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TAXES

Can you pay your Austrian taxes using a foreign bank account?

If you still use your old bank account in you home country - or an online bank with a non-Austrian IBAN number- as a resident in Austria, you can still pay your income tax without having to open a new account here. But it can be complicated.

Published: 8 April 2024 16:19 CEST
Pictured is a person filing their taxes.
Pictured is a person filing their taxes. Photo by Jakub Żerdzicki on Unsplash

It’s not uncommon for foreign residents in Austria to keep their old bank accounts abroad. With the rise in popularity of international online banks such as N26, Wise, and Revolut, even people who are from Austria can sometimes end up with an IBAN that does not start with AT. 

Does that mean once you need to deal with the government – for paying taxes, for example – you’ll need a brand new account created in an Austrian bank?

Usually, no. As we’ve written before, you can keep using your home country’s bank account as long as it is an EU bank or part of the Single Euro Payments Area (SEPA), which includes the European Union and several non-EU countries, such as Switzerland and the UK. 

Since international online banks also usually offer bank accounts based in the EU, you’ll also have no trouble keeping them instead of having to open a new account with an Austrian lender. 

However in practice, you might face a few challenges with something known as “IBAN discrimination”. This is when an employer or company refuses to accept your SEPA IBAN for euro payments or direct debits. This is illegal under the SEPA agreement but happens often.

READ ALSO: Why it’s worth filling in your annual tax return in Austria

It’s not uncommon to find stories of people who have tried to sign up for a service or utility, such as paying for a mobile plan, but were denied because their IBAN identification, though it was from a euro country, did not start with AT—it was not from Austria.

But does Austria’s government discriminate against foreign IBAN?

No. If you go on the official financial portal, FinanzOnline, you will see that you can add a SEPA IBAN to your account. This way, you can receive any social benefits (including payouts such as the Klimabonus or family benefits such as the Familienbeihilfe) directly in your bank account as long as this bank is located in a SEPA country. 

It gets a little bit more complicated when it comes to paying your taxes, which you have to transfer yourself if you are, for example, a self-employed worker whose income tax is not automatically deducted from your salary. 

In those cases, you fill out your tax income assessment and receive information on how much money you owe to the government. Austria has comparatively high taxes to support its social system, and you might have to pay anywhere from 20 to 55 percent of your income in taxes depending on how much you earn (those earning below a threshold which was € 11,693 in 2023 don’t have to pay taxes at all). 

Actually making the transfer is more complicated for those without an Austrian bank account. If you have a local bank account, the payment is made with a few simple buttons since the banks’ systems are integrated with FinanzOnline. If not, you have to do it yourself. 

Austria’s government suggests you use the payment system on the FinanzOnline website, but when you try to use the “electric payment” method online, it leads to the EPS system that will ask you to choose your bank name – and accept only Austrian banks.

READ ALSO: What foreign residents in Austria should know about taxes

How do I pay using my foreign bank account, then?

You will have to make a bank transfer directly to the government office, as The Local has confirmed with Finanzamt, the country’s financial authority.

Once you make your tax income declaration, you should receive a form called “Anspruchszinsenbescheid”. That will have all the information you need. On the bottom of each page, you will find the bank account to which you need to send the money (Bankverbindung). On the top right, you will find your Steuernummer and your tax number, which you must add as a reference when you transfer. 

It can still take a few days for the office to process your payment. After you log in with your account details, you can check if it has been processed on the homepage of FinanzOnline.

If you don’t see a payment confirmation a few days before the tax payment deadline, you can call Finanzamt from Monday to Thursday from 7:30 am to 3:30 pm and on Friday from 7:30 am to 12:00 pm on 050 233 233 for private individuals and 050 233 333 for businesspeople.

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For members

WORKING IN AUSTRIA

Why are people in Austria paying more taxes despite federal reforms?

Workers in Austria are still among those with the highest tax burdens in the world, with the taxes and contributions taking more than 40 percent of wages even as the country introduced sweeping tax reforms.

Published: 26 April 2024 12:21 CEST
Why are people in Austria paying more taxes despite federal reforms?

