An Introduction to Austrian Payroll

Part 2

What we’ll cover in part 2:

• Tax• Benefits• Social Insurance• Employment Law

Tax

Tax Administration

• Bundesministerium fur Finanzen (BMF) is the controlling government department

• The website can be found at www.bmf.gv.at

• Administration is performed through local tax offices (Finanzamt)

• In Vienna the particular office is determined by your postcode (there are 8 different offices)

Tax – the basics

• The Austrian tax year is the calendar year January to December

• Income is divided in to 7 different types with specific rules applying to each type – employment income is one of the types

• An Austrian has all of the different types of income aggregated together before tax is calculated via the tax return

• There is a withholding obligation for the employer to undertake

• PAYE is known as Lohnsteuer

Payroll Account

This must be created for all employees

• A record per employee

• Can be maintained abroad but must be bought into Austria in a “reasonable” time period if requested by the authorities as part of an audit

• Should be kept electronically – most communication between employer and tax authority is electronic

Payroll AccountItems included on the Payroll Account

• Up to 40 data items proscribed by law

• Includes personal data, data on partners and also children

• Pay by regular payments and one-off payments

• Tax and social security assessable pay and deductions calculated for pay period and YTD

• Certain tax free payments such as per diems, mileage expenses and business expenses

• Pension contributions

• Grants from the employer towards childcare costs

• Commuter lump sum and euro deductions operated via payroll

Payroll Account

Supporting documentation must be retained in original

format (paper or electronic copies)

• Sole earner/lone parent declaration

• Commuter expense declaration

• Child care subsidy claims

• Expatriate staff expenses (rent, school fees)

• Stock option agreements

• Overtime hours worked

Sole earner/Lone Parent

Tax reduction for lone parents and sole breadwinners

• For the sole breadwinner the parents must have been together for at least six months in the tax year

• The none working parent can have small earnings (under €6,000 pa)

• A credit reducing tax is awarded through the payroll calculation

Sole earner/Lone Parent

Tax reduction for lone parents and sole breadwinners

• The parent submits form E30 to the employer to claim the allowance

• The employer is responsible for identifying obviously inaccurate declarations

• The details must be included in the Annual Wage Tax Adjustment

Sole earner/Lone Parent

The rates are:

• €41.17 per month for one child

• €55.75 per month for two children

• €74.08 for three children

• An additional €18.33 per month for each subsequent child

Tax relief for Commuter CostsAustria allows some relief for home to work travel costs

• The “Commuter Tax” is a relief applicable when the employee travels 20 KM or more to work

• There is a standard (small) relief applicable where the employee travels at least 2 KM and public transport is not available for at least half the journey

Tax relief for Commuter Costs

• Pro rata amounts are given to part timer employees

• The full allowance is awarded to those who travel at least 11 days per month

Commuter Tax

Rates for Commuter Tax:Distance Home to work Public transport

“reasonable” – monthly deduction

Public Transport “unreasonable” – monthly deduction

2KM to 20 KM - €31

20KM to 40KM €58 €123

40KM to 60KM €113 €214

60KM + €168 €306

Commuter Euro

An additional deduction from tax for commuting costs

• Awarded at the rate of €2 per KM travelled on the journey to work

• The maximum award is €80 pa

• So those with a journey of 40KM or more get the maximum allowance

• This deduction is applied via the payroll calculation

• Part timers are awarded a pro rata amount in line with the commuter tax calculation

Commuter Tax Relief

How is this applied?

• The employee completes form L34 and gives it to the employer

• The employer must evaluate the form and challenge any obvious discrepancies

• The employer then uses the new online calculator available on the BMF website to calculate the value of the deduction: https://finanzierung.or.at/pendlerpauschale/

Commuter Tax relief

Other issues:

• Relief is also available to those who live in another country and commute into (Germany, Slovakia etc) - the employee must apply using form L33

• This is sent to the tax authority, there is no facility to calculate cross border journeys using the online calculator

Commuter Tax relief

Other issues:

• Forms must be received by 30th June each year otherwise the claim is not valid

• Employees who have a company car cannot claim either relief

• Employees with a “Job Ticket” – a tax free employer funded public transport pass cannot claim either relief.

