Special ruling for expatriates
In the course of the 2015/16 tax reform, the government has complied in part with the long-standing demand for a special ruling for expatriates.
Contrary to the existing Expatriate Decree, the consideration of flat-rate professional expenses is now on a legal basis already in the ongoing payroll accounting. The decree, in contrast, only constituted an 'interpretation aid' for the financial administration. The existing definition of an expatriate was adopted into the regulation from the decree.
You will find the provision in detail below:
How is an expatriate defined?
An expatriate is an employee:
- of a foreign company:
- who works for a maximum of five years in Austria and
- who has an employment contract with an Austrian employer (group company or domestic business premises)
- who has not had a place of residence in Austria in the last ten years
- who has retained one's place of residence abroad and
- on whose income Austria has a right of taxation.
All these persons are entitled to a flat-rate professional expenses allowance of 20% of the calculation basis.
How is the calculation basis determined?
The calculation basis results from the gross remuneration:
- less special payments within the sixth month of the year, and
- less tax-free remuneration.
The annual maximum amount is EUR 10,000; the professional expenses can be taken into account without verification. This covers additional expenses in connection with the assignment in Austria (e.g. dual household, trips home to see family).
If the employee does not work in Austria for the whole year, the (maximum) amount is to be calculated on a pro rata basis. Months commenced are treated as full months.
The professional expenses exceed the flat rate - what needs to be done?
If the expatriate wishes to claim professional expenses that exceed the flat rate of EUR 10,000 (e.g. for the apartment in Austria or for trips home to visit family), these can be claimed in one's tax declaration. In turn, pursuant to the general regulations, a verification of individual receipts is necessary.
Please note that cost reimbursements pursuant to Section 26 of the Income Tax Act (Einkommensteuergesetz or EStG) (e.g. remuneration for relocation) reduce the flat rate for professional expenses. However, travel reimbursements pursuant to Section 26 Clause 4 of the Income Tax Act (EStG) do not reduce the flat-rate allowance.
In contrast to the flat-rate allowances for professional expenses for other professional groups, the flat rate for expatriates can already be taken into account by the employer directly in the monthly payroll accounting; if this is not the case, the allowance can be claimed in the employee's tax declaration.
If the flat-rate allowance for professional expenses is taken into consideration in the monthly payroll accounting, this is to be listed in wage slip L16 under "allowance pursuant to Section 63 of the Income Tax Act (EStG)". A separate notice of the allowance is not necessary.
Additional special expenditures, business expenses, and extraordinary financial burdens can be considered in the annual tax return.
In case of consideration during payroll, the employer must forward a written notification to the appropriate tax office at the beginning of the assignment and thereafter at the beginning of every calendar year, stating the names of the employees for whom the beneficial tax treatment is claimed, and must inform the tax authorities of their personal data, including addresses in Austria and in the foreign country.
Work and residence permit
According to the current Austrian legal regulations, individuals who wish to take up employment in Austria basically need a work permit and residence permit unless they are citizens of a country that is a member of the European Union, the European Economic Area, or Switzerland. Special rules apply for new EU citizens from Croatia. These individuals do not require a residence permit, but basically still need to obtain a work permit (Beschäftigungsbewilligung).
Nevertheless, EU/EEA and Swiss nationals (including new EU citizens) must apply for a registration certificate (EU-Anmeldebescheinigung) at the competent immigration authority within four months of arrival if they intend to stay longer than three months in Austria. The registration certificate is only qualified as a kind of registration requirement and not a permit.
In case of employing third-country nationals (Non-EU/EEA or Swiss nationals) in Austria, the employer or the individual generally must apply for a permit at the local immigration authority or the Austrian Consulate abroad. As of 1 October 2017, new regulations regarding Intra-Corporate Transferees (ICT), introduced by EU law, are in force. This combined work and residence permit is designed for highly skilled employees (so-called ‘executive employees’, ‘specialists', or ‘trainees’; trainees must hold a university degree). They must be transferred from an undertaking established outside the territory of an EU member state to an entity belonging to the undertaking or to the same group of undertakings that is established in Austria (ICT). The permit is issued for one year and is eligible for extension for up to three years in total with regard to executive employees or specialists. Trainees are not eligible for extension.
Furthermore, depending on the individual's professional experience and educational background, other immigration routes may be applicable, such as the Red-White-Red Card or the Blue Card-EU, which are combined work and residence permits for local hires only.
Note that only upon receipt of a combined work and residence permit may a third-country national legally start working in Austria.
Family members (spouses over 21 years, children younger than 18 years) of ICT permit holders can apply for a residence permit ‘Family Member (with ICT)’, family members of Red-White-Red Card or Blue Card-EU holders can apply for the Red-White-Red Card plus.
Also introduced by the legislator as of 1 October 2017, for third-country nationals who hold a valid work and residence permit from an EEA country, a so-called ‘Personal Lease Confirmation – EU’ (EU-Überlassungsbestätigung) can be issued (by the local labour authority) for temporary employment in Austria.
To ‘new EU citizens’ (from Croatia), special regulations apply. These citizens do not require a residence permit, but still need to obtain a work permit. This is still valid until 30 June 2020, as Austria will continue to apply the transitional arrangement up to the maximum duration.