Inflation bonus

As part of the inflation relief packages, a contribution-exempt and tax-exempt inflation bonus has been introduced for employees subject to wage tax obligations. The inflation bonus does not incur wage tax, social security contributions, severance fund contributions, or non-wage labour costs (employer contribution to the family allowance fund (DB), surcharge to the employer contribution (DZ), and communal tax). The tax-exempt inflation bonus can be granted to employees for a limited period in the calendar years 2022 and 2023.

Prerequisites

The inflation bonus must always be a supplementary payment that was not normally paid in the past. Supplementary and bonus payments that were made in accordance with contractual agreements are in any case excluded from the tax exemption.

Upper limit – max. EUR 3000 per year

In total, a tax-exempt inflation bonus may be paid of max. EUR 3,000 per calendar year.

• a) Of this amount, no further prerequisites need to be fulfilled up to the amount of EUR 2,000 per year.
• b) For the remaining EUR 1,000, the inflation bonus must be granted on the basis of a wage-regulating provision in accordance with Section 68 para 5 numbers 1-7 Austrian Income Tax Act (EStG). These include statutory provisions, collective bargaining agreements or works agreements, but also internal company regulations applicable to all employees or certain groups of employees.

The tax-exempt inflation bonus can be paid out as a single payment, or as two or more instalments, or on a monthly basis together with regular wage or salary payments.

Difference from tax-free profit participation and conversion (2022)

The tax-exempt profit participation, which was introduced from 1 January 2022 (Section 3 para 1 number 35 EStG), is only exempt from wage tax. Social security contributions, severance fund contributions, and non-wage labour costs continue to apply.

If both an inflation bonus and a tax-exempt profit participation are paid in 2022 and 2023, these will only be tax-exempt from a total amount of EUR 3,000 per year.

A tax-exempt profit participation that has already been paid out this year can still be retrospectively converted to a tax-exempt inflation bonus in the course of the calendar year 2022. In this case, all the prerequisites for an inflation bonus have to be fulfilled. In particular, the payments must constitute supplementary payments that were not ordinarily made in the past. If, for example, voluntary profit participations (e.g. bonus payments) were repeatedly paid in the past with noticeable regularity, current case law states that these cannot be deemed to be supplementary payments. It is not permissible to convert profit participations paid on the basis of contractual agreements, which constitute a legal entitlement.