Home office or remote work in Austria can have different consequences in the taxation and the social security obligations depending on whether the employee works from home only during the pandemic or permanently. In our article we describe the tax and social security implications of the remote work in Austria according to the latest legal regulations. We show you two scenarios of an example, where Mr A (residing in Austria) is an employee of a company established in another country. So far, Mr A commutes to the company in that country to carry out his work.
Tax and social security implications of permanent remote work in Austria
In the first scenario Mr A and the company agree that, from now on, Mr A can work 100% remotely from his home office in Austria, independently of the COVID-19 pandemic.
The Austrian tax administration takes a “facts and circumstances-approach” to assess whether remote work in Austria creates a permanent establishment (PE) for the foreign employer. The main criteria are the extent of home office work, the nature of work carried out in the home office and whether it was initiated by the employer or by the employee. In the case in question, it is very likely that the tax administration assumes that a PE is created. In addition, home office work would trigger municipality tax (3% from employee’s gross wage).
Mr A is subject to Austrian income taxation. The foreign employer will not have to deduct and pay monthly Austrian wage tax, but will have to file a so-called wage-statement by March of the following year. The employee will have to file an income tax declaration by June of the following year.
As Mr A spends 100% of his working time in Austria, he is also subject to Austrian social security regulations. The foreign company will have to register with the competent Austrian social security authorities and deduct and pay monthly Austrian social security contributions (employee and employer part). If the company is located in another EU country, Mr A and his employer could agree that these compliance duties are fulfilled by Mr A. However, in practice, this is rarely carried out, as all non-compliance risks would remain with the foreign employer. In addition, the foreign employer will have to pay a contribution to the Austrian family support fund (3.9%).
Tax and social security implications of remote work in Austria only during the COVID-19 pandemic
In the second scenario Mr A and the company agree that, only during the COVID-19 pandemic, Mr A can work 100% remotely from his home office in Austria. The Austrian tax administration takes the position that, if home office work is performed only temporarily during the COVID-19 pandemic, the home office will not create a PE for the foreign employer.
As regards Austrian income taxation, there is no difference to the first scenario. Only in case the company is a German resident company, Austrian income tax could be avoided.
This is due to the fact that, according to a mutual agreement on the tax-implications of COVID-19 concluded between the German and Austrian tax administration, the employee could opt (no obligation) to remain subject to German income taxation.
As regards social security, the competent Austrian ministry takes the view that temporary restrictions on cross-border employment imposed by COVID-19 do not constitute relevant changes as regards the applicable social security legislation. This means that, in the case of COVID-19 related temporary remote work in Austria, the employee will remain within the applicable foreign social security legislation of its country.
If you would like to know more about the tax and social security consequences of remote work in Austria, please visit the homepage of ICON Wirtschaftstreuhand GmbH, partner firm of WTS Global in Austria!