Other Tax Deductions

Other deductions claimed on the Payroll Account:

• Standard employee deduction of €54 per year

• Tax free allowances are based on personal circumstances

• There is a standard employee business expense deduction of €291 per year

• All these allowances are coded automatically into the payroll system

Austrian tax rates

From 2015 the Austrian government started to

implement changes in the tax regime

There were significant changes in the current year,

reducing the rates of tax for the lower bands and adding

an additional higher rate band of 55%

Austrian tax rates

From 2015 the Austrian government started to

implement changes in the tax regime

There were significant changes in the current year,

reducing the rates of tax for the lower bands and adding

an additional higher rate band of 55%

Austrian tax rates 2016

Taxable Income Rate of tax

Up to €11,000 0%

€11,000 - €18,000 25%

€18,001 - €31,000 35%

€31, 001 - €60, 000 42%

€60, 001 – €90, 000 48%

€90, 000 – €1, 000, 000 50%

Over €1m 55%

Other CompensationNot all of the salary is taxed using these rates

• Salaries are often paid in 14 instalments – including a Christmas bonus and a holiday allowance

• Such additional payments are taxed using a special rule

• Where 1/6 of the ordinary payments, up to a maximum of

€21, 000 are not exceeded the payments are tax free

• If the additional payments do not exceed 1/6 of the ordinary payments but exceed €21, 000 a tax free amount of €620 is applied

• The special rules do not apply to social insurance

Other Compensation

Extraordinary payment value Tax rate

0 - €620 0%

The next €24, 380 6%

The next €25, 000 27%

The next €33, 333 35.75%

For amounts exceeding €83, 333 Up to 55%

Other Compensation

Other exemptions:

• Bonuses for following items tax free up to €360/month:

• Dirty money – schmutzzulager

• Difficult/dangerous working condition –erschwerniszulage/gefahrenzulager

• Weekend, holiday and night work

• Overtime premiums for the first 5 overtime hours each month tax are free up to a maximum of 50% of base salary, with an overriding limit of €86 per month

Benefits In Kind

Taxation position

• Benefits in kind must be added to pay and taxed at source. They are also subject to social insurance

• They must be recorded separately on the Payroll Account

• The general valorisation principle is used i.e. fair market value

• Certain benefits in kind are taxed using specified rules

Benefits In Kind

Standard benefits in kind include:

• Luncheon vouchers

• Jubilee benefits

• Stock options

• Travel expenses

Company cars

• The monthly benefit in kind value for company cars is calculated as 1.5% of list price including extras and VAT

• The maximum ceiling is €720 per month

• If the employee travels less than 500 KM per month then half the value is used e.g. 0,75%

• Employees must maintain a logbook detailing all private and business travel

• Any amounts made good by the employee will reduce the benefit in kind value

AccommodationAccommodation provided via employment

• Standard accommodation consisting of bedrooms, living area and bathroom is valued using a flat rate charge per square metre. Different provinces have set their own rates

• For example - Vienna €5.16/M2, Styria (for Graz) €7.11/M2, Upper Austria (for Linz) €5.58/M2

• So 70 square metre apartment in Vienna has a taxable BIK value of 70 x €5.16 = €361.20 per month

• However where the accommodation provided is under 30 square metres then no taxable benefit in kind is created

Accommodation

• If the employee has to bear operating costs (not including light, heat and telephone) a 25% discount of the value is given

• If the apartment fails to meet the standard living accommodation definition a 30% discount is given

• If the actual market value is 100% higher or 50% lower than the standard calculated value, then the actual market value is used

• If the employer covers heating costs an additional supplement of €0.58/metre is added

• There is a calculator available on the BMF website to work out the taxable value

