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Residents are subject to tax on their worldwide income. For tax purposes, a resident is defined as an individual whose home is in Austria or who has been in Austria for more than six months, retroactive to the start of the individual's stay. Non-residents are subject to tax only on certain Austrian-sourced income. However, they are generally ineligible for personal deductions. Tax treaties should provide protection against those living temporarily in Austria or non-residents being taxed twice on the same income. 

Taxable income and rates
The first EUR 11,000 of earned income is tax free. There are four tax bands in which the marginal rate for those at the top of the band is 0% at EUR 11,000, 20.44% at EUR 25,000, 33.73% at EUR 60,000 and 50% at amounts above EUR 60,000. The first EUR 620 of special payments, such as the 13th or 14th salary, is tax free. Above that amount, tax is paid at 6% on these special payments unless the bonuses are higher than two months' normal salary. In that case, any excess is taxed as part of annual salary if no other special tax benefits are applicable. 

Determination of taxable income
For residents, taxable income is worldwide earned income if an applicable tax treaty does not grant beneficial tax treatment. A number of tax credits and deductions are available, many of which are deducted at source by the employer. There are automatic tax credits related to the number of income earning individuals in the household and whether there are children and to cover travel to work. A flat rate deduction is available for "special expenses" for certain types of insurance premium, investment (particularly in start-up companies) and the purchase of a house or home improvements. Some other types of savings, particularly towards retirement, are deductible in full up to a ceiling of EUR 2,920 per person. However, the ceiling is higher for a single income or single parent household, or for families with three or more children.

Deductions are possible for work-related expenses, some of which are at a flat rate, which can be replaced by a claim for actual expenditure if higher. Deductible expenses can include the cost of keeping a flat close to the workplace if a long commute is not feasible, professional use of a home computer and broadband Internet connection, a mobile phone or a car.

Most unearned income is taxable and tax is withheld at source. However, interest from certain types of savings products is tax-exempt or tax-exempt up to certain levels of interest. Some capital gains also are taxed.

A 25% withholding tax applies to interest earned from bank deposits; ordinary, convertible or profit-sharing bonds; and loans secured by a mortgage on real property. The same tax applies to dividend income. The tax is final in the case of personal taxpayers. Individuals do not have to declare income from which tax has been withheld. They may do so if their effective tax rate is lower than 25%, as they can then reclaim that part of the tax that exceeds their effective tax rate. Interest and dividend income from sources without an Austrian paying agent must be declared; they are also subject to only 25% or an effective lower tax rate. Where tax has been withheld at source on foreign income and dividends and the rate at which tax is withheld is

higher than the Austrian rate, the difference may be reclaimed under a tax treaty, although not always in full. Non-residents can in most cases reclaim tax withheld in Austria.

Capital gains on shares held for less than one year are taxed as earned income. There are some exemptions for stock options, employee share schemes and shares in start-up companies. Capital gains on the sale of shares in companies in which the investor has held more than 1% at any time in the previous five years are subject to tax at half the normal income tax rate. Capital gains also are taxable where the underlying transactions are deemed to have been speculative. This tax is waived under the terms of some tax treaties. Capital gains on investment property held for longer than 10 years are tax free if it is not business income.

Twenty percent of capital gains derived from an Austrian investment fund and foreign investment funds that have a fiscal representative in Austria that provides evidence on the amounts and composition of the actual income of the fund are taxed at 25%. Where the money is held in a foreign investment fund that has no fiscal representative in Austria, is marketed in Austria and deposited in an Austrian bank, capital gains are assessed on a lump-sum basis and 25% tax of 6% of the call price will be withheld unless the investor can provide evidence on the amounts and composition of the actual income of the fund.

Special expatriate tax regime
There is no specific expatriate tax regime in Austria. Nevertheless, the tax authorities are prepared to accept a number of deductions reflecting the additional cost-of-living expenses incurred by expatriates.

Capital taxes
There are no capital taxes on individuals.

Source: Deloitte

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