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 provisions apply for British citizens as of 1 January 2021 (please see below).
Nevertheless, EU/EEA and Swiss nationals 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 as a permit as such.
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.
As far as regulations for British nationals post Brexit are concerned, the following regulations apply from the perspective of Austrian immigration law as of 1 January 2021:
British nationals who have exercised their right of residence in Austria before the end of the transition period on 31 December 2020 or who have exercised employment as cross-border commuters in accordance with EU law and who continue to reside there or work as cross-border commuters thereafter will continue to have unrestricted access to the Austrian labour market on the basis of the withdrawal agreement.
British nationals who wish to take up long-term employment in Austria from 1 January 2021 will not be granted such special status under the Withdrawal Agreement. Since the Trade and Cooperation Agreement of 24 December 2020 does not provide for any special regulations either, the same regulations that apply to other newly arriving third-country nationals therefore apply to these individuals. British nationals who plan to work or settle in Austria for more than six months must therefore apply for a residence permit under the Settlement and Residence Act (such as a Red-White-Red Card for highly qualified key workers).
However, the Trade and Cooperation Agreement contains provisions on short-term business trips, intra-corporate transferees, contract service providers, and freelancers. An individual assessment of each case is required.
Furthermore, the agreement contains a clause on short-stay visas (stay of 90 days within a period of 180 days). In this clause, the European Union and the United Kingdom have agreed that short stays in the European Union or the United Kingdom will continue to be exempt from visa requirements.