It’s often said that Austria is a country with high quality of living and high taxes, but a new OECD study shows just how high the tax burden is here compared to other OECD countries.

According to the report, Austria has the third-highest tax burden on workers and the so-called “tax wedge”, how much of a worker’s wage is taken by the government,  increased as well.

According to the OECD, in most countries, the increase in labour taxation was primarily driven by increases in personal income tax.

This is because nominal wages increased in 37 out of 38 OECD countries as inflation remained above historic levels. However, since most of these countries do not have automatic indexation of tax systems, high inflation tends to increase workers’ tax liabilities by pushing them into higher tax brackets. 

However, Austria’s federal tax reforms removed this in the country in 2023. This means that once inflation rises, the tax brackets that define how much taxes you will pay on your income will also rise – and they have risen in 2023 and in 2024 since the change. 

The measure was known as the “end of the cold progression” in Austria and should have protected workers’ incomes from inflation losses.

READ ALSO: The tax benefits that parents and families receive in Austria

What is the tax ‘wedge’?

The OECD defines a tax wedge as “income tax plus employee and employer social security contributions, minus cash benefits.” 

In other words, if an employer has a labour cost of €100, how much will they actually see in their pockets, and how much of this goes to the state? According to the organisation, the percentage is the tax wedge.

In Austria, €100 earned by a single employee without children was taxed at an average of €47.2 last year. The amount was only smaller than in Germany (47.9 percent) and Belgium (52.7 percent) and it rose compared to the previous year when it was still at 46.9 percent.

The average of the 38 OECD countries was 34.8 percent.

Married single-earner couples with two children also have high tax burdens, with a tax wedge of 32.8 percent (OECD average: 25.7 percent), which is the eleventh-highest tax and contribution burden within the OECD for this group (2022: 13th place). For married dual-earner couples, the wedge was 40.6 percent.

The tax wedge for individuals or households with children is generally lower than those without children, as many OECD countries grant households with children a tax advantage or cash benefits.

READ ALSO: Why it’s worth filling in your annual tax return in Austria

Why is Austria’s tax burden higher this year?

Despite the tax reform presented by the government, Austria’s tax wedge has increased compared to the year before. 

The reason is the relief granted in Austria in 2022 in the form of one-off state payments. With the rising cost of living, the federal government released several temporary measures to help people in the country cushion the effects, including the popular €500 Klimabonus payment every person who had been a resident of Austria for at least six months was entitled to. 

These payments and increases in family allowances reduced the tax burden in 2022 – but they no longer exist or were drastically cut in 2023. Because of that, the tax burden is rising again. 

“The abolition of cold progression and the other measures have merely prevented the tax burden from rising more sharply,” Wifo economist Margit Schratzenstaller told Der Standard.

The report said the increased tax issues show that there is still a need for action. Compared to other industrialised countries, Austria’s tax burden on work for a single person without children is ten percentage points higher. Of course, the expert noted, the fact that many industrialised countries have a different social system with fewer publicly funded benefits also plays a role here. However, labour is also expensive in Austria compared to the EU average.

READ ALSO: What foreign residents in Austria should know about taxes

“The fact that the tax burden on the middle classes has increased is due to the government’s failure. Instead of structural relief, there have been one-off payments that have evaporated,” said Lukas Sustala, head of Neos-Lab, the think tank of the liberal opposition party.

NEOS representatives have urgently called for a ‘comprehensive tax reform’ to alleviate the heavy labour burden, with a significant reduction in non-wage labour costs, according to an ORF report.

In addition, NEOS proposes the creation of ‘tax incentives for full-time work’ – including a full-time bonus and tax exemption for overtime pay. Simultaneously, NEOS aims to eliminate ‘part-time incentives of any kind’, offering a potential boost to the economy and workers’ incomes.

Economist Schratzenstaller also recommends action: She suggests reducing social insurance contributions, for example, for health insurance companies. However, it’s important to note that intervening in this area could affect the largely autonomous financing of Austria’s healthcare system, which is funded mainly through workers’ and companies’ payments via social insurance contributions. 

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