what they need to.

“An important rule is to consult in advance so that there is time to make adjustments. It is often too late, but even in these situations, we help reduce the tax burden a bit through, for example, tax refunds.” Kratochwill says.

Taxes can be filed in three years

And audited even later than that.

In Austria, you have from one to five years to file your income tax (longer if you do it through a tax advisor or in exceptional cases like during the pandemic), depending on your case. However, Dr Kratochwill advises against taking advantage of the long filing periods.

“The main thing an expat should keep in mind is to do it the right way from the beginning on and not start thinking about it after three years”.

In a country with a complex tax system, knowing your earnings and expenses, having your finances documented, and storing those files is crucial. And because tax audits can happen up to seven years after the filing (tax advisors will tell you to keep your documents for at least that long), Austrians know to keep their files for a very long time.

READ ALSO: Five things you will find in (almost) every Austrian home

This is why you will often see shelves full of binders in your local friend’s house – they are storing that receipt for that English class they took five years ago.

Do as your Austrian friend and save yourself some trouble in future years by saving your papers now.

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For members

COST OF LIVING

Grocery shopping in Austria: How much could you save by switching chains?

With food prices rising in Austria the weekly grocery shopping bill has become more of a burden on households but is there anything to be saved by switching chains? David Everson-Baltas crunched the numbers.

Grocery shopping in Austria: How much could you save by switching chains?

All over the world, people are having to deal with what seems like a barrage of unending economic uncertainty and soaring prices, but Austria in particular has been grappling with some of the highest inflation rates in Europe.

Quite understandably, our initial reaction to out-of-control price hikes tends to focus on one thing: earning more money. But in our efforts to manage our money more diligently, we often forget that our choices as consumers can have just as significant an impact on our bank balances.

Where you shop for groceries is one such choice, and with inflation pushing up food prices by as much as 30 percent, you can make regular and sizeable savings simply by being more selective in where you shop.

Since the beginning of 2023, after seeing a pack of tri-colour peppers at an eye-watering €3.99, I have been making a concerted effort to reduce my household food expenses by thinking more carefully about where I shop, and in doing so have made some considerable savings.

To help you make more informed shopping decisions, I have recently conducted a price comparison of essential food shops across three major supermarket chains in Austria.

READ ALSO: Everything you need to know about supermarkets in Austria

The three supermarkets:

As a resident of Austria, you will likely be familiar with the market chains: Spar, Billa and Hofer.  Outlets for all three companies can be found throughout Austria, yet they differ substantially in their prices and respective reputations for variety, quality, and promotional offers.

Spar: Der österreichische Supermarkt in Ihrer Nähe! (The Austrian supermarket near you)

With over 1,500 locations across the country, Spar is central to the Austrian food shop. Whether you’re in Vienna, Vorarlberg, or an out-of-the-way mountain village, the chances are there is, indeed, a spar store “near you”.

Tomatoes

Image by M. from Pixabay.

Particularly in the case of its larger INTERSPAR stores, the Dutch supermarket chain offers a much wider choice of products compared to Billa and Hofer, and with the introduction of its new app, shoppers can now get immediate access to a limited number of 25 percent off discounts for their most expensive items.

Billa: A portmanteau of “billiger Laden” (cheap shop)

Billa, with over 1,000 outlets in Austria, has been serving Austrians since 1953, offering a diverse range of products to meet their daily requirements. The chain often includes 25 percent off discount stickers in their mail-marketing brochures, so shoppers can enjoy regular savings on their most expensive purchases.

This, coupled with its loyalty card scheme , makes it a popular choice for those who like big promotions and exclusive offers.

Hofer: Da bin ich mir sicher (I’m sure)

Hofer, known in some parts of the world as Aldi, has revolutionized the food shopping experience with its commitment to affordability. With over 500 locations across Austria, Hofer has become synonymous with budget-friendly shopping. This discount supermarket offers no-frills shopping, focusing on the essentials with an albeit smaller range of products.

The results:

Having compiled a shopping list of general food staples and essentials, I took to the shops to see which would cause the least amount of damage to my budget. It should be noted that the products across Spar, Billa and Hofer are often from independent producers and don’t always share the same brand, so in order to maintain a fair comparison, items were compared according to quality and price level i.e., store brand bio products were always compared with other store brand bio products, as were budget brand items.

Below is the list of items that were compared across the three stores:

*Onions (1kg)

Peppers (x1)

Midi vine tomatoes (1kg)

Potatoes (1kg),

Bananas (1kg)

Apples (1kg)

*Eggs (10x L)

Butter (250g)

Full-fat Milk (1l)

Chicken (1kg)

*Olive oil (750ml)

Flour (1kg)

Sugar (1kg)

Bread roll (Kaisersemmel x1)

*Sausages (240g)

Cheese (175g)

*Adjustments in price were made to items sold in different weights or quantities.

The total bill for each shop came to:

Spar: €76,06

Billa: €76,86

Hofer: €67,79

So, there you have it. Of the three, Hofer emerges as the more economical choice with prices over 10 percent cheaper on average than those of its rivals.

But as you’ll by now be aware, each shop has its own benefits and drawbacks, and price alone might not be the sole determinant for where you decide to shop.

Which Austrian chain is best to shop in?

Image by Alexa from Pixabay

Things to consider:

No single shop provides everything: It’s crucial to note that the above comparison does not factor in the various promotional offers and discount schemes unique to each store, nor does it account for our individual tastes in choice and quality. To maximise your savings, I encourage you to take full advantage of Billa and Spar’s 25 percent off stickers, using them for items not available at Hofer or when they offer a better deal.

READ ALSO: Where to find international food in Austria 

Distance: Living in Vienna, I am fortunate enough to have all three stores within walking distance of my home, though I understand this to be the exception rather than the rule. That being said, with Hofer being the farthest of the three, I’m still forced to give up more of my time in order to benefit from the lower costs. The optimists among you may, however, join me in viewing this longer trek to the shop as an opportunity for exercise. Consider your new trip to Hofer as a means of improving both your physical and financial health.

Quality: Having shopped at all three chains for more than five years, I’ve found no substantial differences in the quality of their products, especially when it comes to essential food items. Given the significantly lower prices Hofer has to offer, any shopper who prefers Billa and Spar products may still be inclined to overlook certain drops in quality in order to save money.

Keep up-to-date: To aid consumers in battling rising food prices, the ÖVP Minister of Economic Affairs Martin Kocher has proposed a law mandating all major supermarkets to publish their food prices on comparison platforms. While they don’t yet provide a fully comprehensive list of every store’s pricing, you can compare many of your shopping list items already at https://www.supermarkt.at/.

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