Taxation of pensions

• Income tax
• Wage tax
• Special payments
• Multiple pensions
• Collective taxation of pensions within the employee tax assessment
• Advance payments
• Pensioner tax credit
• Higher-rate pensioner tax credit
• Social security rebate
• Single-earner/single-parent tax credit
• Pension income from another EU/EEA state or a third country
• Further links
• Forms

Income tax

Both pensions from the statutory social security (e.g. from the Pension Insurance Institution (→ Association of Austrian Social Insurance Institutions)^{German text} of workers, of employees, of farmers or of commercial economy) and pensions from the state or the provinces are considered income from employment. They are therefore subject to income tax.

Wage tax

The wage tax from the current pension is retained by the pension-issuing body and calculated on the basis of the income tax rate (→ USP).

Special payments

The special payments due in April and October are also taxed (after deduction of health insurance contributions) in the same way as other earnings (holiday pay and Christmas bonus) for workers in current employment.

Multiple pensions

If a pensioner draws multiple pensions from statutory social security, retirement benefits, a pension from a previous employment contract with a province or pensions from domestic pension funds, these pension payments will be taxed collectively. The body who pays out the highest taxable earning is responsible for the collective taxation.

If a pensioner receives a company pension in addition to their statutory pension, then collective taxation is not mandatory. In this instance, an employee tax assessment must be completed at the end of the calendar year.

Collective taxation of pensions within the employee tax assessment

As a rule, for earnings that are not taxed collectively, each body paying out an earning or pension only calculates the wage tax for the earnings they themselves pay out. Altogether, this results in too low a wage tax.

For the employee tax assessment, the pensions are totalled and taxed as if the pensioner had received the entire sum in the form of a single payment. This puts "multi-pensioners" on an equal footing with a pensioner who draws from one pension only, but receives as much as the "multi-pensioner" does from multiple payments.

Advance payments

Consequently, advance payments can also be necessary for pensioners if the additional tax payment exceeds 300 Euro. In these instances, the additional tax payment for the previous year and the advance payment for the current year can coincide in one year as an exception (e.g. if two payments are received in parallel for the first time). Through advance payments possible additional tax payments for the current year can be avoided.

Pensioner tax credit

People drawing their pension are entitled to a pensioner tax credit, which is automatically factored in by the pension-paying body. The pensioner tax credit is available up to a certain amount of taxable current pension income and decreases evenly to zero between the upper and lower limits of pension income. Annual pension income is calculated by deducting the social security statutory contributions from the gross pension.

The following table contains the amount of the pensioner tax credit for the respective calendar year and the lower and upper limits of pension income for the pensioner tax credit.

Higher-rate pensioner tax credit

Pensioners are entitled to the higher-rate pensioner tax credit, if

• the pensioner is married or in a registered partnership for more than six months in the calendar year and does not permanently live separately from their spouse/partner,
• the pension income does not exceed the upper limit in the calendar year,
• the income of the spouse/partner does not exceed the maximum annual amount and
• there is no claim for single-earner tax credit.

The higher-rate pensioner tax credit is available in full up to a certain amount for taxable current pension income that does not exceed the lower income limit. The higher-rate pensioner tax credit is reduced evenly to zero for taxable current pension income that lies between the income limits.

The following table contains the amount of the higher-rate pensioner tax credit, the lower and upper limit of the pension income for the higher-rate pensioner tax credit and the limit for the (spouse's) partner's income for the respective calendar year.

The higher-rate pensioner tax credit must be applied for from the pension-paying body by completing form E30. Form E30 contains information on calculating the earning thresholds.

If the requirements for the higher-rate pensioner tax credit are not met, the pensioner is entitled to the pensioner tax credit.

Social security rebate

If pensioners are entitled to the (higher-rate) pensioner tax credit on account of a negative income tax, a social security rebate can be claimed in the course of the employee tax assessment.

The following table contains the maximum amount of the social security rebate and the maximum possible share of the social security contributions that can be refunded if pensioners are entitled to a pensioner tax credit for the respective calendar year.

Single-earner/single-parent tax credit

In certain circumstances, pensioners are entitled to the single-earner tax credit or the single-parent tax credit.

The following table contains the single-earner and single-parent tax credit for the respective calendar year.

The single-earner or single-parent tax credit must be applied for from the pension-paying body by completing form E30.

Pension income from another EU/EEA state or a third country

As a rule, anyone whose residence or permanent address is in Austria is fully liable for domestic taxes. In this instance, the total world income (e.g. pension from another EU/EEA state) is subject to income tax.

Whether for an international pension income tax must be paid in Austria or for a domestic pension income tax must be paid abroad, also depends on the type of pension and the double tax convention in question.

The state in which income tax for a pension needs to be paid varies depending on whether the earnings are paid from public or private funds and whether the pension claims are based on employment contracts under private law or on public service work. For employers operating under public law, it also primarily depends on whether the work conducted included sovereign duties or whether it concerned commercial or industrial activities. Depending on the double tax convention, the pension payments may be taxed in the country from which the payment originates, in the country of the earlier work activity or in the country of residence. Owing to the many differing bilateral conditions, we recommend you seek expert advice to clarify the legal situation around the double tax convention.

Taxing pensions earned abroad

If, on account of the double tax convention, taxation law for foreign pension income is assigned to Austria, this foreign income must be recorded in form L 1i and if applicable form L 17.

Pensioners who receive a pension income that is taxable in Austria only 12 times in the calendar year can disclose the level of foreign earnings (= gross revenue less income-related expenses) in form L 1i simply using code 359. To correctly account for the legally prescribed tax credits, the tax office (→ BMF)^{German text} must also be notified whether the foreign earnings contain only pension payments. Furthermore, the tax office must in all cases be made aware of foreign taxes creditable using code 377.

If the criteria specified above for a foreign pension are met, there is no need to complete form L 17. Form L 17 must in any case be submitted to the tax office (→ BMF)^{German text} if foreign earnings are paid out 13 or 14 times in the calendar year (with special payments). The favourable tax rate for special payments can only be considered upon completion of form L 17.

If the pensioner is resident in Austria and the taxation right is (also) assigned to the foreign country, it must be determined whether the double taxation in Austria is avoided by applying the exemption method or the credit method.

If you wish to initiate proceedings against an income tax assessment by the Austrian Tax Office, you can file an appeal (→ USP) with the tax office, which will be adjudicated by the Federal Tax Court.

Further links

• Foreign income from employment (→ BMF)^{German text}
• Tax rate and tax credits (→ BMF)^{German text}
• Tax credits for low incomes (social security rebate) (→ BMF)^{German text}
• The Tax Book (→ BMF)

Forms

• Single-earner tax credit/single-parent tax credit/Family Bonus Plus/higher-rate pensioner tax credit – declaration for consideration – E30^{German text}
• Single-earner tax credit/single-parent tax credit/higher-rate pensioner tax credit/country of residence for children/Family Bonus Plus – notification of termination or change – E31^{German text}
• Enclosures to form L 1 or E 1 Income from employment without wage tax deduction – Additional data for fulfilling specific cross-border criteria – Application for unlimited tax liability – L1i^{German text}
• Wage statement/wage certificate – L 17^{German text}