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TAXES

EXPLAINED: What can I deduct from my tax bill in Austria as a freelancer or business? 

Taxes are high in Austria and can be a burden even when we acknowledge the quality of life and public services in the country The good news is that there are some deductions you can make. Here's your guide to some common deductions.

Published: 7 May 2021 15:38 CEST
Updated: 4 March 2024 17:06 CET
A home office is one of the ways you can claim tax back as a freelancer (Photo by Ina FASSBENDER / AFP)
(Photo by Ina FASSBENDER / AFP)

Austria may be a great place to live and start a business but the more you earn, the more taxes you will have to pay.

So how can you get back some of your hard-earned money when completing a tax declaration as a freelancer in Austria?

The Local spoke to SEA – Services for self-employed and Tax Advisor Alexandra Kaspar to find out. 

What can you deduct?

First of all, there are many items you can deduct from your tax bill. If you are self-employed, you can deduct all expenses related to your business from your revenue.

For example :

  • office costs including costs for working from home
  • training costs
  • car and transportation, travel expenses
  • communication expenses
  • office supplies
  • liability insurance and other insurances, which are related to your business
  • social security contributions (SVS) (but only what you paid so far for the relevant year).

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

For some of the items mentioned above especially working from home, training and car/transportation costs, there are special circumstances and regulations.

What about a flat tax deduction rate?

Many people decide rather than claiming back the tax for every individual item, they would rather apply a flat tax deduction rate. 

In this case, as long as your annual revenue does not exceed €220,000, you can apply a tax deduction rate (Betriebsausgabenpauschalierung) of 6 percent or 12 percent depending on your business or activity.

This saves you having to collect bills for all your expenses. 

After deducting the flat tax deduction rate, you can still subtract your social security (SVA) contributions.

READ MORE: Being self-employed in Austria: What you need to know

The Raiffeisen Bank in Austria  (Photo by ALEXANDER KLEIN / AFP)

Flat rate for small businesses

From 2020 onwards, another flat rate has been introduced for small businesses: up to an annual revenue of €35,000, the flat rate for expenses will be 20 percent for service providers and 45 percent for other businesses, for example trading businesses. 

Social security contributions can also be deducted in addition to the flat rate. 

From 2021 onwards, this rule is connected to VAT exemption for small businesses (this is also applicable even if the small business “opts to apply VAT”), and can therefore be applied up to a revenue of €42,000.  

There is an upper limit of €8,400 for expenses which can be deducted for businesses which provide services and an upper limit of €18,900 for other businesses. 

After the deduction of actual expenses or the flat rate and social security contributions, you come up with the amount of your actual profit. 

Additional tax free profit allowance

An additional 13 percent tax-free profit allowance (Grundfreibetrag) can then be deducted from the net amount for business with profit up to €30,000. 

If your profit before the 13 percent allowance amounts to more than €30,000, an additional 13 percent allowance may apply to the extra amount, if it is covered by certain investments into business assets (Gewinnfreibetrag). 

You can use this tax calculator to calculate your income tax

When does it make sense to claim individual expenses rather than the flat rate?

Tax Advisor Alexandra Kaspar says that sometimes it makes sense for service providers to claim for individual expenses instead of choosing a flat rate, especially when there are big costs related to materials, equipment and rent for an office. 

This could be the case for therapists or physiotherapists renting an office, artists with their own studio or film production companies for example.

Some companies have a big amount of expenses in the first year and this is when it’s more beneficial for them to collect bills rather than claim back the flat rate of tax.

What else can I deduct from tax?

If you are eligible to deduct expenses for an office in your private apartment (i.e. when working from home) you may deduct:

  • a part of the rent
  • a part of electricity and gas costs
  • a part of the costs of furnishing the room 
  • maintenance of the room and the furnishings
  • work equipment such as computers, fax machines, printers, etc (deductible even if they are set up in a room that doesn’t match the deduction requirements)

Further education

  • work equipment and work documents
  • transportation costs
  • accommodation costs
  • specialist literature (job-related literature or literature to improve job opportunities)
  • office and writing materials
  • part of the telephone and internet costs

Other deductibles:

  • consulting costs (e.g. from lawyers, tax consultants)
  • interest on debt (for liabilities related to your business)
  • contributions for compulsory memberships, for example the Chamber of Commerce (WKO)
  • advertising expenses

You can learn more about all the possibilities for deductibles at www.bmf.gv.at

SEA – Services for self-employed is designed to support self-employed individuals by delivering information in form of guidebooks and free articles in English. 

You can find out more in their guidebook on self-employment aimed at those who fall into the New self- employed (Neue Selbständige) working category.

Useful vocabulary

Tax – Steuer

Steuerberater/ Steuerberaterin – Male tax adviser/ Female tax adviser

Flat tax deduction rate – Betriebsausgabenpauschalierung

Tax-free profit allowance  – Grundfreibetrag

Business assets – Gewinnfreibetrag 

New self-employed – Neue Selbständige

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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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