New wage withholding tax obligation in Austria as per 01/01/2020

Up until now, foreign companies which employed employees in Austria or seconded employees to Austria were only obliged to monthly withhold Austrian wage tax if their business activities in Austria constituted a so-called “wage tax permanent establishment” (i.e. if a business is wholly or partly conducted in Austria from an office, factory or other physical presence, or construction activities lasting longer than 6 months are carried out in Austria). As per 01/01/2020, the monthly wage withholding tax obligation is extended. Even if the foreign company is not constituting a wage permanent establishment in Austria it is still obliged to monthly withholding wage tax if

• the employee is or becomes an Austrian tax resident (especially if he/she has a regular residence there) AND
• works in Austria AND
• the Austrian taxation right is not restricted according to the double tax treaty between Austria and the foreign country.

The new regulation is therefore applicable, for example, in the following cases:

• Employees of foreign companies resident in Austria and performing a part of their work from a home office in Austria;
• Sales representatives of foreign companies who are performing their work at least partly in Austria and have tax residency in Austria;
• Personal leasing if the employee is or becomes an Austrian tax resident

Five-step guide to avoiding fines for non-compliance in Austria

1. Identify employees affected by the changes:
    
   • Employees with a regular residence or habitual abode in Austria
   • Employees working in Austria (i.e. in an Austrian home office)
      
2. Register the company at the competent tax office in Graz:
    
   • For the application, please send the form Verf19E (available also in English) to the tax office (see here)
   • Required enclosures: Copy of the Company Register excerpt, Copy of the CEO’s ID card
   • Please add on the form: “only an employee is located in Austria, no revenue and company activity are made in the country”
   • You can either send the registration form by fax or by post to the Graz tax office.
      
3. Implement a monthly Austrian “shadow payroll” for the employees affected:
    
   • The “shadow payroll” must be carried out according to Austrian tax regulations. Therefore, in practice you will need to assign an Austrian tax advisor/payroll provider/group company with that task and submit to them the monthly payroll data.
      
4. Carry out a monthly deduction of wage tax from salary and pay wage tax to the tax office in Graz:
    
   • Wage tax must be paid by 15th of the following month.
      
5. File an annual wage statement at the tax office:
    
   • For each employee, a so-called annual wage statement (detailing wage components and tax withheld) must be filed by the end of February of the following year. This is carried out electronically and is usually triggered by the Austrian payroll provider.

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