Foreign researchers or scientists in Austria, relocated from abroad, might be entitled to favourable tax treatment if the relocation is in Austria´s public interest. There exists two tax privileges:
- by retaining the previous foreign tax burden (but at least 15%) on foreign income (Section 103 (1) of the Austrian Income Tax Act), and
- by granting a tax allowance of 30% of the income from scientific activities taxed at the rate ("immigration allowance") pursuant to Section 103 (1a) of the Austrian Income Tax Act.
The first tax advantage can also be applied by athletes and artists moving to Austria. In practice, however, the tax allowance (so-called "Zuzugsfreibetrag") is by far the most frequently applied type of immigrant allowance.
How does the tax allowance work?
The allowance is 30% of the income from domestic and foreign scientific activities, insofar as these are taxed according to the progressive tax rate. The allowance is granted for a period of five years and can be taken into account in payroll accounting as well as in the yearly tax assessment. This tax advantage is intended to compensate for the additional costs of moving to Austria (such as differences in the price level, costs for moving, costs for double household management including travel costs and costs for language courses). If the tax-free allowance is granted, no other operating expenses, income-related expenses or exceptional charges connected with the relocation can be claimed.
Formal requirements
The application for granting the tax allowance for moving must be submitted in writing to the Austrian Federal Ministry of Finance (BMF) within six months of moving in. The application must be accompanied by a list containing the following information:
- justification that the relocation is in the public interest because it supports science and research,
- disclosure of the state of departure,
- disclosure of the date of moving to Austria,
- disclosure of Austrian residences within a period of ten years before moving in and at the time of the application,
- disclosure of foreign residences within a period of five years before moving in and at the time of the application,
- the disclosure of the centre of vital interest within a period of ten years before relocating and at the time of the application,
- (for requests for elimination of additional tax burdens, the complete presentation of the determination of the flat tax rate).
Furthermore, a supplement must be attached to the annual tax return in which the following information is disclosed:
- evidence that the public interest is still fulfilled in the assessment year,
- all foreign and domestic domiciles were disclosed during the respective assessment period,
- the centre of vital interest in the respective assessment period is in Austria.
According to the opinion of the tax authority, one of the basic prerequisites for granting the allowance is that the centre of the researcher's or scientist's life interest is relocated to Austria. The Federal Fiscal Court (BFG 18.07.2017, RV/7100774/2017) confirmed this view, according to which merely establishing domestic residence is not sufficient for the granting of the tax allowance (case still pending before the Administrative Court under No. Ro 2017/13/0018).
Summary
Scientists and researchers switching their “centre of vital interest” (controversial; this question still pending at the Administrative Court) to Austria are entitled to claim an additional tax allowance of 30% of taxable income from domestic (and partly also foreign) scientific and research activities for a period of up to five years. The relocation has to be in the public interest for Austria because it supports science and research. An application for obtaining the tax benefit must be filed with the Austrian Ministry of Finance within six months of the date of moving to Austria.
WTS Austria has already successfully completed tax applications for scientists and researchers from different countries such as Hungary, Germany, Spain, Poland, Russia and Switzerland. Our experts at WTS Austria will be pleased to advise you in your individual situation.
