Holiday bonus in summer: What to consider regarding the taxation of special payments!

Special payments such as holiday and Christmas bonus payments are additional financial grants to the regular remuneration payments that became indispensable. Special payments such as holiday and Christmas bonus, are also often referred to as 13th and 14th wages/salaries.

Within this article the tax categorization of these special payments as well as exciting special cases and features will be discussed.

Did you know that…

…holiday and Christmas bonus payments as special payments are not regulated by the Austrian income tax law, but by the various collective bargaining agreements. Alternatively, the special payments can also be arranged within the employment contract, if employees are not subject to a collective bargaining agreement in Austria. This also means: Those who are not subject to a collective bargaining agreement, are generally not entitled to these special payments, since there is no legal regulation in this regard. When the special payments need to be paid out to employees, depends on the applicable collective bargaining agreement. Usually, the holiday bonus is paid out between May and July each year and the Christmas bonus in November or December each year.

Find out how different payout models can impact the world of work in our latest P&O blog post from our Workforce Transformation team.

What is different regarding the taxation of these special payments?

Generally, special payments (e.g. one-time payments, bonus, holiday and Christmas bonus) are preferentially taxed within the “annual sixth” threshold with reduced tax rates.

The basis of assessment for the application of the reduced tax rates is the amount of the regular remuneration less social security contribution up to the threshold called “annual sixth”. Upon payment of the first special bonus, an exempted amount of EUR 620.00 should be deducted from the income tax basis once per year.

Important: Special payments generally are taxed preferentially up to the (individual) threshold of the annual sixth with the reduced tax rates. Special payments that exceed the (individual) annual sixth threshold in amount, will be taxed with the progressive taxation rates such as regular payments.

Annual sixth threshold

The annual sixth is a threshold which equals an individual exempted amount for employees and this threshold also represents the maximum amount up to which special payments can be taxed with the reduced tax rates. In general, it can be assumed that with a consistent remuneration, the annual sixth is equal to two monthly salaries. Special payments can be preferentially taxed with the reduced tax rates up to the (individual) annual sixth. An excess, also known as “annual sixth excess”, will be taxed with the on-going progressive taxation rates together as regular payment.

Attention: There is a de minimis limit! If your personal annual sixth does not exceed the de minimis limit (EUR 2,570.00 for 2025), the special payments will not be taxed. At a gross salary of up to EUR 1,285.00 no income tax on wages on the other remuneration is incurred.

Each time a special payment will be paid out (e.g., bonus, vacation pay, Christmas bonus, etc.), the annual sixth threshold must be recalculated for each payment.

If a special payment from the previous year is to be paid out in the following year, this is to be taxed in the year of the disbursement.

Note: Therefore, employees could have tax disadvantages, because this delayed payment may lead to an annual sixth excess, and thus special payments may be taxed with the progressive taxation rates.

Special cases

Holiday bonus payments are normally paid by employers together with the monthly wage/salary when it becomes due.

However, in some collective bargaining agreements there are different regulations. In some collective bargaining agreements, the special payments are due quarterly or only at the start of the annual leave. This applies for instance to the insurance industry (only back office), gastronomy and hotel industry.

Another special regulation is with regard to the Austrian Construction Workers’ Leave and Severance Pay Act (BUAG). Employees that are subject to BUAG, receive the holiday bonus only upon the actual commencement of their annual leave.

Further specific regulations can be found for instance within the collective bargaining agreement “Bauhilfsgewerbe”, for white- and blue-collar employees. Employees that are not subject to BUAG, the holiday bonus is due upon the first commencement of the first day of annual leave. If the annual leave is not being consumed, the holiday bonus will be paid out at the end of the calendar year. This regulation can for instance be found in the collective bargaining agreement “Eisen- und Metallverarbeitendes Gewerbe”. In this collective bargaining agreement, it is to be noted that in case of distribution of the annual leave, only the relevant aliquot share of the holiday bonus will be paid out.

If you have further questions regarding the calculation of the annual sixth, further special types or your collective bargaining agreement, contact the P&O team.