Car Parking Space at Work

Car Parking Space at Work is a taxable benefit in kind

• This covers employer owned garages and car parking spaces or those rented by the employer

• It applies to both company car holders and those who drive their own vehicles to work

• The benefit applies equally to guaranteed spaces, first come first served spaces and those only occasionally used

• The Standard benefit in kind is calculated as €14.53 per month

Miscellaneous benefits

• Staff discounts beyond normal commercial discounts

• Small quantities (such as food for personal use) can be ignored

• Interest free loans where the balance exceeds €7,300

• The benefit in kind is calculated using the Maribor interest rate + 0.75%

Tax free Travel Expenses

• Maximum mileage allowance of €0.42/KM

• Payable for a maximum of 30,000 KM per tax year

• Reimbursement at this rate includes motorway tolls

• Tax free subsistence reimbursed at rate of €2.20 per hour for all trips of 3-12 hours duration

• So maximum payment of €26.40/day

Tax Free Travel Expenses

Continued ...

• Additional payment of 0.05c/KM due for each additional passenger

• 0.24c/KM paid for motorbikes

• 0.38c/Km (limited to 2,000 KM a year) for bikes or electric bikes

• All mileage claims must be backed up by a mileage log using the official log for company car usage

Tax Free Travel Expenses

International Travel

• Flat rate subsistence rates are provided for Austrians on foreign trips

• For example the day rate for the UK is €41.40

• The day rate to Germany is €35.30

• Trips to border towns within 15 KM of the frontier are treated as domestic journeys

Tax free Benefits

What can the employer provide tax free?

• Meal voucher to a maximum value of €4.40 per day

• Gifts/vouchers at Christmas of €186

• Company social events to maximum of €365/year

• Shares in the employers business to a maximum of €1,460 a year

Job Ticket • An employer provided ticket for public transport to get the employee to work

• The ticket must be for the named route unless it covers a mass transit system such as the Vienna metro

• The employer must purchase the ticket – not reimburse for it

• The employee should not claim commuter tax relief

• The scheme can be provided on a salary sacrifice basis subject to any CBA limitations

Payroll Calculation

On Line Payroll Calculator

http://onlinerechner.haude.at/bmf/brutto-netto-rechner.html

Paying Tax over to Tax AuthorityKey Deadlines

• Tax deducted from employee salaries must be remitted to local tax office by 15th of the following month

• For example tax deducted from April salary must be paid by 15th May

• If the date falls on a weekend or public holiday the date falls back to the next working day

• Tolerance rule – cleared funds by the 18th are treated as being paid on time

• Payment after this date incurs a penalty of 2% of the tax due, repeated if the payment is 3 months late

Year End processesYear End Declaration

• Required by the employer submitting form L16 for each employee

• The return is due for all existing employees by 28th February

• Form is due for leavers in year – to be submitted by the end of the month following leaving date using the ELDA system online

• For example an employee leaves 31st August, L16 to be submitted by 30th

September

• Paper returns only allowed in exceptional circumstances and must be submitted by 31st January if used

• Annual wage tax declaration is filed by April in paper or June online using FinanzOnline

• Employees have to submit their return in the same deadlines

L16 Form

• Provides a detailed breakdown of each element of the employees package

• Each field is given an identifying code e.g.

• KZ210 – general cash

• KZ215 – tax exempt overtime pay

• KZ220 – the other payments that the special 6% tax is levied on

• KZ240 – deduction for tax free expenses

• The form must include the work address using the Statistics Austria 5 digit code for location

Social Security

Social SecurityAustria has a comprehensive system focusing on three areas:

• Social insurance financed by compulsory insurance contributions providing:

• Accident insurance(AUVA),

• Retirement pension insurance (PVA),

• Health insurance (VGKK)

• Unemployment insurance

• Public assistance – in the form of grants and allowances funded from general

taxation Comprehensive details can be found at : http://ec.europa.eu/employment_social/empl_portal/SSRinEU/Your%20social%20security%20rights%20in%20Austria_en.pdf

