New wage tax obligation in 2020 for employers without a PE for wage tax purposes in Austria
From 01.01.2020, employers of individuals subject to unlimited taxation in Austria will be required to withhold Austrian wage tax. This change in the law results from the Austrian Tax Amendment Act 2020, which was published in the Federal Law Gazette on 22 October 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.
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 will also 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 will also 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.)
The legal changes will impact you most as an employer if you use the following forms of cross-border employee assignment/posting:
- You send employees on assignment to Austria for more than six months.
- You have recruited employees locally to carry out activities in Austria (‘sur place’ cases) and no wage tax PE existed in Austria.
- You employ cross-border employees who are resident in Austria and commute to work in other countries.
Other arrangements may also be affected, for example 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.
If you have employees with connections to Austria, we recommend the following:
- Collect information from your 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 must 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 permanent establishment 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.
In our free PwC Webinar on 5 December 2019, we will give you an overview of the latest developments, with a focus on the creation of PEs in Austria.