International contractors looking for clients and projects in an EU member country could consider Austria. It has a strong economy, widely spoken English, and also, an excellent quality of life. The cost of living is relatively high, but so are wages to offset the expense.
If it is your first time contracting in Austria, you will need to know a couple of things before you leave. These include the local tax laws, residency requirements, social security contributions, and immigration steps. This guide will give you an outline of those topics, plus the best ways to get hired and paid in Austria, to maximize retained income from your clients.
Do I need a visa to work as a contractor in Austria?
EU nationals do not need a work visa in Austria but will need a residence permit after 90 days in the country, and a trade permit from a trade authority unless they are categorized as a ‘new freelancer’.
Non-EU nationals will have to apply for a work permit if they are staying past the six-month business visa period. The work permit is known as the Red-White-Red Card and is valid for 24 months and is also a residence permit. It is awarded based on a points system, to self-employed ‘key workers’ that fit certain skill categories.
How do I get paid as a contractor in Austria?
The way you choose to get paid while contracting in Austria will affect the relationship with your clients and the number of overall earnings that you retain. One critical point is to make sure that you are meeting the Austrian government’s criteria for self-employment to avoid appearances of ‘disguised employment. The criteria are:
- An obligation for an ongoing relationship (evidenced by a contract)
- No personal dependence or only to a limited extent
- No binding instructions or directives
- Free of restrictions on personal behaviour
- The workflow can be regulated independently and can be changed at any time
- Essential operating resources are provided by the employer
- Remuneration is made according to the period spent on work, rather than based on performance or delivery of a work product
- Performing services mostly in person
Work as a self-employed freelancer
There are several categories of freelancers or self-employed in Austria, depending on the area of trade or services. The ‘new self-employed’ category is for work that does not require a trade license, while others are more regulated.
Because of the work visa hurdles, the freelancer option is really only guaranteed for EU nationals who don’t need to get a work permit. If you decide to go this route, you would contract directly with the client and make sure to follow all the self-employment criteria described above.
Set up your own limited company
It is possible to set up your own limited company in Austria, as long as you follow all of the business registration and capitalization requirements. Your limited company would contract directly with the client, and essentially lease you out as the worker.
Experienced contractors with a commitment to Austria may select this option as the best business structure in terms of taxation and client confidence.
Work with an umbrella company in Austria
If you want to have a third-party intermediary to help you with contracting and payment, then you can also use an umbrella company in Austria. More so than in some countries, using an umbrella company may bring the relationship under labour leasing laws, similar to the AUG law in Germany. There is no AUG license required in Austria, but there are some restrictions.
What this means is that you could be viewed as an ‘employee of the umbrella company, who would need to follow labour requirements such as contracting directly with the client as your ‘employer’. This does not affect your work or compensation per see. However, you would need to make sure the umbrella company was fully compliant and prepared to represent your interests.
An umbrella company is the best option for contractors from ‘third’, non-EU countries. They can sponsor your work permit, assist with taxes, and ensure a smooth work relationship.
How do taxes work for contractors in Austria?
Austria has some unusual tax rules for contractors working as self-employed, some of which reduce your tax burden. The tax year is the calendar year as in many countries.
What are the tax rates?
Earnings are tax-free up to EUR 11,000 and then tax rates are progressive based on income from 25% to 55%. Self-employed contractors receive a special ‘profit tax allowance’ of EUR 3900. As a self-employed, you can deduct expenses from your income as well.
What is the tax residency rule in Austria?
Austria uses the 183-day rule to determine tax residency, and stays beyond that will result in taxation of worldwide income. You would then have to look to a Double Taxation Agreement with your home country to avoid double taxation.
Non-residents (less than six months) only pay tax on Austrian-sourced income but must add a fictional EUR 9000 to their income amount for purposes of tax calculation.
How do I file taxes in Austria?
Individuals for whom employment income (such as when a contractor uses an umbrella company to withhold taxes PAYE) is the only source of income are not obligated to file income tax returns. However, you may do so to obtain a tax refund where you have incurred deductible business or special expenses.
Independent freelancers and limited companies will need to file a tax return as they handle their own reporting and filing obligations.
You can file taxes online or by paper. The tax filing deadline is April 30th.
Step 1: Register for FinanzOnline
- Register for the Federal Ministry of Finance’s (Bundesministerium Für Finanzen) online tax filing portal here. You will be required to fill in your details. Then, select a User ID (which must be 8-12 characters in length and contain at least 1 letter and 1 digit).
- After successful registration, you will receive your ID, user ID, and PIN by registered mail.
- If you have a Citizen Card, registration is not required.
Step 2: Log in to FinanzOnline
Once you have registered for FinanzOnline, you can log in to file. All tax forms can be accessed and completed online. Data from the previous year can be transferred automatically and notifications e.g. tax decisions can be viewed via the electronic Data Box.
What are the social security contributions in Austria?
Self-employed social security contributions are 27.68% on annual profit up to EUR 71,820. Amounts above that are contribution-free. Social security contributions are deductible for income tax calculation.
EU nationals may be able to avoid making contributions if they are covered in their home country.
How do I stay compliant while contracting in Austria?
The main compliance concerns for international contractors in Austria are
- Making correct tax payments
- Meeting immigration requirements, and
- Paying social contributions.
Each of these can apply to expat contractors in Austria, and depend on a number of criteria that may be difficult if you are new to the country.
The easiest way to remain compliant is to use an umbrella company as your local partner in Austria. They are already well-versed in the rules for self-employed contractors. Thus, they can help you get started with the contract, and then facilitate all of the compliance-related steps on your behalf.
Using an umbrella company is the best way to avoid any misclassification issues or violating any self-employment rules. Aside from compliance, here are the other benefits of using an umbrella company:
- Firstly, handle all client payments, tax withholding, and any social contributions
- Secondly, you a payslip each month, to an Austrian or foreign account
- Sponsor work permits for non-EU citizens
- Help set up the contract with the client
- Moderate any disputes with your client
- Last but not the least, advise on access to totalization and double taxation treaties
Contractor Taxation has experienced umbrella companies in Austria who are ready to help you right away, even before you leave home. Please contact us for more information on how an umbrella company can be your essential partner in international contracting in Austria.