Social Security

• Social welfare – funding of last resort for disability, retirement and living

benefits funded from general taxation

• System made up of 25 separate insurance companies with the Association of

Austrian Social Insurance Institutions providing an umbrella organisation

• Employers will inevitably have to interact with a number of different

insurance bodies

Comprehensive details can be found at : http://ec.europa.eu/employment_social/empl_portal/SSRinEU/Your%20social%20security%20rights%20in%20Austria_en.pdf

Social Security RatesRates for salaried employees:

• Health insurance 3.87%

• Pension insurance 10.25%

• Unemployment insurance 3%

• Other miscellaneous cover 1%

• Total liability 18.12%

• Capped to maximum monthly income of €4,860

• So maximum employee contribution per month €880.63

Social Security RatesEmployer rates for salaried employees:

• Health insurance 3.83%

• Accident insurance 1.3%

• Pension insurance 12.55%

• Unemployment insurance 3%

• Other miscellaneous cover 0.85%

• Total liability 21.48%

• Again capped to maximum monthly income of €4,860

• So maximum employer contribution €1, 043.93

Social Security rates

Special payments

• The special one off payments qualifying for the 1/6 average pay taxation rates subject to different rate

• Levied on special payments on top of the normal contribution capped to €9,720 pa

• Contribution of 17.12% due from the employee (or €1,664.06 for the year)

• Contribution of 20.98% due from the employer (or €2, 039.26 for the year)

• This makes maximum employer contributions €13,799.30

Social Security rates

Variations to standard rates

• Employees who have been classified as “blue collar workers” have a lower monthly social security base

• Hence the employee and employer pay lower contribution rates

• Employees over the age of 60 have no accident insurance charged on them – a saving for the employer of 1.3%

Social Insurance

Low income

• Employees earning below the low income threshold make no contribution at all

• There are aggregation rules to generate contributions on multiple low income employments

• The employer only has to pay the accident insurance contribution of 1.3% on these employees

• This threshold for 2016 is pay of €415.72 per month

• The employer must then pay towards health and pension

Registration process

It is very important to register new hires promptly

• New hires must be registered before commencing work

• Registration is submitted electronically via ELDA

• Only if there is no access to computer equipment (including temporary IT failure) can registration be made by paper which must be faxed to the relevant office

• Registration is made with relevant Sickness Insurance institution

• So for Vienna based employees it would be the Vienna institution

Registration Process

New Starters:

• Before starting work (i.e. up to the day before commencing) the minimum information must be submitted

• This is employer identity, name and social security number or date of birth of the employee

• And place of work and start date

Registration Process

New Starters:

• Further details regarding salary, contract type, family details etc must be submitted within 7 days of commencing work

• A copy of the completed application must be given to the employee

• Failure to meet the deadlines for starter, leaver and changes could result in a fine of up to €5,000 per error

Social Security NumberVSNR

• All Austrians issued one as part of birth registration

• 10 digit number positions 5-10 being DoB

• The number cannot begin with a zero, position 4 is a check digit

Social Security NumberVSNR

• Needs to be included on new employee registration

• However foreign workers arriving in Austria won’t have one, so date of birth and gender must be provided instead

• Numbers which show the month of birth as “13” are not necessarily wrong –these are issued to certain foreign guest workers, also used where the allocation for a particular date of birth has been exhausted

Changing Employment Contract

Details of significant changes to the employment contract must be

registered with social security:

• Name and or address changes

• Ending of an apprenticeship

• Change to the contribution group (worker to salaried employee)

• Change to the insurance class (older worker over 60 exempt from accident insurance)

• All changes must be reported via ELDA within 7 days of the end of the calendar month in which the change is effective

LeaversLeavers must be de-registered promptly

• De-registration must take place within 7 days of the end of compulsory insurance cover

• Process submitted electronically via ELDA to the relevant sickness insurance institution

