Austria: New Withholding Obligation for Employers Without a PE for Wage Tax Purposes

Tax Insights from Global Mobility

Austria: New withholding obligation for employers without a PE for wage tax purposes

November 11, 2019

In brief

Employers of individuals subject to unlimited taxation in Austria will be required to withhold Austrian wage tax as of January 1, 2020. This change in the law stems from the Austrian Tax Amendment Act 2020, which was published in the Federal Law Gazette on October 22, 2019. Previously, the obligation to withhold Austrian income tax via wage tax deduction only applied to employers with a permanent establishment (PE) for wage tax purposes in Austria.

In detail New withholding obligation as of 2020 Employers without a PE for wage tax purposes soon will have to withhold tax if they have employees subject to unlimited taxation. An individual is subject to unlimited taxation in Austria if s/he is resident or has his/her habitual abode in Austria. For the obligation to withhold wage tax, it is immaterial whether an employee is tax resident in Austria in accordance with a double taxation convention. In such cases, employers without a wage tax PE also will be subject to further obligations, including liability for wage tax, reporting requirements in relation to the Austrian tax authorities, and an obligation to maintain payroll accounts and submit pay slip documentation. These employer obligations also will apply if a double taxation convention allows pay to be exempted from taxation in Austria.

To be released from wage tax obligations in the context of payroll accounting, corresponding documentation must exist (confirmation of tax residence, calendar of working days, etc.) What employers may be impacted? The legal changes will impact businesses if they use the following forms of cross-border employee assignment/posting:

 Sending employees on assignment to Austria for more than six months  Recruiting employees locally to carry out activities in Austria (‘sur place’ cases) and no wage tax PE existed in Austria

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 Employing cross-border employees who are resident in Austria and commute to work in other countries. Other arrangements also may be affected (e.g., cases in which employees become subject to unlimited taxation in Austria due to a second home (or holiday home), or due to de-facto residence with a spouse or civil partner in Austria). The takeaway Employers of employees with connections to Austria should consider the following:

 Collect information from employees regarding any possibility of unlimited tax liability in Austria and oblige them to disclose any changes immediately;  Withhold wage tax voluntarily for employees who may be subject to unlimited tax liability in Austria (retrospectively);  Determine as soon as possible whether there is an obligation to withhold wage tax in Austria under the new legislation. If Austrian wage tax has not previously been voluntarily withheld, Austrian payroll accounting should be introduced in a timely manner. For employees who are subject to limited taxation in Austria, the obligation to withhold wage tax only applies if the employer has a PE for wage tax purposes in Austria in accordance with Section 81 of the Austrian Income Tax Act. It is nevertheless possible to withhold wage tax voluntarily.

Let’s talk

For a deeper discussion of how this issue might affect your business, please contact your Global Mobility Services engagement team or one of the following team members:

Global Mobility Services – Austria

Olivia Stiedl Katharina Bregulla Julian Hagelkrueys +43-699-1630-5235 +43-699-1630-5417 +43-699-1630-3741 [email protected] [email protected] [email protected]

Evelyn Kappel Stefan Perklin +43-1-501 88-3555 +43-699-1630-5135 [email protected] [email protected]

Global Mobility Services – United States

Peter Clarke, Global Leader +1 (646) 471-4743 [email protected]

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