Duties of Austrian companies employing foreign workers in Austria

General information

The regulations regarding wage tax apply irrespective of whether the employee is resident in Austria or not. The same provisions apply in respect of short-term employment (for example, for seasonal work). Double tax conventions (DTC) only prevent an employee from being taxed in Austria under taxation law if they carry out their work outside Austria.

Wage tax deduction

Wage tax should be deducted for employees resident outside Austria in the same way as for Austrian-based staff, except for the single-earner tax credit (Alleinverdienerabzug) and the single-parent tax credit (Alleinerzieherabsetzbetrag).

The only situation in which wage tax according to tariff levels is not deducted is when an employee resident outside Austria carries out work that would trigger special withholding tax according to section 99 EStG if they were working on a self-employed basis. Here, a fixed-rate wage tax deduction is applied, amounting to 20 per cent or 25 per cent.

Provision of workers by third parties

Even if the Austrian employer of workers provided by a third party qualifies as an (economic) employer for the purposes of applying a double tax convention, this does not affect the applicability of domestic law. Under domestic law, employers employing workers provided by third parties often do not qualify as employers for tax purposes. If they do not qualify as employers, no wage tax deduction should be made. However, the income of the workforce provided in this manner can still be taxed in Austria. There are two ways to meet the requirement to tax these workers within Austria:

1. Withholding tax pursuant to section 99 of the Income Tax Act (Einkommensteuergesetz – EStG)

The fee paid by the Austrian employer to the labour provider based outside Austria is subject to a withholding tax obligation pursuant to Section 99 EStG. From an economic point of view, withholding tax covers the tax due on the wages of these temporary staff. If the labour provider is based outside Austria and does not have its own premises in Austria, a discharge can generally take place due to an applicable double taxation agreement. On the one hand, there is the possibility of relief at source in the amount of 30 per cent of the 20 per cent withholding tax (in the case of a commercial supply of labor, an exemption notice must be obtained beforehand). On the other hand, they can apply for a refund of any withholding tax. The refund is also granted at a flat rate of 30 percent of the 20 percent withholding tax. 70 percent of the 20 percent withholding tax on the fee represents a lump-sum wage taxation.

2. Voluntary wage tax deduction (exemption notice)

The other way of meeting the taxation requirement is to enrol for voluntary wage tax deduction. In this case, full relief from the withholding tax on the secondment fee (as required under tax treaty law) can be granted by a notice at source (exemption notice). The labour provider or – alternatively – the domestic employer withholds wage tax for the temporary workers. No withholding tax is to be withheld and paid on the fee for the temporary employment. If withholding tax is nevertheless withheld, this can be refunded in full.

This relief is provided by means of an exemption notice from tax at source. Applications for such exemptions must be submitted to the Tax Authority for Large Traders (Finanzamt für Großbetriebe – FAG) using the web form (known as BEFBESCH). In the case of intra-group transfers of employees, relief from tax at source is not conditional on the application for an exemption notice.

Further links

• Obligations on Austrian traders regarding activities in Austria by foreign traders
• Refund of Austrian withholding tax (→ BMF)^{German text}
• Relief from Austrian withholding tax on employee postings (→ BMF)^{German text}
• Decree on the DTC Discharge Ordinance (→ BMF)^{German text}

Legal bases

• DBA-Entlastungsverordnung
• Arbeitskräftegestellungsverordnung