• It is particularly important to record the reason for termination of employment using one of the options given

• Certain reasons (including voluntary resignation) result in a 4 week “lock” on unemployment benefit being paid

• Compromise agreements do not result in this “lock” being applied

Unpaid leaveDeregistration is sometimes required

• If unpaid leave is under one month no action is taken

• However, if unpaid leave lasts for more than one month deregistration must be submitted

• Periods of absence for military or civil service also require deregistration

• Retirement also needs to be reported using a special form submitted by ELDA

Other Employer Charges

Other employer costs calculated from payroll

• Employer contribution to the family compensation fund (FLAG) of 4.5% of gross wages including low income employees less €1,460

• Employer contribution surcharge – additional charge on top of the above paid to the individual regions of Austria

• For example Vienna is 0.4%, Styria is 0.39% and Upper Austria is 0.36%

Other Employer Charges

• Employer contribution to subway construction

• This only applies to employers with employees in Vienna

• It is levied at a flat €2 per head per week on all Viennese based employees

• Those working less than 10 hours per week or over the age of 55 are exempt

Municipal TaxCalculated from payroll – Kommunalsteuer

• Levied on the employer but not the employee

• Calculated using all cash pay and taxable benefits in kind

• Expense reimbursements and severance payments are not included in the calculation

• Based on the payroll total provided that the minimum threshold is exceeded

• Payable is made to each municipality in proportion to the number of employees employed in that municipality

• Annual return due by 31st March (or within one month of closing) each year (form KommSt1) via ELDA

Occupational Pensions

There are compulsory employer contributions in excess of social

insurance contribution

• It is designed to provide a second tier pension for employees

• Contributions are due one calendar month after commencement of employment

• So an employee starting on 7th March would have an employer contribution due on pay from 7th April – 30th April

• All remuneration is subject to the employer contribution including benefits in kind up to the maximum social insurance threshold (€4,860 per month)

• Contributions remitted with other deductions by 15th of month via social insurance to be passed to the relevant occupational pension fund

ELDA

What is it?

• The electronic system for transferring pay and tax/social insurance data to the relevant Austrian bodies

• In order to use it the company official must have a Citizen Card or registered mobile phone signature

• See www.buergerkarte.at for details

• Anyone with a citizen card can then register at www.elda.at and download the free software that allows the transmissions to be made

• The portal is only available in German

• Payroll providers will have software that interacts automatically with ELDA

Useful websitesFor Social Insurance:

• http://www.hauptverband.at/portal27/portal/hvbportal/content/contentWindow?contentid=10007.693656&action=2&viewmode=content

• http://www.hauptverband.at/portal27/portal/auvaportal/content/contentWindow?contentid=10007.670935&action=2&viewmode=content

• http://www.hauptverband.at/portal27/portal/vgkkportal/content/contentWindow?contentid=10007.722378&action=2&viewmode=content

• http://www.pensionsversicherung.at/portal27/portal/pvaportal/content/contentWindow?contentid=10007.707551&action=2&viewmode=content

• https://www.usp.gv.at/Portal.Node/usp/public

• http://www.noedis.at/portal27/portal/dgnoegkkportal/content/contentWindow?contentid=10007.678835&action=2&viewmode=content

• http://www.ooegkk.at/portal27/portal/ooegkkportal/content/contentWindow?contentid=10007.704986&action=2&viewmode=content .

Inspection and Audit

Employers pay records could be inspected by either tax office or

by social insurance inspectors

• Inspections are undertaken via the joint committee GPLA covering tax, social insurance and municipal tax

• Inspectors will want access to:

• Payroll account records

• Working time records

• Contracts of employment

• Travel expense claims

• All employers are visited under a rolling 3-5 year programme

Data retention

Employers must retain all payroll records for a minimum of

seven years

Remember this includes payroll and HR records and has to

be taken into account if you move between payroll

systems/payroll vendors

Thank you for attending!

END