Small Steps to Financial Freedom: Demystifying the Austrian Tax System
Updated: 3 days ago
One major reason for our success is that we employ so many women - almost 85% of our employees are female. ARTUS makes it a priority to offer great flexibility to parents, which makes it so much easier to be a working mom. Simone Gerner I COO of ARTUS
It's a well known fact that, across the globe, women have reduced access to financial education and resources. In spite of the progress achieved over the last few decades, money seems to have remained a taboo topic, intrinsically connected to the male realm. Subsequently, although they control $72 trillion of the global investable wealth, females worldwide tend to score lower than men on most financial literacy measures.
Our goal is to make this a thing of the past and support every kick-ass female in thriving financially, which is exactly why we decided to turn to experts on the topic. Earlier this month, the female factor had the pleasure of hosting a special masterclass with our partners, ARTUS Tax Consulting. Led by Paula Timofte, the event tackled the basics of Austrian tax law and covered useful tips & tricks that can help in saving money, time and energy. Read on for some of the key takeaways.
If you maintain a regular residence or a habitual abode on Austrian territory, all your worldwide income is liable to taxes in Austria, which functions on a pay-as-you-earn system and thus tries to hold the same rates for both employees and the self-employed. For your international income please note that there are several double tax treaties.
In Austria, taxes are paid based on final profit (income - expenses), and the amount of money you can get back depends on the sum you have paid in advance. If you are currently earning what is considered a very low income (under 11.000 € a year), you have officially not paid any taxes in advance, which means that, despite possible expenses, you can’t request refunds from the tax authorities.
As an employee, you pay your taxes (and social insurance) every month in advance for the whole year - your employer already deducts the payable sum and pays it to the responsible authority. The time frame during which you can declare your taxes as an employee is five years, which basically means that, in 2020, you could report anything from the years 2015 to 2019. By this you can claim back probably income tax back. This can change on official request, if the authorities request a tax declaration from you by a certain deadline.
WHEN DO I HAVE TO FILL OUT A TAX REPORT?
You can fill out a tax report if:
you are an employee and would like to claim expenses that your employer did not refund
you have just one employer and a side business and your income from it is under 730 Euro per year
You must fill out a tax declaration if:
you have more than one employer
you have a business and your income is over 730 Euro per year
the tax authority (Finanzamt) requests a tax declaration
OUR TOP TAX SAVING HACKS FOR EMPLOYEES
1. Children: Ever since 2019, when the Familienbonus+ (125€ per kid/ month) was instated, you don't have to claim any money back. Instead, you have the possibility to ask your employer to consider this every month in your payroll, so that the 125€ gets deducted directly from the tax. If your employer doesn’t consider this amount in his monthly pay roll, you can claim this money through filling out a tax declaration.
2. Acquisitions over 800 Euro: If your employer did not compensate you for acquisitions considered necessary for your job, you can claim the expenses in your tax report. If your purchase exceeds 800€, you can't deduct the whole amount in the first year, and will have to spread the costs over the expected useful life (gewöhnliche Nutzungsdauer).
3. Travel expenses: You can deduct travel expenses you didn't get compensated for by your employer, as long as you keep a record of everything. You can calculate with 0,42€ for every kilometre you had to travel. There is also the possibility to claim money for every day or night of your stay (Tagesgelder/Diäten).
4. Expenses for further education: Every educational class you take that you can associate to your job, you can add to your tax report. Additionally, you can add the route to your class to the travel expense sheet.
5. Special literature: You can add every book/magazine you buy to your declaration as well, as long as it is useful for your professional activity.
6. Home office: If you have a separate room in your apartment or house which you only use exclusively as a home office (no use in a private way) you can claim all related costs in your tax report: specific percentages of your rent (e.g. your apartment is 100m2 in total and your home office is 20m2 you can deduct 1/5 of your rent), part of internet and phone bills, special furniture or stationary.
7. Consultancy services: If you have a lawyer or tax advisor, you can deduct these costs, as well as job-related coaching, as long as it’s not strictly personal development.
8. Social security contributions: Social security contributions you had to pay for yourself (e.g. seeing a private doctor) are expenses that you could claim too.
9. Special expenses (until 2020): You can deduct costs from home loans or your private insurance rate (the maximum amount for all special expenses is 2.920€). Church contributions (for a maximum amount of 400€) and donations to most charities are also deductible.
10. Extraordinary expenses with Selbstbehalt: This includes costs for renewing your teeth, adoption costs, in vitro fertilisation, funerals, etc. The only part that is deductible is the one that exceeds the Selbstbehalt (usually 6-12% of your yearly income).
11. Extraordinary expenses without Selbstbehalt: You can claim expenses in full that you might have suffered because of a natural disaster, disability or a medical special diet.
TAX SAVING HACKS FOR THE SELF-EMPLOYED
Keep in mind that you can add all the aforementioned things to your tax report even if you’re self-employed, while also completing a special, two-part tax declaration as a business person.
Filing your taxes while self-employed is usually very personal and tailored to your specific situation. The tips below should get you started, but we definitely recommend consulting a tax advisor like ARTUS for more detailed information.
1. Consultancy services: You should always check if your consultancy services are better off being part of your personal taxes or as business expenses.
2. GSVG Befreiung for small scale businesses: If you already know that your profit will be under 5,527.92 Euro for the upcoming year, and your maximum turnover is 30,000 Euro (35,000 in 2020), you don't have to pay double insurance, as long as it is a side business for which you wouldn’t need additional social insurance. Thus, you only have to pay accident insurance (9€ per month).
3. Expenses for your car: If you own a car and you use it for your business, you can create a driver's logbook, where you document every business-related trip you make. At the end of the year, you will be able to find out to which extent you used your car for your business.
if less than 10% are business drives, you cannot deduct any costs you had for your car
between 10-50%: you can choose to have a travel expense book or you could put in a part of your costs for the car
more than 50%: you have to make it a business car and you would have to declare all of your costs and then take out the part you used in private
4. Time your income and your expenses: You can choose to play with your income and expenses - if you have a forecast or an excel sheet where you keep track of it the whole year, you can decide in December how to navigate. Furthermore, a tax advisor can predict the potential loss or gain.
5. Buying securities: Every taxpayer has the right to deduct a certain percentage from their tax. You can only do this with a maximum profit of 30,000 € a year - if it is more, you have the right to do so, but you would have to buy securities in the same amount. When you buy the securities you have to keep them for at least 4 years.
EXPENSE FLAT RATE
An easy way to up your savings is to check if you are better off with a flat rate, especially if you don't have many expenses or you don't want to keep a very complicated accounting system. A flat rate involves taking your turnover and deducting 20% for service businesses and 45% for other businesses. Additionally, you can also deduct your social security contribution and the base tax-free allowance. What’s more, you don't have to keep any bills for this, all you need is your turnover.
ARTUS is an Austrian company specialising in tax consulting, HR management, auditing, accounting and management consulting. In addition to their seasoned team of experts, they maintain a network of competent partners to support companies at all stages of development.
Paula Timofte is a soon-to-be tax advisor. She has been a part of the ARTUS team since 2018 and has been a business owner for many years. Furthermore, she currently also focuses on working as a content creator.
Simone Gerner is the chief operating officer of ARTUS and a mentor at the female factor. As head of business services, her scope of duties includes Business/Organisational Development, Human Resources and Marketing.
Sonja Millgrammer is currently working as a tax advisor for ARTUS and is a mentor at the female factor. Moreover, she's the manager of the team business economics, corporate entities, consolidated companies & valuation of companies.